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The UK’s Financial Conduct Authority has fined challenger bank Starling Bank £28.959 million for what it said were “financial crime failings related to its financial sanctions screening.”

The bank, also repeatedly breached a requirement not to open accounts for high-risk customers, the FCA said in a statement yesterday. 

As the regulator set out, Starling grew quickly, from about 43,000 customers in 2017 to 3.6 million in 2023. However, measures to tackle financial crime did not keep pace with its growth, it said. 

The FCA said that when looking at financial crime controls at challenger banks in 2021, it identified serious concerns with the anti-money laundering and sanctions framework in place at Starling. The bank agreed to a requirement restricting it from opening new accounts for high-risk customers until this improved. Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023, it said.

In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions, the FCA said. A subsequent internal review identified systemic shortcomings in its financial sanctions framework. Starling has since reported multiple potential breaches of financial sanctions to the relevant authorities.

“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,” Therese Chambers, joint executive director of enforcement and market oversight, FCA, said.

This case took 14 months from opening to achieving an outcome – compared with an average of 42 months for cases closed in 2023/24. This is an example of the FCA improving the pace of its enforcement investigations, it said.

Starling has established programmes to remediate these breaches and to enhance its wider financial crime control framework. The FCA continues to supervise firms to ensure that they have the right systems and controls to manage financial crime risks, the regulator said. 

Starling’s response
“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,” David Sproul, chairman of Starling Bank, said. “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.”

The bank said it has completed both a detailed re-screening of transactions and an in-depth back book review of customer accounts in respect of the contraventions detailed in the notice, it said in its statement. 

“In response to the FCA’s investigation, and as a result of the bank’s continuous review of processes and controls, Starling has introduced extensive additional safeguards to ensure the bank complies with regulatory requirements. Starling has significantly increased capability, structure and resources across all lines of defence,” it continued. “Enhanced controls in respect of the Bank’s monitoring and oversight of its compliance with the VREQ and in respect of its financial sanctions screening systems and controls are now in place.”