Starling Bank has been fined £29m by the City watchdog for “shockingly lax” financial crime controls which “left the financial system wide open to criminals and those subject to sanctions”.
The Financial Conduct Authority (FCA) said the challenger bank had grown quickly but “measures to tackle financial crime did not keep pace with its growth”.
Starling, a UK-based online bank founded in 2014 by entrepreneur Anne Boden, grew rapidly, from 43,000 customers in 2017 to 3.6 million in 2023.
Banks are required by law to conduct rigorous checks on new customers to prevent fraud and money laundering.
The FCA’s review of financial crime controls at challenger banks in 2021 identified serious concerns with the anti-money laundering and sanctions framework in place at Starling.
The bank agreed to a requirement restricting it from opening new accounts for high-risk customers until this improved – but failed to comply and opened more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023, the FCA said.
In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions. An internal review found systemic issues in its financial sanctions framework, and the bank has since reported multiple potential breaches of financial sanctions to the relevant authorities.
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.”
Starling said it “regrets and apologises” for its failings, and has paid the fine as full and final settlement. It added that it had rescreened transactions and reviewed its customer accounts in depth, and introduced additional safeguards.
David Sproul, the bank’s chair, said: “I would like to apologise for the failings outlined by the FCA and to provide reassurance that we have invested heavily to put things right, including strengthening our board governance and capabilities.”
Starling took on an average of 15,000 new business customers a month during the Covid crisis, according to analysis by the Observer in June 2022. The bank was accused by former minister Lord Agnew of failing to properly review borrowers before handing out taxpayer-backed loans. Boden rejected the comments and said she was “shocked” by them.
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Starling’s founder Boden stepped down as chief executive in May last year in a surprise move that she said was designed to shield the online bank from potential concerns over a conflict of interest, because she was a major shareholder. She quit as a non-executive director in June to run her venture AI by Boden, but retains a stake of less than 5% in Starling.
The FCA said it took 14 months to resolve this case, compared with an average of 42 months for cases closed in 2023-24, adding that it showed how it was improving the pace of its investigations.
The fine would have been nearly £41m but the FCA said that, as Starling had “agreed to resolve these matters”, it qualified for a 30% discount under its processes.