Starling Bank fined £29m over ‘shockingly lax’ controls

Starling Bank has been fined £29 million by the City regulator for “shockingly lax” controls that left the financial system “wide open to criminals and those subject to sanctions”.
The Financial Conduct Authority said the digital bank failed to “design, implement, and maintain adequate systems and controls to mitigate financial crime risks”.
The bank’s financial controls “failed to keep pace with its growth” as it went from its first account in July 2016 to having 3.6 million customers by 2023, the regulator said.
Serious concerns with the bank’s anti-money laundering and financial sanctions systems were first identified during a regulatory review of fast-growing banks in 2021. As a result, Starling agreed not to open any new accounts for high-risk customers pending improvement of its systems.
However, the bank breached this agreement and subsequently opened 54,359 accounts for 49,183 high risk customers, the authority found.
Starling’s automated screening system for checking if customers were subject to financial sanctions also failed. Between 2017 and 2023 the system had been screening only “a fraction” of those it should have been.
When the bank tackled this issue, it found “wider systemic issues including Starling’s assessment of its financial sanctions risk, policies and procedures, testing and calibration of screening systems, and a lack of management information regarding alert volumes and trends”, the FCA said.
Banks are required to check their “exposure” to customers subject to financial sanctions and ensure that they are not processing payments in breach of the sanctions.
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, 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.”
In June, The Times reported that Starling had disclosed that the City regulator had opened an investigation into the bank’s compliance with the UK’s anti-money laundering rules. It said at the time that the potential impact of the investigation could be “material”.
Starling was founded in 2014 by Anne Boden, a former Royal Bank of Scotland and Allied Irish Banks executive. It offers personal current accounts, business banking, overdrafts, loans and money transfers. Boden, who led the business for the vast majority of the period the fine relates to, left the bank last year.
Responding to the fine, Starling said it “regrets and apologises for the events and shortcomings” between December 2019 and November 2023 over the onboarding of “certain high-risk customers and sanctions screening processes”.
David Sproul, Starling’s chairman, said the bank had “invested heavily to put things right, including strengthening our board governance and capabilities”.
Starling has had previous brushes with controversy, including a bitter row between Boden and Lord Agnew of Oulton, the former counter-fraud minister.
In 2022, Agnew accused Starling of acting “against the government and taxpayers’ interests” by allegedly failing in its counter-fraud duties on the £47 billion bounce back loan scheme. He also accused Starling of being lax in its oversight of the scheme, using it as a “cost-free marketing exercise” and to “swell their balance sheet” at taxpayers’ expense.
Boden demanded the withdrawal of the comments but Agnew refused to back down. Official figures later showed that the bank had been among the worst performing major users of the scheme. The bank subsequently said that its lending under the state-backed scheme had been to businesses with a higher-risk profile than other lenders, so “direct comparisons” were unfair.