Starling Bank banking app on your smartphone.
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Britain’s financial regulator fined British digital bank Starling Bank £29 million ($38.5 million) for failures related to its financial crime prevention system.
London’s Financial Conduct Authority said in a statement on Wednesday that it fined Starling “due to financial crime failures related to financial sanctions screening”. Starling also repeatedly breached requirements not to open accounts for high-risk customers, the FCA said.
Starling was not immediately available for comment when contacted by CNBC.
Starling is one of the UK’s most popular online challenger banks and is widely seen as a potential IPO candidate in the next year or so. The startup had previously said it planned to go public, but has pushed back its expectations to 2023 from an earlier IPO target.
The FCA said in a statement that as Starling’s customer base expanded from 43,000 in 2017 to 3.6 million in 2023, the bank’s measures to combat financial crime had failed to keep pace with the growth.
The FCA began studying the financial crime controls of digital challenger banks in 2021, amid concerns that fintech brands’ anti-money laundering and know-your-customer compliance systems are not strong enough to prevent fraud, money laundering and sanctions evasion on their platforms.
After the investigation was first launched, Starling agreed to stop opening new bank accounts for high-risk customers until internal controls could be improved. However, the FCA said Starling failed to comply with this regulation and opened more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.
In January 2023, Starling became aware that, since 2017, its automated systems had been screening customers against only a small subset of the full list of individuals and entities subject to financial sanctions, the FCA said, adding that the bank had set out the rules in its sanctions framework Systemic issues were discovered during an internal review.
Starling has since reported multiple potential breaches of financial sanctions to authorities, according to British regulators.
The FCA said Starling has plans in place to rectify the breaches it identified and strengthen its wider financial crime control framework.
The UK regulator added that the investigation into Starling was completed within 14 months from the date it began, compared with an average of 42 months for cases concluded in the 2023/24 calendar year.
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