The Financial Conduct Authority (FCA) has fined Starling Bank £29m for failing to stop customers involved in criminal activities from having an account.
The failings related to its ‘financial sanctions screening’, which is the process of identifying whether individuals may be considered high-risk or be subject to economic sanctions and to avoid association with anyone involved in illegal activities including money laundering, corruption, terrorism financing or bribery.
The regulator said the bank also “repeatedly breached a requirement not to open accounts for high-risk customers”.
The FCA said Starling Bank had grown “quickly”, and its measures to tackle financial crime did not keep pace as its customer base rose from around 47,000 in 2017 to 3.6 million in 2023.
The regulator looked into financial crime controls at challenger banks in 2021 and found “serious concerns” with the anti-money laundering (AML) and sanctions framework at Starling Bank.
The challenger bank agreed to a requirement that restricted the opening of new accounts for high-risk customers until this framework was improved.
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The FCA said Starling Bank did not comply and continued to open more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November last year.
Additionally, in January last year, Starling Bank became aware that, since 2017, its automated screening system had only been screening customers against a “fraction” of the full list of those subject to financial sanctions.
A follow-up internal review found there were “systemic issues” in its financial sanctions framework. Since then, Starling Bank has “reported multiple potential breaches of financial sanctions to the relevant authorities”, the FCA said.
The fine imposed by the FCA was reduced by 30% from £41m, as Starling Bank agreed to resolve these issues.
Therese Chambers, joint executive director of enforcement and market oversight, said: “Starling’s financial sanction screening controls were shockingly lax. 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.”
FCA said the speed it took to reach an outcome reflected its improved pace of enforcement investigations. It took 14 months from the opening of the case to reach an outcome with Starling, compared to the average 42 months for cases closed in 2023/24.
Starling Bank has since introduced programmes to remediate these breaches and improve its overall financial crime control framework.
This article is based on one that was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Starling Bank fined £29m for financial crime ‘failings’