UK Regulators Slap Digital Lender Starling Bank with Hefty Fine for Financial Crime Failures
In a stern warning to digital lenders, UK financial regulators have imposed a substantial £29 million fine on Starling Bank for its failures in preventing financial crimes. The Financial Conduct Authority (FCA) cited Starling’s inadequate financial sanctions screening and repeated breaches of high-risk customer account openings.
Starling, a popular online-only challenger bank, has grown exponentially from 43,000 customers in 2017 to 3.6 million in 2023. However, the FCA found that the bank’s measures to tackle financial crimes failed to keep pace with this rapid growth.
The regulator began investigating financial crime controls at digital challenger banks in 2021, concerned that fintech brands’ anti-money laundering and know-your-customer compliance systems were not robust enough. Starling agreed to stop opening new accounts for high-risk customers until it improved its internal controls, but the FCA alleges that the bank failed to comply, opening over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
An internal review revealed systemic issues in Starling’s sanctions framework, which only screened clients against a fraction of the full list of individuals and entities subject to financial sanctions. The bank has since reported multiple potential breaches of financial sanctions to relevant authorities.
Starling’s chairman, David Sproul, apologized for the failings and assured customers and employees that the issues are historic and have been addressed through heavy investments in strengthening board governance and capabilities. The bank has also established programs to remediate the breaches and enhance its financial crime control framework.
The FCA’s investigation into Starling was completed in 14 months, significantly faster than the average 42 months for cases closed in the calendar year 2023/24. The regulator’s swift action serves as a warning to digital lenders to prioritize financial crime prevention and compliance.
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