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The UK regulator the Financial Conduct Authority (FCA) has fined Starling Bank £28,959,426 for financial crime failings.
The FCA said that Starling underwent exponential growth from being a start-up in 2016 to 2023, when its customer base was about 3.6 million in 2023 while its revenue increased to £452.8m. Its financial crime controls, however, failed to keep pace with its growth, the FCA said. The authority identified serious concerns with Starling’s anti-money laundering and financial sanctions framework during its review of financial crime controls at ‘challenger banks’ in 2021.
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.’
The FCA pointed out this case took 14 months from opening to achieving an outcome, compared to the regulator’s average of 42 months for cases closed in 2023/24.
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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.”
Stuart Favier, Client Manager at the IT services consultancy Northdoor plc says: “This is a huge fine and one that exemplifies just how seriously the Government and the FCA are enforcing adherence to the financial sanctions process. In the immediate aftermath of the Russian invasion of Ukraine, there was a huge effort from most in the financial sector to check their accounts and close any that were sanctioned due to being aligned with the Russian regime. However, over the years there has been some relaxation as the focus has turned away from sanctions.
“What is clear from Starling’s fine is that there has been no such relaxation by the regulatory authorities. It seems that the automated system put in place by the bank had been failing to pick up on the current client accounts as well as seemingly unable to keep up-to-date with the changes on the lists. To open up 54,000 accounts for 49,000 high-risk customers is a huge problem.
“Whilst other banks will not have had the same numbers, even a small number of accounts opened for customers on sanctions lists is a real problem. Keeping up-to-date with the changing lists manually is almost an impossible task, and as we have seen with Starling implementing deficient technology can also cause huge issues. However, some companies have turned to automated solutions that can provide accurate screening processes helping to ensure that individuals or companies on sanctions lists are identified. These solutions can also help banks and financial institutions prove their adherence to regulation.
“By automatically creating reports for every search and providing a full audit trail of all the searches conducted, all the hard evidence needed to show compliance is done very easily. The Starling fine shows that companies need to get on top of sanctions. If they do not have a solution in place that automatically does the job then one needs to be implemented quickly as manual searching is no longer good enough. If there is a solution in place companies need to ensure that it is doing the job they expect it to be doing. With fines reaching tens of millions of pounds it is not worth leaving to chance.”
