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The Starling Bank banking app on a smartphone.
Adrien Dennis | AFP via Getty Images
British financial regulators have fined British digital lender Starling Bank £29 million ($38.5 million) for failings related to its financial crime prevention systems.
In a statement on Wednesday, London’s Financial Conduct Authority said it had fined Starling “for financial crime failings relating to its monitoring of financial sanctions”. Starling also repeatedly breached the requirement not to open accounts for high-risk customers, the FCA said.
In response to the FCA sanction, Starling said it was sorry for the failings highlighted by the regulator and that it had carried out a detailed audit and review of customer accounts.
“I would like to apologize for the failures highlighted by the FCA and assure you that we have invested heavily to turn things around, including strengthening the governance and capabilities of our board,” David Sproul, chairman of the FCA, said on Wednesday. Starling Bank, in a press release.
“We want to assure our customers and employees that these are historical issues. We have learned from this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing on our safety and sustainability strategy. growth, supported by a robust risk management and control framework,” he added.
Starling, one of the UK’s most popular online challenger banks, has been widely seen as a potential candidate for an IPO in the coming year. The startup previously announced plans to go public, but pushed back the planned timeline from its original goal of an IPO as early as 2023.
The FCA said in a statement that while Starling grew from 43,000 customers in 2017 to 3.6 million in 2023, the bank’s measures to tackle financial crime have failed to keep pace with this growth.
The FCA began reviewing financial crime controls at digital rival banks in 2021, concerned that fintech brands’ anti-money laundering and KYC systems were not robust enough to prevent fraud, money laundering and sanctions evasion on their platforms.
After that investigation opened, Starling agreed to stop opening new bank accounts for high-risk customers until it improved its internal controls. However, the FCA claims Starling failed to comply with this provision and opened more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
In January 2023, Starling became aware that, since 2017, its automated system was only screening its customers against a fraction of the full list of people and entities subject to financial sanctions, the FCA said, adding that the bank had identified systemic problems in its sanctions framework. as part of an internal review.
Since then, Starling has reported multiple potential financial sanctions violations to the relevant authorities, according to the UK regulator.
The FCA said Starling had already put programs in place to address the breaches identified and to improve its wider financial crime control framework.
The UK regulator added that its investigation into Starling was completed 14 months after it was opened, compared to an average of 42 months for cases closed in the 2023/24 calendar year.