A British regulator said on Wednesday it had fined start-up Starling Bank £29 million because controls were “appallingly lax” and had left “the financial system wide open to criminals and sanctions”.
The Financial Conduct Authority (FCA) fined Starling, an online challenger bank that takes on established lenders in the fintech world, the equivalent of $39 million for failings related to the bank’s automated customer verification process.
Starling was founded in 2014 by experienced banker Anne Boden before obtaining her banking license from the Bank of England. According to their website, the company currently serves more than four million personal and business accounts.
“Starling grew rapidly…However, measures to combat financial crime have not kept pace with its growth,” the FCA said in a statement.
Starling revealed in January 2023 that since 2017 its automated screening system had been screening customers for only “a fraction of the full list of those subject to financial sanctions,” the regulator said.
It added that after an initial review of financial crime controls at challenger banks in 2021, Starling had failed to deliver on its promise to tighten its own controls.
“The bank agreed to a requirement that prohibits it from opening new accounts for high-risk customers,” the FCA said.
However, “Starling failed to comply with these regulations and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.”
Therese Chambers, the FCA’s joint chief executive for enforcement and markets supervision, said: “Starling’s controls on financial sanctions screening were shockingly lax.”
Starling Chairman David Sproul apologized Wednesday for the lapses, adding that the bank had “invested heavily to remedy the situation,” including strengthening board leadership.
“We have learned the lessons from this investigation,” he added in a statement.
The regulator found that Starling’s actions in the matter resulted in a fine reduction of £41 million.