Starling Fined $38 Million for ‘Shockingly Lax’ Crime Controls

Starling Bank has been fined 29 million pounds ($38 million) for failing to implement proper financial crime controls.

The U.K. Financial Conduct Authority (FCA) announced the penalty against the neobank Wednesday (Oct. 2), noting that it stemmed from problems first identified in 2021. The fine comes amid a series of regulatory actions against banks over their money laundering standards.

“Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions,” Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said in a news release.

“It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime.”

According to the release, the FCA noted “serious concerns” with Starling’s anti-money laundering (AML) and sanctions framework when it began examining the financial crime measures at challenger banks in 2021.

Starling agreed to a requirement restricting it from opening new accounts for high-risk customers until this could be remedied, but failed to comply, opening more than 54,000 accounts for 49,000 high-risk customers over a two year period, the FCA said.

“In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions,” the FCA said. “A subsequent internal review identified systemic issues in its financial sanctions framework.”

The regulator added that Starling has since notified authorities of multiple potential breaches of financial sanctions. Starling had noted in its annual report earlier this year that it was under investigation, the results of which could have a material impact.

The bank issued a statement Tuesday saying it accepts the FCA’s findings and that it “regrets and apologizes for the events and shortcomings” that led to the watchdog’s actions.

“In response to the FCA’s investigation, and as a result of the bank’s continuous review of processes and controls, Starling has introduced extensive additional safeguards to ensure the bank complies with regulatory requirements,” the company said.

The last few weeks have seen a number of banks dealing with regulatory issues tied to their financial crime controls.

For example, Canada’s TD Bank is reportedly in talks with prosecutors in the U.S. about a plea deal in relation to its alleged anti-money laundering control failures.

And Wells Fargo last month signed an agreement with the U.S. Office of the Comptroller of the Currency to correct deficiencies in its AML and financial crimes risk management practices.