Starling Bank Fined £29 Million for Failing AML Standards
Starling Bank, the UK-based digital bank, has been fined £29 million by the Financial Conduct Authority (FCA) following a series of failures in its financial crime controls. The fine, discounted from £41 million due to the bank’s cooperation, stems from lapses in anti-money laundering (AML) and sanctions screening processes that left the financial system vulnerable to criminal activities.
The FCA first raised concerns with Starling’s AML framework in 2021, flagging what it called “serious concerns” with the bank’s ability to prevent money laundering and other financial crimes. The FCA identified that Starling had repeatedly breached an agreement not to open accounts for high-risk customers while these issues were being addressed.
Despite agreeing to restrict the opening of new accounts for high-risk customers, the FCA found that Starling opened over 54,000 accounts for 49,000 high-risk individuals between 2021 and 2023. “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions,” stated Therese Chambers, FCA’s Joint Executive Director of Enforcement and Market Oversight.
Systemic Issues Identified
In January 2023, Starling discovered that its automated screening system had, since 2017, only been checking a fraction of sanctioned individuals. An internal review uncovered “systemic issues” in the bank’s sanctions screening processes, including failures to cross-check against 3,049 designated individuals. The review also highlighted that Starling’s management lacked the expertise to effectively implement the FCA’s requirements.
Following the discovery, Starling reported multiple potential breaches of financial sanctions to the authorities. The bank issued a statement expressing regret, noting that it had “established programmes to remediate these breaches and enhance its wider financial crime control framework.”
Broader Context in the Banking Sector
Starling’s penalty comes at a time when several banks globally are facing scrutiny over their financial crime controls. Recently, Canada’s TD Bank and the U.S.’s Wells Fargo have both been involved in regulatory investigations concerning similar issues. These incidents highlight increasing regulatory pressure on financial institutions to maintain robust AML and sanctions screening systems.
Conclusion
The £29 million fine imposed on Starling Bank underscores the severity of its compliance failures. Despite implementing new safeguards to rectify its shortcomings, the FCA’s action serves as a reminder of the importance of adhering to strict financial crime prevention measures. As regulatory bodies worldwide tighten controls, banks must remain vigilant in upholding their responsibilities to protect the integrity of the financial system.
