The FCA has imposed a hefty £28.96m fine on Starling Bank for what it described as “shockingly lax” financial crime controls.
According to City A.M, this penalty marks the regulator’s first financial punishment against a neobank, highlighting increased scrutiny on digital lenders’ compliance measures.
Founded in 2014, Starling Bank experienced a rapid increase in its customer base, growing from 43,000 in 2017 to 3.6m in 2023. However, the FCA pointed out that the bank’s financial crime safeguards did not evolve in tandem with its expanding customer numbers. Specifically, Starling failed to adhere to an FCA directive that limited the opening of new accounts for “high-risk customers.” From September 2021 to November 2022, the bank opened over 54,000 accounts for 49,000 such customers, despite previous warnings from the FCA following a 2021 review which raised serious concerns about its anti-money laundering and sanctions frameworks.
Additionally, Starling reported several “potential breaches of financial sanctions” after discovering systemic issues within its financial sanctions framework during an internal review. The review revealed that, since 2017, its automated system had been screening customers against only a portion of the full sanctions list, a critical oversight that left significant gaps in its compliance.
The fine initially set at £40.96m was reduced following Starling’s agreement to address these failings. Starling’s chairman, David Sproul, expressed remorse for the bank’s shortcomings, stating, “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. We want to assure our customers and employees that these are historic issues. We have learned the lessons of this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing our strategy of safe, sustainable growth, supported by a robust risk management and control framework.”
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, criticized Starling’s controls, saying, “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.”
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