The UK Financial Conduct Authority (FCA) has imposed a fine of around £29m on Starling Bank due to shortcomings in its financial crime systems and controls, particularly concerning financial sanctions screening.
The bank has also breached regulations prohibiting it from opening accounts for high-risk customers on multiple occasions.
Starling Bank experienced rapid growth, expanding its customer base from approximately 43,000 in 2017 to 3.6 million in 2023. However, its measures to combat financial crime did not align with this growth.
During a review of financial crime controls at challenger banks in 2021, the FCA identified significant issues within Starling’s anti-money laundering and sanctions framework. As a result, the bank accepted a requirement that limited its ability to open new accounts for high-risk customers until improvements were made. Nevertheless, Starling failed to adhere to this requirement, having opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
In January 2023, Starling acknowledged that its automated screening system had only been assessing customers against a small portion of the complete list of individuals subject to financial sanctions since 2017. An internal review that followed revealed systemic issues within its financial sanctions framework. The bank has since reported several potential breaches of financial sanctions to the relevant authorities.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight, remarked, “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime.”
The investigation into this case lasted 14 months, from initiation to resolution, in contrast to the average duration of 42 months for cases concluded in the 2023/24 period. This serves as an illustration of the FCA’s efforts to expedite its enforcement investigations.
Starling Bank has implemented programmes aimed at addressing these breaches and enhancing its overall financial crime control framework. The FCA continues to oversee firms to ensure that they maintain adequate systems and controls to manage financial crime risks.
