The U.K. Financial Conduct Authority has fined British digital lender Starling Bank £29 million for failings related to its financial crime prevention systems. The FCA found that Starling breached a requirement not to open accounts for high-risk customers and failed to properly screen clients against financial sanctions. Starling has apologized for these failings and has invested heavily to address the issues, including strengthening its board governance and capabilities. The bank stated that these were historic issues and that it has learned from the investigation, putting it in a strong position for future growth.
Starling Bank, known as one of the U.K.’s most popular online-only challenger banks, has been seen as a potential IPO candidate. While the company had previously expressed plans to go public, its expected timing has been pushed back from an earlier target of as early as 2023. The FCA noted that as Starling’s customer base grew significantly, its financial crime prevention measures did not keep pace with this expansion. The regulator began investigating digital challenger banks’ financial crime controls in 2021 due to concerns that their anti-money laundering and know-your-customer compliance systems were not robust enough.
As part of its investigation, the FCA found that Starling failed to comply with a provision to stop opening new accounts for high-risk customers until it improved its internal controls. The bank opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023, despite the agreement. Starling also discovered that its automated system was only screening clients against a fraction of the full list of individuals and entities subject to financial sanctions since 2017. The bank identified systemic issues in its sanctions framework and reported multiple potential breaches of financial sanctions to relevant authorities.
Despite the regulatory penalty, Starling has taken steps to remediate the breaches it identified and enhance its financial crime control framework. The FCA stated that Starling has implemented programs to address the issues raised in the investigation. The regulator noted that its investigation into Starling was completed in a relatively short time frame of 14 months from opening, compared to an average of 42 months for cases closed in the calendar year 2023/24. Starling’s chairman, David Sproul, emphasized the bank’s commitment to rectifying the failings and ensuring a strong risk management and control framework moving forward. The company is confident in its ability to continue its strategy of safe, sustainable growth supported by these improvements.
