UK fines digital bank Starling for ‘scandalously lax’ controls

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A British regulator announced on Wednesday that it had fined start-up Starling Bank £29 million for “shockingly lax” controls that “left the financial system wide open to criminals and those subject to sanctions”.

The Financial Conduct Authority (FCA) has fined Starling, a rival online bank targeting established fintech lenders, $39 million for failings linked to automated customer screening by the bank.

Founded by veteran banker Anne Boden in 2014 before receiving her banking license from the Bank of England, Starling currently services more than four million personal and business accounts, according to its website.

“Starling has grown rapidly… However, measures to tackle financial crime have not kept pace with its growth,” the FCA said in a statement.

Starling became aware in January 2023 that its automated control system had, since 2017, only selected customers from “a fraction of the full list of people subject to financial sanctions,” the regulator said.

He added that following an initial review of financial crime controls at rival banks in 2021, Starling failed to deliver on its promise to strengthen its own controls.

“The bank agreed to a requirement prohibiting it from opening new accounts for high-risk customers,” the FCA said.

However, “Starling failed to comply with its obligations and opened more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.”

Therese Chambers, the FCA’s co-executive director of enforcement and market oversight, said Starling’s “financial sanctions screening controls were shockingly lax”.

Starling Chairman David Sproul apologized Wednesday for the failures, adding that the bank had “invested heavily to turn things around,” including strengthening board governance.

“We have learned lessons from this investigation,” he added in a statement.

The regulator noted that Starling’s action in this case resulted in a reduction of its fine by £41 million.

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