The Financial Services Authority (FSA) has fined the Nationwide Building Society £980,000 for failing to have effective systems and controls to manage its information security risks.

The failings came to light following the theft of a laptop from a Nationwide employee's home last year. The FSA found Nationwide did not have adequate information security procedures and controls in place, potentially exposing its customers to an increased risk of financial crime.

The FSA also discovered that Nationwide was not aware that the laptop contained confidential customer information and did not start an investigation until three weeks after the theft.

Margaret Cole, director of enforcement, said: "Nationwide is the UK's largest building society and holds confidential information for over 11 million customers. Nationwide's customers were entitled to rely upon it to take reasonable steps to make sure their personal information was secure.

"Firms' internal controls are fundamental in ensuring customers' details remain as secure as they can be and, as technology evolves, firms must keep their systems and controls up-to-date to prevent lapses in security.

"The FSA took swift enforcement action in this case to send a clear, strong message to all firms about the importance of information security."

Philip Williamson, Nationwide's chief executive said: "We have extensive security procedures in place, but in this isolated incident our systems of control were found wanting. We have made changes to fill the gap and improve our procedures further.

"Towards the end of last year I sent a letter to every one of our members telling them about this matter and apologising for any concern it may have caused them. I would like to reiterate that apology to our members and assure them that we have taken action to tighten our already high security procedures.

"To set people's minds at rest I wish to emphasise that there has been no loss of money from our customers' accounts as a result of this incident. Our customers have the additional assurance that they are protected by the Society's customer promise that 'If you are the innocent victim of fraud, you will not lose out.'"

By agreeing to settle at an early stage of the FSA's investigation Nationwide qualified for a 30% discount under the FSA's executive settlement procedures - without the discount the fine would have been £1.4 million.

(CD/SP)