Starling Bank banking app on smartphone.
Adrian Dennis | AFP via Getty Images
UK financial regulators have fined British digital bank Starling £29 million ($38.5 million) over failures related to financial crime prevention systems.
London's Financial Conduct Authority said in a statement on Wednesday that it had fined Starling “due to financial crime failings relating to financial sanctions checks”. The Financial Supervision Authority said that Starling repeatedly violated the requirement not to open accounts for high-risk clients.
In response to the FCA penalty, Starling said it was sorry for the failings identified by the regulator and that it had completed a detailed examination and in-depth review of customer accounts.
“I would like to apologize for the failings identified by the FCA and provide reassurances that we have invested heavily to get things right, including strengthening our board governance and capabilities,” David Sproul, chairman of Starling Bank, said in a statement on Wednesday.
“We want to emphasize to our clients and employees that these are landmark cases. We have learned lessons from this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing on our safety and sustainable growth strategy, supported by a strong risk management and control framework,” he added.
Starling, one of the most popular online-only challenger banks in the UK, is widely seen as a potential IPO candidate in the next year or so. The startup previously indicated plans to go public, but backed down on its expected timing from an IPO previously targeting early 2023.
As Starling expands from 43,000 customers in 2017 to 3.6 million in 2023, the bank's measures to tackle financial crime have failed to keep pace with this growth, the financial watchdog said in a statement.
The Financial Conduct Authority (FCA) began looking into financial crime controls at digital challenger banks in 2021, fearing that fintech brands' anti-money laundering and KYC compliance systems were not robust enough to prevent fraud, money laundering and evasion. Sanctions on its platforms.
After this investigation was first opened, Starling agreed to stop opening new bank accounts for high-risk clients until it improved its internal controls. However, the financial watchdog says Starling failed to comply with this requirement and opened more than 54,000 accounts for 49,000 high-risk clients between September 2021 and November 2023.
Starling realized in January 2023 that since 2017, its automated system was only screening clients against a small portion of the full list of individuals and entities subject to financial sanctions, the financial watchdog said, adding that the bank had identified systemic issues with its sanctions framework. In internal audit
Since then, Starling has reported multiple possible violations of financial sanctions to the relevant authorities, according to the British regulator.
The Financial Conduct Authority (FCA) said Starling had already established programs to address the breaches it had identified and strengthen its wider framework to combat financial crime.
The British regulator added that its investigations into the Starling case were completed within 14 months of opening, compared to an average of 42 months for cases closed in the 2023/24 calendar year.
