Starling Bank has been fined £29 million by the Financial Conduct Authority (FCA) for “appalling negligence” in controlling financial crime which has left the UK financial system vulnerable to criminals and individuals.
The FCA’s investigation revealed that the digital bank failed to design and implement adequate systems to reduce the risk of financial crime, particularly as it rapidly grew from its first account in 2016 to 3.6 million customers by 2023.
The FCA has raised serious concerns about Starling’s anti-money laundering (AML) and financial sanctions controls in early 2021 during a review of fast-growing banks. In response, Starling agreed to suspend opening new accounts for high-risk customers until its systems were upgraded. However, the bank breached this agreement, opening more than 54,000 accounts for approximately 50,000 high-risk customers, a direct breach of the FCA’s requirements.
Other failures in Starling’s automated screening process between 2017 and 2023 meant that only a small proportion of customers subject to financial sanctions were properly screened. This oversight exposed the bank to “material risk” that people subject to sanctions might open or continue to have accounts with Starling.
The regulator’s findings raise serious questions about Starling’s leadership under its founder, Anne Boden, who stepped down as CEO in June 2023 and left the board the following year. The bank had hired a consultancy to investigate its compliance issues, which reported in September 2023 that Starling’s senior management lacked the necessary experience to enforce FCA compliance.
Therese Chambers, the FCA’s joint director of regulatory compliance and market oversight, condemned the bank’s failure, saying: “The supervision of Starling funds was incredibly lax. It has left the financial system open to criminals and those facing sanctions.”
Starling has since apologized for his mistakes, with chairman David Sproul saying that the bank has “invested heavily in getting things right, including strengthening our management and board capabilities.” Despite these efforts, the fine raises concerns about Starling’s pursuit of a listing on the London stock market.
The scam led to rival banks considering legal action against Starling for fraudulent chargebacks related to fraudulent payments made to Starling customers. In June, The Times reported that the FCA had opened a separate investigation into Starling’s compliance with UK anti-money laundering laws.
Starling expressed regret for the failure that occurred between 2019 and 2023, but the fine represents a significant damage to the reputation of the once highly respected digital bank, raising doubts about its future leadership and compliance.
