Starling Bank’s banking app on a smartphone.
Adriaan Dennis | AFP via Getty Images
British financial regulators have fined UK digital lender Starling Bank £29 million ($38.5 million) over deficiencies 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 deficiencies related to financial sanctions screening.” Starling has also repeatedly breached the requirement not to open accounts for high-risk customers, the FCA said.
In response to the FCA fine, Starling said it regretted the shortcomings outlined by the regulator and had completed a detailed screening and in-depth backbook review of customer accounts.
“I would like to apologize for the shortcomings outlined by the FCA and provide reassurance that we have invested heavily to put things right, including strengthening our governance 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 historic issues. We have learned the lessons from this research and are confident that these changes and the strength of our franchise put us in a strong position to continue our strategy of safe, sustainable solutions. growth, supported by a robust risk management and control framework,” he added.
Starling, one of Britain’s most popular online-only challenger banks, is widely seen as a potential IPO candidate in the coming year. The startup previously announced plans to go public, but has shifted the expected timing from a previously planned 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 crimes have not kept pace with that growth.
The FCA began investigating financial crime controls at digital challenger banks in 2021 amid concerns that fintech brands’ anti-money laundering and know-your-customer compliance systems were not robust enough to prevent fraud, money laundering and prevent sanctions evasion on their platforms.
After this investigation was first opened, Starling agreed to stop opening new bank accounts for high-risk customers until internal controls were improved. 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 became aware that its automated system was only screening customers for a fraction of the full list of individuals and entities subject to financial sanctions since 2017, the FCA said, adding that the bank identified systemic issues in its sanctions framework . in an internal review.
Since then, Starling has reported multiple potential breaches of financial sanctions to the relevant authorities, according to the UK regulator.
The FCA said Starling has already put in place programs to remediate the breaches it identified and improve its wider financial crime control framework.
The UK regulator added that the investigation into Starling was completed within 14 months of opening, compared to an average of 42 months for cases closed in the 2023/2024 calendar year.