Starling Bank Hit with £29 Million Fine Over Financial Crime Control Failures

The Financial Conduct Authority (FCA) has imposed a substantial fine of £29 million on digital challenger bank Starling for significant failings in its financial crime prevention systems and controls. The fine comes after investigations revealed that Starling's rapid growth—expanding from 43,000 customers in 2017 to 3.6 million in 2023—was not matched by adequate development of its financial crime prevention measures.

In a particularly concerning revelation, the bank's automated screening system had been operating with severe limitations since 2017, checking customers against only a partial list of sanctioned individuals. This shortcoming was not discovered until January 2023, prompting an internal review that uncovered systemic issues in the bank's financial sanctions framework.

Further compounding these issues, Starling was found to have breached direct FCA requirements by opening more than 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023. This occurred despite explicit restrictions from the regulator following concerns identified during a 2021 review of challenger banks' financial crime controls.

Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, criticized the bank's practices as "shockingly lax," stating that they had left the financial system "wide open to criminals and those subject to sanctions."

The FCA noted that Starling has now initiated programs to address these breaches and enhance its financial crime control framework. The regulator continues to monitor the bank's progress and maintains supervision to ensure appropriate systems and controls are implemented.

This enforcement action represents a significant shift in the FCA's approach to investigations, with the case concluded in just 14 months—considerably faster than the typical 42-month average for cases closed in 2023/24.

The exact fine amount of £28,959,426 reflects the severity of the breaches and sends a strong message to other financial institutions about the importance of maintaining robust financial crime prevention measures, particularly during periods of rapid growth.

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