Starling Bank faces a substantial fine for inadequate financial crime controls, impacting its reputation significantly.
- The FCA uncovered critical deficiencies in Starling’s systems to manage financial crime risks amidst rapid expansion.
- Starling ignored an agreement with the FCA, opening thousands of high-risk accounts despite imposed restrictions.
- Flaws in the bank’s automated systems exposed it to sanctioned individuals, amplifying financial crime risks.
- The consequences of these failings raise questions on the bank’s future leadership and regulatory compliance.
Starling Bank has been fined £29 million by the Financial Conduct Authority (FCA) following revelations of severe shortcomings in its financial crime control systems. The FCA’s extensive investigation pinpointed these deficiencies as the bank rapidly expanded its customer base from inception in 2016 to 3.6 million by 2023. As the bank grew, its risk management systems failed to keep pace, leading to significant vulnerabilities.
In 2021, an FCA review of fast-growing challenger banks highlighted serious concerns about Starling’s anti-money laundering and financial sanctions controls. In response, the bank agreed to halt the opening of new accounts for high-risk customers until enhancements were made to its systems. This directive was contravened, with Starling continuing to open over 54,000 accounts for nearly 50,000 high-risk customers.
Further investigations revealed critical failures in Starling’s automated screening processes between 2017 and 2023. These systems inadequately screened customers against financial sanctions lists, exposing the bank to a substantial risk of engaging with sanctioned individuals.
The FCA’s findings cast a shadow on Starling’s leadership, particularly the tenure of its founder Anne Boden, who departed as CEO in June 2023 and subsequently left the board. An independent consultancy’s report further criticised the bank’s senior management for their lack of expertise in enforcing compliance effectively.
Therese Chambers, FCA’s joint executive director of enforcement and market oversight, described the bank’s screening controls as “shockingly lax”. She remarked that these failings left the financial system susceptible to exploitation by criminals and sanctioned individuals. In response to these criticisms, Starling’s chairman, David Sproul, stated that the bank has made considerable investments to rectify these issues, including strengthening board governance and capabilities.
Despite these reassurances, the imposed fine casts uncertainty over Starling’s aspirations for a London stock market listing. Compounding these challenges, other banks are reportedly contemplating legal actions against Starling due to associated fraud reimbursement costs stemming from fraudulent payments made to its customers.
In June, reports suggested that the FCA had initiated yet another investigation into Starling’s compliance with UK anti-money laundering regulations. Starling has publicly expressed regret over these failures, underscoring their negative impact on the bank’s previously sterling reputation and raising doubts about its future regulatory adherence and leadership.
This fine and the surrounding investigations pose significant challenges to Starling Bank’s reputation and future endeavours.
