The Office of Fair Trading (OFT) has imposed a £544,505 financial penalty on the online payday lender MCO Capital Limited for breaching the Money Laundering Regulations 2007.
This also included its failure to adequately verify the identities of loan applicants.
The OFT has also revoked MCO’s consumer credit licence.
The regulator said it is believed 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.
In addition, 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.
“MCO’s failure to put adequate procedures in place made it vulnerable to fraud,” said David Fisher, OFT director of credit.
“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.”