69/12    9 August 2012

The OFT has imposed a £544,505 financial penalty on the online payday lender MCO Capital Limited (MCO) for breaching the Money Laundering Regulations 2007, including its failure to adequately verify the identities of loan applicants. The OFT has also revoked MCO's consumer credit licence.

It is thought that MCO's failures led to it being targeted by fraudsters who used the personal details of over 7,000 individuals to successfully apply for loans amounting to millions of pounds. The Money Laundering Regulations 2007 require lenders to conduct appropriate identity checks and are designed to reduce the risks of businesses being used for money laundering and terrorist financing.

The OFT found that MCO had also engaged in unfair business practices by writing to people, who they were aware may not have taken out loans, asking unequivocally for repayment. MCO also ignored the OFT's requests to stop this practice. Additionally, MCO was found to lack the necessary skills, knowledge and experience to run a consumer credit business. All of these failures justified the revocation of MCO's consumer credit licence.

The company has a right of appeal against the OFT's decisions.

David Fisher, OFT Director of Credit, said:

'MCO's failure to put adequate procedures in place made it vulnerable to fraud. The way in which MCO then wrote to consumers to collect debts caused unnecessary distress and inconvenience to thousands of people. This financial penalty sends out a strong message that businesses lending to consumers must have adequate anti-money laundering procedures in place.' 

Consumers who are pursued by a lender for a debt they do not owe should write to the lender and, where appropriate, the debt collection agency, making it clear why payment is being refused.  Further information on what consumers can do is available in a leaflet produced by the Credit Services Association.

NOTES

1. The OFT has a role under the Money Laundering Regulations 2007 to supervise the anti-money laundering controls of estate agents and consumer credit financial institutions (CCFIs). CCFIs are those businesses engaged in consumer credit lending which are not either authorised by the Financial Services Authority (FSA) or supervised by HM Revenue and Customs (HMRC) as a money service business. The Regulations seek to reduce the risk of businesses being used for money laundering or terrorist financing. They require regulated businesses to, for example, apply risk sensitive policies and procedures on the verification of customer identity, record keeping, training staff and reporting suspicious activity to the Serious Organised Crime Agency.
2. The OFT's power to impose a financial penalty arises under Regulation 42(1) of Money Laundering Regulations 2007. The OFT may impose a financial penalty that is 'effective, proportionate and dissuasive'.
3. Action Fraud issued a press release in April 2011 which stated  that the City of London Police wrote to over 7,000 people whose personal details were compromised by fraudsters.
4. The OFT made a third decision not to grant applications by MCO to vary its licence in addition to the decisions referred to above.
5. MCO has 28 days in which it may appeal the OFT's decisions to revoke its licence, to impose a financial penalty and to refuse the applications to vary its licence to the First-tier Tribunal (Consumer Credit).
6. See anti-money laundering FAQs.
7. Lenders and debt collectors should at all times (including when seeking payment of disputed debts) have regard to the principles in the OFT's debt collection guidance.