Starling Bank banking app on your smartphone.
Adrian Dennis | AFP (via Getty Images)
Britain’s financial regulator has fined British digital lender Starling Bank 29 million pounds ($38.5 million) for deficiencies related to its financial crime prevention system.
London’s Financial Conduct Authority said in a statement on Wednesday that it had fined Sterling for “failing to commit financial offenses in relation to a financial sanctions review.” The FCA said Starling also repeatedly breached requirements not to open accounts for high-risk customers.
“Sterling’s financial sanctions review controls were shockingly lax,” leaving the financial system wide open to criminals and sanctioned individuals. The situation was made worse by Sterling’s failure to adequately comply with the FCA’s agreed requirements designed to reduce the risk of facilitating financial crime. ”
In response to the FCA’s fine, Starling said it regretted the deficiencies identified by the regulator and had completed a detailed review of customer accounts and a thorough backbook review.
In a statement on Wednesday, Starling Bank chairman David Sproul said: “We apologize for the shortcomings identified by the FCA and are reassured that we have made significant investments to put things right, including strengthening board governance and capacity. I want to do that,” he said.
“We want to assure our customers and employees that these are historic issues. We have learned lessons from this investigation and through these changes and the strength of our franchise, we want to assure our customers and employees that these are historic issues. We are confident that we are in a strong position to continue executing on our viable strategy, with growth supported by a solid risk management and control framework,” he added.
Starling, one of the UK’s most popular online-only challenger banks, is widely seen as a potential IPO candidate in the next year or so. The company had previously hinted at plans to go public, but has now delayed its expected IPO date from its original goal of as early as 2023.
The FCA said in a statement that while Starling’s customer numbers have grown from 43,000 in 2017 to 3.6 million in 2023, the bank’s fight against financial crime has not kept pace with that growth.
In 2021, the FCA announced that it was concerned that fintech brands’ anti-money laundering and know-your-customer compliance systems were not robust enough to prevent fraud, money laundering and sanctions evasion on their platforms. An investigation has begun.
After this investigation was first launched, Starling agreed to suspend new bank account openings for high-risk customers until internal controls were improved. However, the FCA said Starling failed to comply with this provision and opened more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
In January 2023, the FCA announced that Starling discovered that since 2017, its automated systems had been screening customers against a portion of the entire list of individuals and entities subject to financial sanctions. It added that the bank had identified systemic issues in the sanctions framework. In an internal review.
Since then, Starling has reported multiple potential breaches of financial sanctions to relevant authorities, the UK regulator said.
The FCA said it had already established a program to redress the breaches identified by Sterling and strengthen its broader financial crime control framework.
The UK regulator added that investigations into Sterling were completed within 14 months of inception, while the average time for cases concluded in the 2023/24 calendar year was 42 months.
