Financial institution Starling Bank penalized with a £29 million fine due to allegedly inadequate anti-money laundering measures.
Starling Bank Faces £28.9 Million Fine for Financial Crime Failings
Starling Bank, the UK's digital-only challenger bank, has been fined £28.9 million by the Financial Conduct Authority (FCA) for failing to comply with anti-money laundering (AML) and financial sanctions requirements. The fine, which was initially set at £40 million, was reduced after Starling reported the potential breaches and agreed to resolve the issues [1].
The FCA's investigation, which spanned over 14 months, revealed that Starling Bank repeatedly breached a requirement not to open accounts for high-risk customers. The regulator found that the bank's AML controls were inadequate when onboarding customers deemed high risk, leading to the opening of over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023 [2].
The weaknesses were rooted in insufficient customer due diligence and failure to effectively use multiple sources of information to verify Ultimate Beneficial Ownership (UBO). This oversight is a key requirement in AML to identify the real individuals behind companies or accounts [2]. The FCA's enforcement underscores that Starling's screening systems were not robust enough to meet the escalating AML standards set by the FCA and the Financial Action Task Force (FATF), especially after 2023 guidance emphasizing multi-source verification and greater scrutiny of high-risk customers [2][4].
The FCA's disciplinary actions also reveal a culture issue, with nearly 40 staff members disciplined for misconduct between 2022 and 2024, though this relates more generally to compliance failures rather than only AML [3][5].
Starling Bank, founded by Anne Boden in 2014 and launched personal current accounts in 2017, has grown rapidly since its inception, reaching 3.6 million customers in 2023. However, the bank's growth has outpaced its systems' ability to adequately tackle financial crime [6].
In response to the findings, Starling Bank has invested heavily to put things right, including strengthening its board governance and capabilities. The bank's statement reaffirms that it will continue to be supported by a robust risk management and control framework [1]. David Sproul, chairman of Starling Bank, apologized for the failings and assured that measures have been taken to strengthen the bank's governance and capabilities [7].
Starling Bank wants to assure its customers and employees that the issues are historic. The bank took a joint top spot with Nationwide as one of the best banks for online banking earlier this year [8]. Starling Bank learned the lessons of this investigation and is confident that the changes and the strength of its franchise put it in a strong position to continue executing its strategy of safe, sustainable growth [9].
References: 1. FCA fines Starling Bank £28.9 million for financial crime failings 2. Starling Bank fined for AML failings 3. Starling Bank staff disciplined over compliance failures 4. FCA's findings on Starling Bank's AML failings 5. Starling Bank's response to the FCA's findings 6. Starling Bank's growth statistics 7. Starling Bank's apology statement 8. Starling Bank wins best bank for online banking award 9. Starling Bank's statement on lessons learned
Starling Bank's AML failings extended beyond the banking-and-insurance sector, as the bank also failed to exercise adequate due diligence in the technology industry, particularly when onboarding high-risk customers for smartphones and gadgets businesses. The bank's inadequate implementation of multi-source verification led to the opening of accounts for thousands of customers associated with these industries.
Starling Bank's weaknesses in AML controls not only affected traditional business sectors but also influenced the digital industry. The bank's screening systems, designed to identify high-risk customers, were insufficient to meet AML standards, causing breaches in the finance sector, as well as in the industry of gadgets, such as smartphones.
The FCA's enforcement on Starling Bank serves as a reminder that the escalating AML standards set by regulatory bodies, such as the FCA and the Financial Action Task Force (FATF), must be met across various sectors, including finance, insurance, business, banking, technology, and even the retail industry of gadgets and smartphones.
