When one of the UK’s best-known digital banks gets fined £21 million, the fintech world pays attention.

That’s exactly what happened to Monzo after regulators uncovered some painful truths about its compliance setup. Turns out, the bank was letting people open accounts using addresses like 10 Downing Street and Buckingham Palace. And no, it wasn’t a joke.

For fintech startups, this isn’t just another headline. It’s a warning.

When growth outpaces controls

Between 2018 and 2022, Monzo exploded from 600,000 users to nearly 6 million.

What didn’t grow fast enough? Its internal systems to handle risk, fraud, and onboarding checks. The FCA found that Monzo’s controls were so weak, customers could enter obviously fake addresses and still pass KYC.

Worse still, Monzo was under a formal regulatory restriction during this time. It was told not to onboard high-risk customers. It did it anyway. Repeatedly.

Frictionless onboarding is great — until it backfires

Startups love smooth onboarding flows. But Monzo’s went too far.

The bank didn’t properly verify addresses. Some users signed up with P.O. boxes or foreign addresses with UK postcodes. Others used the same address multiple times, a common sign of money muling.

Some customers even ordered cards to different countries than the one they signed up in. And nobody caught it in time.

The result? High-risk accounts slipped through the cracks. And Monzo ended up violating the very rules it was meant to follow.

Regulatory warnings aren’t optional

In 2020, the FCA formally told Monzo: stop opening accounts for high-risk users until you sort your systems out.

Monzo agreed. And then opened more than 33,000 of them.

Turns out, many employees didn’t even know the restriction existed. Or didn’t understand how serious it was.

That kind of internal breakdown is exactly what regulators look for when deciding whether to fine you. And how much.

Monitoring doesn’t stop after onboarding

Monzo didn’t just fall short on Day 1 checks. It also failed to monitor existing accounts properly.

It didn’t regularly ask how customers intended to use their accounts. It didn’t verify if activity matched that purpose. It didn’t update information over time.

All of which made it harder to spot suspicious behavior. And easier for criminals to slip through.

Compliance costs less than a scandal

Monzo cooperated with the investigation. That knocked the fine down from £30 million to £21 million.

But the brand damage? That’s harder to measure.

This isn’t the kind of headline any startup wants. Especially when your whole value proposition depends on customer trust.

The company says it’s fixed the problems. And maybe it has. But the lesson for other fintechs is simple: it’s cheaper to do it right the first time.

Key takeaways for fintech startups

Here’s what you should take from Monzo’s experience:

• Compliance needs to scale with growth. If your user base is growing fast, your controls need to grow faster.
  
  
• Don’t skip address verification. Obvious fakes should never make it past onboarding.
  
  
• Take regulatory restrictions seriously. If the FCA says “stop,” stop.
  
  
• Keep monitoring after sign-up. Ongoing checks are just as important as first-day checks.
  
  
• Invest in risk and compliance early. It’s a lot cheaper than fines and crisis PR later.
  
  

Want help making your fintech startup bulletproof from day one?

Get in touch with Your Fintech Story, we help startups grow with strong strategies, smart structures, and serious compliance thinking.