Implications of Starling fine, reprimand come into sharp focus, UK’s new fraud rules and Credit Suisse still casts shadow

From Paul O'Donoghue at AMLi

Implications of Starling fine, reprimand come into sharp focus, UK’s new fraud rules and Credit Suisse still casts shadow

As the dust starts to settle from Starling Bank’s ￡29 million bombshell fine, some of the implications are coming into focus.

The firm, which has billed itself as the UK’s ‘first digital bank’, was raked over the coals by the FCA for ‘shockingly lax’ AML and customer screening controls.

It’s clear now that at board level, AML ignorance no longer equals innocence. As we highlighted in our analysis piece, Starling’s ‘senior staff’ were repeatedly called out for incompetence in their anti-financial crime approach.

Choice failings include a shambolic approach to sanctions screening and opening accounts for almost 50,000 high risk customers after already getting a warning from the FCA.

Starling should perhaps count itself fortunate it is a UK, rather than U.S. firm. The ￡29 million fine, while substantial by UK standards, is unlikely to be too impactful to a business which made pre-tax profits of ￡300 million last year.

But as an indicator of the bank’s AML approach - the FCA fine has cast Starling in a pretty poor light. In an era of individual accountability it also puts CEOs and boards on notice.

IAFCS: Starling’s AML woes will give attendees of ‘International Anti-Financial Crime Summit 2024’ plenty to discuss.

With the event’s October 9 date rapidly approaching, it’s the last chance to grab tickets to what looks like a sell-out.

High profile speakers will include the likes of FATF president Elisa de Anda, while top experts are set to dig deeper into the likes of what happened at Starling and how finance firms can stay one step ahead.

FRAUD: Given its London location, a key talking point at IAFCS 2024 will likely be the UK’s new fraud reimbursement rules

The measures, which come into force on Monday October 7, will require banks and payments firms to reimburse fraud victims in most cases.

Payouts will be capped at ￡85,000, well below the previously-flagged ceiling of ￡415,000, following strong lobbying from banks and politicians.

But UK lenders are still unhappy. Given that many scams originate on social media, there are growing calls from banks for tech firms to shoulder their share of the compensation burden.

NORTH AMERICA

TD BANK: It’s well-covered how bad the last few months have been for Canadian lender TD Bank, which looks set to swallow at least $3 billion in AML-related penalties.

But recently, the focus has also shifted to what regulators could have done to prevent the company’s issues from spiraling.

In what looks like a nod to TD’s woes, Canada’s banking regulator has said risks to banks from AML risks have recently “risen in prominence”.

While not naming TD, Peter Routledge, the director of the Office of the Superintendent of Financial Institutions, has conceded that AML problems faced by the country’s banks could be “more significant than I appreciated”.

CITIGROUP: New York-based Citigroup got some positive AML news this week, when the Federal Reserve confirmed it was finally closing a long-running probe into the firm.

The investigation related to Citi’s Banamex subsidiary over deficiencies in its anti-money laundering programs.

However, Citi recently confirmed that it will split Banamex from the rest of the bank, with the business expected to IPO in the second half of 2024.

CYBERCRIME:

EVIL CORP: Originally a Moscow-based crime group, Evil Corp has grown to become one of the largest cybercrime organizations in the world.

A new investigation has revealed that the group still has a family influence, with prominent Evil Corp figure Maksim Yakubets allegedly being supported by his father Viktor Yakubets

The report from the UK’s National Crime Agency came as the country sanctioned 16 people who are allegedly part of the group, adding to penalties from the U.S. and Australia.

CREDIT SUISSE: Finally, the shadow of Credit Suisse continues to loom large over UBS.

The Swiss banking giant took over its former rival after Credit Suisse went to the brink of a complete meltdown last year.

But while UBS may have gained the bones of an international organization, it has also taken on many of its liabilities.

For example - a court case concerning money laundering charges linked to the Bulgarian mafia.

While UBS is trying to have the matter thrown out, so far the court has not played ball.

FRAUD: Given its London location, a key talking point at IAFCS 2024 will likely be the UK’s new fraud reimbursement rule.

The measures, which come into force on Monday October 7, will require banks and payments firms to reimburse scam victims in most cases, with payouts capped at ￡85,000.

At the eleventh hour, digital bank Revolut has called for Meta to help share the costs of the scheme, with an extraordinary attack on the social media firm.

Revolut said Meta is failing to police fraud on its platform, saying the tech firm has "no incentive" to tackle scams as it doesn't have to share in reimbursement costs.

The tough language points to the deep unhappiness of UK banks that they will be largely responsible for paying out fraud victims, despite many scams originating on social media.

?? We have special offers for Individual and Corporate Members. Your Chief Compliance Officer, Department Head, or Chief Librarian can contact us about our Enterprise Membership for your organisation. Please reach out to James Treacy at [email protected] for further information.

Join the world’s fastest-growing FinCrime community and become an AML Intelligence member.

Subscribe now

Have a great Friday ??

Stephen and the team at AMlintelligence.