Anamika Dey, editor
Brief news
- Starling Bank was fined £29 million by the FCA for deficiencies in financial crime prevention, including failing to screen high-risk customers properly.
- The bank has expressed regret and committed to enhancing its governance and risk management systems.
- Starling’s growth from 43,000 to 3.6 million customers outpaced its financial crime controls, prompting regulatory scrutiny and corrective measures.
Detailed news
Starling Bank, a British digital lender, was issued a £29 million ($38.5 million) sanction by the United Kingdom’s financial regulators for deficiencies in its financial crime prevention systems.
London’s Financial Conduct Authority issued a statement on Wednesday in which it announced that Starling had been fined for “financial crime failings related to its financial sanctions screening.” The FCA also stated that Starling violated a requirement to refrain from opening accounts for high-risk customers on multiple occasions.
Starling expressed its regret for the deficiencies identified by the FCA in response to the penalty and announced that it had conducted a thorough back-book review and detailed inspection of customer accounts.
David Sproul, chairman of Starling Bank, issued a statement on Wednesday in which he expressed his regret for the deficiencies identified by the FCA. He also assured that the bank has made substantial investments to rectify the situation, which includes enhancing its board governance and capabilities.
“We wish to reassure our employees and customers that these are historical concerns.” We have learned the lessons of this investigation and are confident that the strength of our franchise and the changes we have implemented will enable us to continue executing our strategy of safe, sustainable development, which is backed by a comprehensive risk management and control framework.
One of the most prominent online-only challenger banks in the United Kingdom, Starling, has been widely regarded as a potential IPO candidate in the future year. The startup had previously indicated its intention to go public; however, it has since revised its anticipated timetable from 2023 to 2024.
As Starling expanded from 43,000 customers in 2017 to 3.6 million in 2023, the FCA stated in a statement that the bank’s measures to combat financial offenses were unable to keep up with this rate of growth.
In 2021, the FCA initiated an investigation into financial crime controls at digital challenger banks due to concerns that fintech brands’ anti-money laundering and know-your-customer compliance systems were inadequately designed to prevent fraud, money laundering, and sanctions evasion on their platforms.
Starling consented to refrain from establishing new bank accounts for high-risk customers until its internal controls were enhanced, following the initial opening of this investigation. Nevertheless, the FCA asserts that Starling neglected to adhere to this provision and established more than 54,000 accounts for 49,000 high-risk clients between September 2021 and November 2023.
According to the FCA, Starling became aware in January 2023 that its automated system was only screening clients against a fraction of the full list of individuals and entities subject to financial sanctions since 2017, with the bank identifying systemic issues in its sanctions framework in an internal review.
According to the British regulator, Starling has reported numerous potential infractions of financial sanctions to the appropriate authorities since that time.
The FCA stated that Starling has already implemented programs to address the vulnerabilities it identified and to improve its overall financial crime control framework.
In comparison to the average of 42 months for cases closed in the calendar year 2023/24, the British regulator concluded its investigation into Starling in 14 months from the time of opening.
Source : CNBC News
