Britain’s financial watchdog, the Financial Conduct Authority (FCA), has fined Starling Bank £29 million ($38.5 million) following a damning review of the digital lender’s anti-money laundering controls and sanctions screening systems, which the regulator said left the financial system “wide open to criminals.”
The FCA stated on Wednesday that Starling’s measures to tackle financial crime failed to keep pace with the bank’s rapid growth and that the lender repeatedly breached requirements not to open accounts for high-risk customers.
Between September 2021 and November 2023, Starling Bank opened more than 54,000 accounts for 49,000 high-risk customers, according to the FCA.
The issues were first identified by the FCA in 2021 during a broader review of financial crime controls across the “challenger bank” sector, which includes digital-only banks aiming to compete with traditional banking institutions. In January 2023, Starling discovered that its automated sanctions screening system had only checked customers against a fraction of the full list of individuals subject to financial sanctions since 2017.
A subsequent internal review found systemic problems within Starling’s financial sanctions framework. The bank has since reported multiple potential breaches of financial sanctions to the relevant authorities, the FCA said.
“Shockingly Lax Controls”
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, criticized Starling’s financial sanctions controls, stating, “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions.
Chambers added, “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.
Starling Responds to the Findings
In a separate statement, Starling Bank acknowledged the FCA’s findings and said it had since taken significant steps to address the failings. These measures included a detailed re-screening of transactions and an in-depth backbook review of customer accounts concerning the breaches.
I would like to apologise for the failings outlined by the FCA and to provide reassurance that we have invested heavily to put things right, including strengthening our board governance and capabilities,” said David Sproul, chairman of Starling Bank.
The FCA’s investigation highlighted how crucial effective financial crime controls are, especially as digital banking platforms grow and cater to increasing numbers of customers. This case has underscored the need for challenger banks to remain vigilant and ensure their compliance measures evolve alongside their expansion.
