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Monzo and Wells Fargo hit this weeks headlines

Monzo sends a warning over its financial crime review, Lithuania’s new anti-money laundering compliance centre and Wells Fargo tries to cut its massive compliance costs.

Antonis Melis
August 7, 2020

With the end of its financial crime review in sight, Monzo sends out a warning that the outcome could have a significant impact on its finances.

As Monzo worries about impending costs, Wells Fargo will look to make drastic cuts to their external compliance partners after realising they have overspent on compliance resources.

And Lithuania starts to look towards building an AML competence centre to ensure they remain a suitable ground for foreign investment.

Find out more on these stories below.

Warning over Monzo financial crime review

Monzo is reviewing the quality of its financial crime controls and warned that the outcome could have a significant impact on its finances.

The troubled digital bank, which has previously issued a warning over its ability to remain in business, began an investigation of its “financial crime control framework” in June after a review by the Financial Conduct Authority.

Monzo said it could not anticipate the outcome or implications of the investigation but said “they could be material”.

New age banks, like Monzo, will need to have their compliance and regulatory requirements in check in order to avoid massive fines from regulators that could lead them to closing up shop.

Lithuania plans to establish anti-money laundering competence centre

Lithuania plans to establish an anti-money laundering competence centre as the Nordic and Baltic region has been hit by several money laundering scandals in recent years, including what could be the biggest scandal involving Danske Bank.

Lithuania has identified key areas of weakness and will be joining local banks in founding the new anti-money laundering competence centre. This new centre will add to an already strong list of 8 other institutions responsible for preventing the risk of money laundering and terrorism funding.

"By not taking action, Lithuania finds itself in a disadvantaged situation in terms of risk managements, and the country's reputation negatively affects investors' behaviour," a draft government resolution read.

It will be reassuring for the countries financial sector that measures are being put in place by both the private and public sectors.

Wells Fargo to dramatically cut consultancy spend after internal backlash

Wells Fargo’s CEO Charlie Scharf wants to dramatically cut back spending on outside compliance consulting, describing the spending as “beyond anything I’ve ever seen.”

That spending, of course, stems from the seemingly endless number of compliance failures Wells Fargo has endured since 2016, when regulators first whacked the bank for its false accounts scandal.

The estimated cost of their compliance, including regulatory fines and internal cost adds up to $20 billion since their compliance woes hit the spotlight four years ago.

Unfortunately, Wells Fargo and other institutions will have to learn that simply throwing money at a situation does not help. What institutions need to do is build a solid framework for how they intend to introduce their compliance needs now, whilst developing plans to further improve them as times goes on.

Similarly, last week Nordic banks were making compliance cost cuts after hiring too many people too quickly, without a plan.

When will institutions learn that compliance does not need a quick injection of people or consultancies to help, but they should rather look to develop a plan that can bring their compliance forward.

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