Starling Bank has fined £29million for ‘shockingly lax’ financial crime controls, which ‘left the financial system wide open to criminals’ over a four-year period.
Starling, which has grown rapidly since it was founded in 2014, also repeatedly breached a requirement to refuse accounts to high-risk potential customers, the Financial Conduct Authority said on Wednesday.
The failings occurred at Starling between December 2019 and November 2023.
Measures to tackle financial crime did not keep pace with Starling’s growth over the period, with the challenger bank swelling from approximately 43,000 customers in 2017 to 3.6million in 2023.
When the FCA reviewed financial crime controls at challenger banks in 2021, it found ‘serious concerns’ with the anti-money laundering and sanctions framework in place at Starling.
Fined: The regulator charged Starling £29million in fines for ‘shockingly lax financial crime controls
The FCA’s National Risk Assessment (NRA) identified the risk that criminals may be attracted to the faster onboarding process offered by challenger banks when compared to traditional high street banks.
As a result of the review, Starling agreed to a requirement restricting it from opening new accounts for high-risk customers until this improved.
Starling failed to comply, however, and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
The digital bank would have suffered a steeper fine of almost £41million, but qualified for a 30 per cent discount because it agreed to collaborate with the regulator.
Starling became aware early last year that its automated screening system had, since 2017, only been screening the names of new and existing customers against a fraction of the full list of those subject to financial sanctions.
An internal review identified ‘systemic issues’ in Starling’s financial sanctions framework, including assessment of its financial sanctions risk, policies and procedures and testing and calibration of screening systems.
Starling has since reported multiple potential breaches of financial sanctions to the FCA and other relevant authorities.
Therese Chambers, FCA joint executive director of enforcement and market oversight, 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 confirmed it fully accepts the findings set out in by the Financial Conduct Authority. It has paid a fine of £29million as a full and final settlement.
The digital bank said it has introduced extensive additional safeguards to ensure the Bank complies with regulatory requirements in response to the FCA’s investigation,
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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