Starling Bank Fined £29M for Lax Financial Crime Controls

Starling Bank, a leading digital banking institution, has faced a significant setback as it has accepted the findings of the Financial Conduct Authority (FCA) regarding its failure to maintain robust financial crime controls. The bank has been fined £29 million, highlighting the importance of prioritizing regulatory compliance and customer protection in the rapidly evolving financial landscape.

Uncovering Starling Bank's Compliance Lapses

Onboarding High-Risk Customers and Sanctions Screening Failures

The FCA's investigation revealed that Starling Bank's financial crime controls failed to keep pace with the growth of its business between December 2019 and November 2023. The bank's onboarding processes for certain high-risk customers and its sanctions screening procedures were found to be inadequate, leaving the financial system vulnerable to criminal activities and individuals subject to sanctions.

Breaching the Voluntary Requirement and Cooperation with the FCA

Starling Bank had previously identified the breaches of the Voluntary Requirement (VREQ) and communicated them to the FCA. The bank has cooperated fully with the regulator's investigation, acknowledging its failure to maintain the necessary financial crime controls as its business expanded rapidly.

Comprehensive Remedial Actions and Strengthened Compliance

In response to the FCA's findings, Starling Bank has taken extensive measures to address the identified shortcomings. The bank has conducted a detailed re-screening of transactions and an in-depth review of customer accounts to ensure compliance with the regulatory requirements. Additionally, Starling has introduced a range of enhanced controls, including increased capabilities, restructured resources, and improved monitoring and oversight of its compliance with the VREQ and financial sanctions screening systems.

Strengthening Governance and Assuring Customers

Starling Bank's Chairman, David Sproul, has acknowledged the failings and apologized for the issues outlined by the FCA. He has emphasized the bank's commitment to learning from this experience and investing heavily to rectify the problems. Starling has strengthened its board governance and capabilities to ensure that these historic issues do not recur, and the bank is confident that the implemented changes and the strength of its franchise will enable it to continue executing its strategy of safe and sustainable growth, underpinned by a robust risk management and control framework.

Regulatory Concerns and the Importance of Compliance

The FCA's Joint Executive Director of Enforcement and Market Oversight, Therese Chambers, has expressed grave concerns about Starling Bank's financial sanctions screening controls, describing them as "shockingly lax." This failure left the financial system wide open to criminals and those subject to sanctions, further compounded by the bank's inability to properly comply with the FCA's requirements.The Starling Bank case highlights the critical importance of maintaining robust financial crime controls and adhering to regulatory standards, especially as financial institutions navigate the challenges of rapid growth and technological advancements. This incident serves as a cautionary tale for the industry, underscoring the need for proactive compliance measures and a strong risk management culture to protect the integrity of the financial system and safeguard customer interests.