The Financial Conduct Authority (FCA) has fined Starling Bank almost £29m for financial crime failings the regulator described as “shockingly lax”.

The challenger bank also repeatedly breached a requirement to not open accounts for high-risk customers, in a move which “left the financial system wide open to criminals and those subject to sanctions”.

In its statement issued at the start of October 2024, Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, said: “Starling’s financial sanction screening controls were shockingly lax.

“It left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime.”

Starling was founded in 2014 by entrepreneur Anne Boden and backed by Golden Sachs. It has grown rapidly, from around 43,000 customers in 2017 to 3.6m in 2023.

However, measures to tackle financial crime have not kept pace with its growth.

In 2021, the FCA reviewed financial controls at the bank and identified serious concerns with the anti-money laundering (AML) and sanctions framework in place at Starling.

Following this, the bank agreed to a requirement restricting it from opening new accounts for high-risk customers. However, Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

In January 2023, Starling discovered that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions. A subsequent internal review identified systemic issues in its financial sanctions framework.

In a statement issued by Starling Bank on 2 October 2024 in response to the charges, the bank confirmed that it fully accepted the FCA’s findings, and “regrets and apologises for the events and shortcomings” that led to the regulator issuing its final notice.

David Sproul, Chairman of Starling Bank, said: “I would like to apologise for the failings outlined by the FCA and to provide reassurance that we have invested heavily to put things right, including strengthening our board governance and capabilities. 

“We have learned the lessons of this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing our strategy of safe, sustainable growth, supported by a robust risk management and control framework,” continued Sproul.

The bank said that it had introduced a series of programmes to remediate the breaches and enhance its wider financial crime control framework.

Read the full FCA press release here.

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