The news: More than half of consumers in the UK would switch their bank if it was involved in a money laundering scandal, according to FICO research.
Key data: Younger customers would be more likely to swap their bank if their lender was found to be involved in money laundering. Over two-thirds (64%) of 18- to 24-year-olds would switch, as would 68% of 25- to 34-year-olds.
The price of doing business? This data contrasts with ComplyAdvantage’s research, which suggests many banks choose to incur money laundering fines as a cost of doing business:
What this means: Banks have to contend with financial and reputational damage if they are found money laundering. They may be able to pay fines, but they also risk losing customers if they’re found flouting rules. The ease with which consumers can switch their bank accounts exacerbates this: Current account switching in the UK is up 41% annually in the year’s first quarter.
The UK’s notoriously competitive environment—composed of both incumbents and neobanks focused on adding new users—also makes banks vulnerable to customer attrition The data shows that customers are aware of the ease of switching accounts and place a heightened importance on ethical behavior in the sector.
And fines by themselves can damage banks’ brands. In December, NatWest's reputation suffered a blow when it was forced to pay £264.8 million ($364.2 million) in a money laundering case that involved cash stuffed into bin bags.
The big takeaway: Trust in banks is low, particularly among younger generations. Almost one third (28%) of adults don’t trust their high street banks, rising to 38% of 25- to 34-year-olds, according to an Opinium survey. Banks risk eroding trust further and ultimately losing business if they’re found to be knowingly breaking rules and paying fines. Effective regulatory controls, strong risk management procedures, and maintaining an ethical culture are essential to ensure they stay on the right side of the law and avoid alienating customers.