Starling Bank has faced regulatory action with a £29m fine imposed by the UK Financial Conduct Authority (FCA) due to lapses in their financial sanctions system.
- The FCA identified that Starling Bank failed to prevent ‘high-risk’ customers from opening accounts, despite previous agreements to mitigate such risks.
- The rapid increase in Starling’s user base from 2017 to 2023 was not matched by sufficient crime prevention measures, raising serious concerns.
- Between 2021 and 2023, Starling opened 49,000 accounts for high-risk individuals, highlighting significant gaps in its financial screening practices.
- Starling Bank has accepted the findings and committed to rectifying these issues, implementing new safeguards and reinforcing their risk management frameworks.
Starling Bank has been fined £29m by the UK’s Financial Conduct Authority (FCA) for significant shortcomings in its financial sanctions screening mechanisms. The FCA’s intervention comes after it found that Starling neglected its duty to prevent ‘high-risk’ customers from opening accounts. Despite prior commitments to strengthen its screening procedures, the bank failed to comply adequately, leaving the financial system e:xposed to potential misuse.
Starling Bank witnessed a massive growth in its customer base, expanding from 43,000 users in 2017 to almost four million in 2023. However, this growth was not paralleled by enhancements in its financial crime prevention strategies, leading to the FCA’s ‘serious concerns’ in 2021. The institution was consequently required to limit high-risk account openings, a stipulation it regrettably did not fulfill.
The FCA’s investigation revealed that between 2021 and 2023, Starling Bank had opened 49,000 accounts for individuals deemed as high-risk, underscoring critical deficiencies in its account opening protocols. Therese Chambers, joint executive director at the FCA, remarked on the laxity of Starling’s controls, indicating they left the system ‘wide open to criminals and those subject to sanctions.’
In what’s seen as a notable pace for regulatory reviews, the FCA concluded its investigation in 14 months, compared to the average timeframe of 42 months. This rapid resolve is attributed to improved enforcement mechanisms within the agency, promising more efficient oversight processes.
Starling Bank has acknowledged the FCA’s findings, stating its full cooperation throughout the probe. The bank has pledged to enhance its operational frameworks, including a comprehensive re-screening of transactions. David Sproul, Starling’s chairman, expressed his apology for the lapses and assured stakeholders of the bank’s commitment to safeguarding its future operations with robust governance and risk management practices.
Starling Bank’s regulatory setbacks highlight the critical importance of stringent financial oversight and proactive risk management.
