Starling Bank, a prominent UK-based challenger bank, has been fined £29 million (around $39 million) by the Financial Conduct Authority (FCA) for insufficient financial crime controls between 2021 and 2023.
Founded over a decade ago, Starling came under FCA scrutiny after the regulator began reviewing financial crime controls in challenger banks in 2021. This review followed the collapse of German fintech Wirecard, which faced insolvency and fraud allegations, leaving €1.9 billion unaccounted for. The FCA, aiming to avoid a similar situation to Germany’s BaFin, intensified its oversight of fintech firms across the UK and Europe.
In Starling’s case, the FCA found deficiencies in its anti-money laundering (AML) processes. The bank had been instructed to halt onboarding high-risk customers until improvements were made. Despite this, around 49,000 high-risk accounts were opened between September 2021 and November 2023. In total, 54,000 such accounts were opened, according to the FCA.
Starling experienced rapid growth, expanding from 43,000 customers to 3.6 million by 2023, with the bank now claiming 4.2 million customers. Therese Chambers, the FCA's Joint Executive Director of Enforcement and Market Oversight, criticized Starling’s lax financial sanction screening, calling it a vulnerability for criminal activity.
Starling has cooperated with the FCA, securing a 30% reduction in its fine by committing to rectify its processes. David Sproul, the bank’s chairman, apologized for the oversight and emphasized that corrective actions, including stronger board governance, have been implemented. He assured customers and staff that these issues are in the past, and the bank is now well-positioned for sustainable growth.
Other challenger banks have also faced regulatory challenges. Monzo, for example, underwent an investigation but saw the FCA drop its criminal probe after two years. Revolut, flagged by the FCA for suspicious accounts in 2023, was granted a UK banking license in 2024 following a lengthy approval process.
Post a Comment