Starling Bank’s smartphone banking app.
Adrian Dennis AFP via Getty Images
UK financial regulators have slapped British digital lender Starling Bank with a £29 million ($38.5 million) fine 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 “failing financial crime related financial sanctions checks.” Starling also repeatedly breached the requirement not to open high-risk customer accounts, the FCA said.
In response to the FCA’s fine, Starling said it apologized for the mistakes made by the regulator and that it had completed a detailed screening and in-depth review of the back book of customer accounts.
“I would like to apologize for the errors identified by the FCA and give assurances that we have invested heavily to put things right, including strengthening our board of directors and capabilities,” said David Sproul, chairman of Starling Bank, in a statement on Wednesday.
“We want to reassure our customers and employees that these are historical issues. We have learned a lesson from this investigation and we hope that these changes and the strength of our business have put us in a strong position to continue to implement our strategy of safety, sustainable. growth, supported by a strong risk management and regulatory framework,” he added.
Starling, one of the UK’s best-known online-only banks, is widely seen as a potential IPO candidate in the next year or so. The startup had previously signed off on plans to go public, but pushed back the expected date for an IPO previously targeted in 2023.
The FCA said in a statement that, as Starling grew from 43,000 customers in 2017 to 3.6 million in 2023, the bank’s measures to tackle financial crime failed to keep pace with that growth.
The FCA began looking into financial crime regulation of digital challenger banks in 2021, concerned that fintech brands’ anti-money laundering and customer compliance systems are not strong enough to prevent fraud, money laundering and social media sanction evasion.
After the investigation was first opened, Starling agreed to stop opening new bank accounts for high-risk customers until it improved its internal controls. However, the FCA says 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 realized that, since 2017, its automated system had been screening customers for only part of the full list of people and organizations subject to financial penalties, the FCA said, adding that the bank had identified systemic issues in its penalty framework. in internal review.
Since then, Starling has reported multiple violations of financial sanctions to the relevant authorities, according to the British regulator.
The FCA said Starling has already put in place plans to address identified breaches and to improve its comprehensive financial crime control framework.
The British regulator added that its investigation into Starling was completed in 14 months from opening, compared to an average of 42 months for closed cases in the 2023/24 calendar year.
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