The Financial Conduct Authority (FCA) has fined Starling Bank £29m due to inadequate financial crime controls.
- The digital bank is accused of failing to design effective systems from 2016 to 2023 for mitigating financial crime risks.
- Starling Bank breached an agreement by opening accounts for nearly 50,000 high-risk customers despite restrictions.
- An automated screening failure exposed the bank to risks of individuals under sanctions holding accounts.
- The fine raises doubts about Starling’s leadership, compliance, and future stock market ambitions.
The Financial Conduct Authority (FCA) has imposed a £29 million fine on Starling Bank, charging it with shockingly lax financial crime controls. The digital banking institution failed to adequately design and implement systems to mitigate financial crime risks, even as its customer base expanded from initial numbers in 2016 to 3.6 million by 2023.
Concerns about Starling’s anti-money laundering (AML) and financial sanctions controls were initially raised by the FCA in 2021. At that time, the FCA identified Starling as one of several rapidly growing challenger banks with potential control inadequacies. Subsequently, the bank agreed to suspend opening new accounts for high-risk customers until the necessary improvements were in place, yet these promises were not upheld.
Despite an explicit agreement with the FCA, Starling violated the terms by opening over 54,000 accounts for approximately 50,000 high-risk customers. This breach directly contravened regulatory requirements and posed significant risks to the banking system.
An additional oversight occurred within Starling’s automated screening processes from 2017 to 2023. During this period, only a fraction of customers subject to financial sanctions were effectively screened, thus exposing the bank to the material risk of sanctioned individuals maintaining accounts.
The FCA’s findings have cast doubt on Starling’s executive leadership, particularly under founder Anne Boden. Boden’s departure as CEO in June 2023 and subsequent exit from the board highlight concerns regarding the bank’s governance. Furthermore, the consultancy hired to investigate reported that senior management lacked the necessary experience to ensure compliance with FCA stipulations.
The severity of the bank’s non-compliance was underscored by the FCA’s joint executive director of enforcement and market oversight, Therese Chambers, who remarked, “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions.”
Starling has publicly acknowledged its failures, and its chairman, David Sproul, asserted that the bank has significantly invested in rectifying these issues. Efforts include strengthening board governance and capabilities. Nevertheless, the imposed fine and ongoing regulatory attention have challenged the bank’s ambitions, including its potential listing on the London stock market.
This scandal has sparked legal considerations among rival banks, focusing on reimbursement costs for fraud involving Starling customers. In June, reports emerged of an additional FCA probe into Starling’s adherence to UK anti-money laundering regulations, further complicating its compliance narrative. Although the bank expressed regret for its shortcomings between 2019 and 2023, the reputational damage remains extensive, calling into question its future leadership and regulatory alignment.
The substantial fine underscores Starling Bank’s significant compliance failures, raising critical questions about its future governance and regulatory adherence.
