A UK regulator Wednesday said it had fined startup Starling Bank £29 million for “shockingly lax” controls that “left the financial system wide open to criminals and those subject to sanctions”.
The Financial Conduct Authority (FCA) fined Starling, an online challenger bank taking on established lenders in the world of fintech, the equivalent of $39 million for failings linked to the bank’s automated screening of customers.
Founded by veteran banker Anne Boden in 2014 ahead of receiving its banking licence from the Bank of England, Starling currently serves more than four million personal and business accounts, according to its website.
“Starling grew quickly… However, measures to tackle financial crime did not keep pace with its growth,” the FCA said in a statement.
Starling became aware in January 2023 that its automated screening system had, since 2017, been screening customers against only “a fraction of the full list of those subject to financial sanctions”, the regulator said.
It added that following an initial review of financial crime-controls at challenger banks in 2021, Starling failed on a pledge to tighten its own checks.
“The bank agreed to a requirement restricting it from opening new accounts for high-risk customers,” the FCA said.
However, “Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023”.
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said “Starling’s financial sanction screening controls were shockingly lax”.
Starling chairman David Sproul on Wednesday apologised for the failings, adding that the bank had “invested heavily to put things right”, including strengthening board governance.
“We have learned the lessons of this investigation,” he added in a statement.
The regulator noted that Starling’s action over the matter resulted in its fine being reduced from £41 million.