FCA fines Starling Bank £29m for sanctions screening failures

The Financial Conduct Authority (FCA) has fined UK challenger Starling Bank £28.9 million for failing to properly manage financial crime risks, particularly in its financial sanctions screening and handling of high-risk customer accounts. Despite significant growth from 43,000 customers in 2017 to 3.6 million in 2023, the FCA found that Starling’s measures to combat financial crime did not keep up with the bank’s rapid expansion. The FCA’s review of challenger banks’ anti-money laundering (AML) controls in 2021 uncovered serious deficiencies in Starling’s approach, leading to the fine.

In response to the FCA’s findings, Starling Bank had agreed to a voluntary requirement (VREQ) to stop opening new high-risk customer accounts while it worked on improving its AML processes. However, the FCA noted that Starling failed to fully comply with the VREQ, continuing to open over 54,000 accounts for high-risk customers between 2021 and 2023, generating £900,000 in interest and fees during that period. FCA’s joint executive director, Therese Chambers, criticized Starling’s financial sanction controls as “shockingly lax,” stating that they exposed the financial system to criminal activities and sanctions breaches.

Starling Bank has since apologized, acknowledging the failure of its financial crime controls to match the growth of the business. The bank has paid the £29 million fine in full and claims to have completed a thorough review of customer accounts and transactions affected by the regulatory breaches. Starling has also implemented additional safeguards to ensure compliance with regulatory standards moving forward.