Starling Bank has been fined £29 million for inadequate financial crime controls.
- The FCA found severe weaknesses in the bank’s anti-money laundering efforts.
- Despite being warned, Starling opened over 54,000 high-risk accounts.
- Starling’s screening failures exposed it to sanctioned individuals.
- The fine raises doubts about the bank’s future compliance capabilities.
Starling Bank has been fined £29 million by the Financial Conduct Authority (FCA) for failing to establish effective controls against financial crime. The FCA’s investigation highlighted severe deficiencies in the bank’s systems meant to mitigate financial crime risks, particularly as it expanded rapidly.
The watchdog first expressed concerns about Starling’s anti-money laundering (AML) and financial sanctions controls in 2021, during a review of quickly growing challenger banks. In response, Starling had agreed to stop opening new accounts for high-risk customers until its compliance systems were improved. However, the bank breached this agreement by opening more than 54,000 accounts for nearly 50,000 high-risk customers, in clear violation of FCA requirements.
Compounding these issues, Starling’s automated screening system failed between 2017 and 2023, ensuring that only a small portion of customers subject to financial sanctions were adequately screened. This oversight created a significant risk for the bank, potentially allowing sanctioned individuals to hold accounts.
The findings by the FCA have cast doubts over the leadership of Starling, notably under its founder Anne Boden, who resigned as CEO in June 2023 and subsequently left the board. A consultancy firm investigating the bank’s compliance issues reported that senior management lacked the necessary expertise to ensure adherence to FCA agreements.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, criticised the bank’s inadequacies. “Starling’s financial sanction screening controls were shockingly lax,” she noted, highlighting the bank’s vulnerability to criminal activities.
In response, Starling’s leadership has apologised, with chairman David Sproul stating that the organisation has “invested heavily to correct its past mistakes, strengthen its board governance, and improve capabilities.” Despite these efforts, the fine has cast doubt on Starling’s ambitions for a London stock market listing, while other banks consider legal action against it for costs related to fraudulent payments.
The FCA had also launched a separate probe into Starling’s compliance with anti-money laundering rules earlier this year. Even though Starling has expressed regret for its failings from 2019 to 2023, the fine delivers a substantial setback to its reputation, complicating its future leadership and question its ability to adhere to regulatory compliance.
The significant fine and compliance failures raise serious concerns about Starling Bank’s future regulatory adherence and corporate governance.
