The U.K. financial regulators have fined British digital lender Starling Bank £29 million ($38.5 million) for failings related to its financial crime prevention systems. The Financial Conduct Authority (FCA) stated that the fine was imposed due to financial crime failings related to financial sanctions screening and the repeated breach of a requirement not to open accounts for high-risk customers. In response, Starling Bank expressed regret for the highlighted failings and mentioned that it had completed detailed screening and a thorough review of customer accounts.
David Sproul, chairman of Starling Bank, apologized for the failings outlined by the FCA and reassured that the bank had made significant investments to rectify the issues, including strengthening board governance and capabilities. He emphasized that the changes implemented were geared towards safe, sustainable growth and that the bank was well-positioned to continue executing its strategy, supported by a robust risk management and control framework. Despite the setbacks, Starling Bank has been seen as a potential IPO candidate in the near future, although its expected timing for going public has been shifted from an earlier projected date.
The FCA noted that Starling Bank’s measures to combat financial crimes did not keep pace with its rapid expansion, as its customer base grew from 43,000 to 3.6 million between 2017 and 2023. The regulator had raised concerns regarding the anti-money laundering and know-your-customer compliance systems of digital challenger banks, leading to an investigation into financial crime controls at these fintech brands in 2021. Following the probe, Starling Bank agreed to refrain from opening new accounts for high-risk customers until it improved its internal controls. However, the FCA found that the bank failed to comply with this agreement and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
In January 2023, Starling Bank discovered that its automated system had only been screening clients against a fraction of the full list of individuals and entities subject to financial sanctions since 2017. This revelation highlighted systemic issues in the bank’s sanctions framework, prompting an internal review. Subsequently, Starling reported multiple potential breaches of financial sanctions to relevant authorities. The FCA acknowledged that Starling has established programs to remediate the identified breaches and enhance its financial crime control framework. The investigation into Starling’s financial crime controls was completed in a relatively short period of 14 months, compared to the average duration of 42 months for cases closed in the calendar year 2023/24, indicating the regulator’s efficient handling of the matter.
