British digital lender Starling Bank has been slapped with a hefty £29 million ($38.5 million) fine by U.K. financial regulators over failures in its financial crime prevention systems. The Financial Conduct Authority (FCA) announced the penalty, citing serious lapses in Starling’s financial sanctions screening and the bank's decision to open accounts for high-risk customers, despite regulations prohibiting such actions.
In response, Starling Bank apologized for its shortcomings, with chairman David Sproul stating that the company has taken extensive steps to address the issues raised by the FCA. These steps include a thorough review of customer accounts and enhanced governance to ensure compliance moving forward. Sproul emphasized that these are past problems, and the bank has learned valuable lessons, strengthening its risk management processes to support its strategy of sustainable growth.
Starling, one of the U.K.’s leading online-only challenger banks, has been seen as a strong candidate for an IPO in the near future. However, its timeline has been delayed as the bank works to resolve internal compliance challenges. The FCA revealed that Starling’s rapid expansion—from 43,000 customers in 2017 to 3.6 million by 2023—outpaced its financial crime controls, leaving the bank vulnerable to potential fraud, money laundering, and sanctions breaches.
The FCA first began investigating financial crime controls at challenger banks like Starling in 2021, raising concerns about weak anti-money laundering and compliance systems across the fintech sector. Starling had agreed to halt the opening of new accounts for high-risk customers while it worked on improving internal processes. However, the FCA found that between 2021 and 2023, Starling opened tens of thousands of accounts for high-risk clients, failing to fully comply with the restrictions.
Starling also discovered in early 2023 that its automated system had been screening customers against only a portion of the required financial sanctions list since 2017. Since then, the bank has reported multiple breaches to authorities and implemented measures to strengthen its financial crime controls.
Despite these setbacks, Starling has taken significant steps to rectify the issues and enhance its internal systems. The FCA highlighted that its investigation into Starling wrapped up in just 14 months—far quicker than the 42-month average for similar cases.
As Starling works to rebuild trust, it remains a prominent player in the U.K. 's fintech landscape, focusing on a more secure and compliant future while continuing its growth ambitions.
