UK rival bank Starling fined £29m by FCA for ‘shockingly lax’ customer checks

The Financial Conduct Authority (FCA) has fined Starling, a challenger online bank that approached established fintech lenders, the equivalent of $39 million for failings related to the bank’s automated customer screening.

Founded by veteran banker Anne Boden in 2014 before receiving its banking license from the Bank of England, Starling currently serves 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 learned in January 2023 that its automated screening system had, since 2017, screened customers only against “a portion of the full list of those subject to financial sanctions,” the regulator said.

It added that following an initial review of financial crime controls at challenger banks in 2021, Starling had not given a commitment to tighten its own controls.

“The bank has agreed to a requirement that restricts them from opening new accounts for high-risk customers,” the FCA said.

However, “Starling did not comply and opened more than 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 market surveillance, said “Starling’s financial sanction screening controls were shockingly lax”.

Starling chairman David Sproul apologized for the failures on Wednesday, adding that the bank had “invested heavily to get things right”, including strengthening board governance.

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

The regulator noted that Starling’s action in the matter had resulted in the fine being reduced from £41m.