FCA fines Starling Bank £29m for sanctions screening failures
The Financial Conduct Authority (FCA) has fined UK challenger Starling Bank £28,959,426 for financial crime failings related to its financial sanctions screening, including breaching rules on high-risk customer accounts.
Starling Bank has paid its £29 million fine
Founded in 2014, Starling grew from 43,000 customers in 2017 to 3.6 million customers by 2023, reporting in June a 54.7% rise in pre-tax profits to £301.1 million in its third consecutive year of profitability.
However, a final notice posted by the FCA notes that the challenger’s “measures to tackle financial crime did not keep pace with its growth”.
This is after the regulator raised “serious concerns with the anti-money laundering (AML) and sanctions framework in place” at Starling during a review of challenger banks’ financial crime controls conducted in 2021.
As a result, Starling initially agreed to a voluntary requirement (VREQ) to halt opening new accounts for high-risk customers until improvements were made through its AML enhancement plan.
However, the regulator reports that Starling “failed to implement all of the underlying requirements and sub-requirements of the VREQ properly and did not adequately monitor its compliance with the terms of the VREQ following its imposition”.
This included opening over 54,359 accounts for 49,183 high-risk customers between September 2021 and November 2023, earning £900,000 in interest and fees during this period.
“Starling’s financial sanction screening controls were shockingly lax,” states Therese Chambers, joint executive director of enforcement and market oversight at the FCA.
“It left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime,” adds Chambers.
In response to the FCA’s investigation, Starling has apologised and says it “accepts its finding that the Bank’s financial crime controls failed to keep pace with the growth of the business. Starling has paid a fine of £29m as full and final settlement”.
In addition, the challenger claims to have now completed both a “detailed re-screening of transactions” and an “in-depth back book review of customer accounts in respect of the contraventions detailed in the Notice”.
Furthermore, Starling states it has introduced “additional safeguards to ensure the Bank complies with regulatory requirements”.
In July, the FCA fined CB Payments, the UK subsidiary of cryptocurrency exchange Coinbase, £3.5 million for similar violations related to offering services to high-risk customers.
