Starling Bank may be one of the fastest-growing digital banks in the UK, but its systems have failed to keep up with its growth, leading to failings over applying adequate measures to tackle financial crime.
Following a 14-month investigation, the Financial Conduct Authority (FCA) has fined the app-based bank £28,959,426 for financial crime failings related to its financial sanctions screening. The UK regulator also said the bank repeatedly breached a requirement not to open accounts for high-risk customers.
Starling, founded by Anne Boden, launched in 2014. It got a banking licence in 2016 and launched personal current accounts in 2017. And earlier this year, it also took a joint top spot with Nationwide as one on the best banks for online banking.
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Starling promised to make banking simpler and smoother with useful tools to help people manage their money. It subsequently grew from 43,000 customers in 2017 to 3.6 million in 2023 as it took on the high street with its sleek processes.
But, while Starling grew its customer base, the measures to control financial crime struggled to keep up.
Where did Starling go wrong?
The FCA identified serious concerns with the anti-money laundering and sanctions measures in place at Starling, labelling its controls ‘shockingly lax’.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “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.”
Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
It was in 2023 that Starling realised its systems were only screening customers against a fraction of the full list of those subject to financial sanctions since 2017. There were also systemic issues in its financial sanctions framework.
Starling has reported the potential breaches and says it is putting things right. The challenger bank would have been fined £40 million, but was granted a 30% discount as it agreed to resolve the issues.
In a statement, David Sproul, chairman of Starling Bank, said: “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. We want to assure our customers and employees that these are historic issues.
“We have learned the lessons of this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing our strategy of safe, sustainable growth, supported by a robust risk management and control framework.”
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