Starling Bank Fined ￡29 Million – A Wake-up Call on Financial Compliance

Overview

In a significant regulatory move, the UK’s Financial Conduct Authority (FCA) fined Starling Bank ￡29 million for serious breaches in its financial crime prevention framework. The fine sheds light on how rapid growth and high customer demand can stretch a company’s compliance systems and risk management capabilities. For Starling Bank, which expanded from 43,000 customers in 2017 to 3.6 million in 2023, the controls meant to safeguard against financial crime simply didn’t keep up.

Starling Bank is a digital and mobile-only bank based in the UK, founded in 2014 by Anne Boden. It offers a range of personal and business banking services through a user-friendly app, Starling Bank has grown rapidly, becoming a major player in the fintech industry.

The Financial Conduct Authority (FCA) is a regulatory body in the United Kingdom responsible for overseeing the financial services industry. Its mission is to protect consumers, ensure market integrity, and promote healthy competition. The FCA enforces standards and regulations that financial institutions must adhere to, acting against misconduct to maintain trust in the financial system.

?Key Compliance Failures

Starling’s journey to meet the needs of a growing customer base came with major oversight gaps. The bank’s automated screening systems had been mistakenly leaving sanctioned individuals out since 2017, a gap that went undetected for years. Compounding the issue, Starling reportedly failed to comply with an agreement not to open accounts for high-risk customers, with over 54,000 such accounts opened between September 2021 and November 2023

These lapses meant that Starling unintentionally exposed the financial system to criminal risks, including individuals flagged for sanctions. Therese Chambers, FCA’s Executive Director of Enforcement and Market Oversight, criticized Starling for its “shockingly lax” approach, stressing the importance of diligent compliance as the first line of defense against financial crimes?

Starling’s Response and Next Steps

Starling Bank has acknowledged the issues and is taking corrective actions to strengthen its systems and processes. CEO Anne Boden noted that as the company scaled, it became evident that their controls needed significant improvements to meet the evolving regulatory expectations. Starling is now investing in more robust automated systems, training staff, and working closely with compliance experts to avoid future lapses.

Lessons for the Financial Sector

1. Scalable Compliance: Growth is exciting, but compliance must evolve alongside it. As digital banking transforms finance, investing in scalable systems and staying ahead of regulatory expectations is crucial.
2. Continuous Monitoring: Effective AML and sanctions compliance require constant oversight, not just periodic reviews. Automated systems need regular testing to ensure they catch the latest risks.
3. Accountability and Transparency: Companies should foster a culture of transparency and accountability, especially in compliance. Open dialogue between regulatory bodies and leadership teams can pave the way for preventative actions rather than costly penalties.?

Conclusion

Starling Bank’s fine is a stark reminder of the stakes involved in compliance within the financial industry. For fintech companies, it’s a call to action to build compliance programs that can match the pace of their growth. Regulators are making it clear: compliance isn’t just a checkbox; it’s an essential part of responsible business practice and customer trust.

Author: Danny Abinesh Ravishanker