U.K. financial regulators have imposed a hefty £29 million ($38.5 million) fine on Starling Bank, a popular digital lender, for shortcomings in its financial crime prevention systems. The Financial Conduct Authority in London stated that Starling failed in its financial sanctions screening and breached rules by opening accounts for high-risk customers.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, criticized Starling’s lax financial sanction screening controls, calling them a gateway for criminals and individuals subject to sanctions. In response to the penalty, Starling expressed regret for the identified failings and highlighted efforts to rectify the situation through detailed screening and a thorough review of customer accounts.
David Sproul, the chairman of Starling Bank, acknowledged the FCA’s findings and reassured customers and employees that significant investments have been made to address the issues. He emphasized the strengthening of board governance and capabilities to prevent similar lapses in the future.
As one of the U.K.’s leading online challenger banks, Starling had been eyeing a potential IPO. However, plans have been delayed as the FCA noted that the bank’s measures to combat financial crimes did not keep pace with its rapid customer growth. The FCA initiated investigations into digital challenger banks’ anti-money laundering and know-your-customer systems, concerned about vulnerabilities to fraud, money laundering, and sanctions breaches.
Despite an agreement to halt account openings for high-risk customers, Starling continued to onboard such individuals, opening over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023. An internal review in January 2023 revealed that Starling’s automated screening system had only been checking a fraction of individuals and entities subject to financial sanctions since 2017. The bank has since reported multiple potential breaches to authorities and is actively working to enhance its financial crime control framework.
The FCA commended Starling for promptly addressing the identified breaches and implementing remediation programs. The regulator noted that the investigation into Starling was concluded within 14 months, a significantly shorter timeframe compared to other cases in the same period. These developments underscore the importance of robust financial crime prevention systems in the rapidly evolving digital banking landscape.
