Starling Bank fined £29m over ‘shockingly lax’ controls

Starling Bank has been fined £29 million by the City regulator for “shockingly lax” controls that left the financial system “wide open to criminals and those subject to sanctions”.
The Financial Conduct Authority (FCA) said the digital bank failed to “design, implement, and maintain adequate systems and controls to mitigate financial crime risks”.
The bank’s financial controls “failed to keep pace with its growth” as it went from its first account in July 2016 to having 3.6 million customers by 2023, the regulator said.
Serious concerns with the bank’s anti-money laundering and financial sanctions systems were first identified during a regulatory review of fast-growing “challenger” banks in 2021. As a result, Starling agreed not to open any new accounts for high-risk customers pending improvement of its systems.
However, the bank breached this agreement and subsequently opened 54,359 accounts for 49,183 high-risk customers, the authority found.
Starling’s automated screening system for checking whether customers were subject to financial sanctions also failed. Between 2017 and 2023 the system had been screening only “a fraction” of those it should have been.
When the bank tackled this issue, it found “wider systemic issues, including Starling’s assessment of its financial sanctions risk, policies and procedures, testing and calibration of screening systems, and a lack of management information regarding alert volumes and trends”, the FCA said.
Banks are required to check their “exposure” to customers subject to financial sanctions and ensure that they are not processing payments in breach of the sanctions. The FCA found a “material risk” that sanctioned individuals would have been able to open or continue to maintain accounts opened with Starling before February 2023.
The fine and failings raise questions about the leadership of the bank under Anne Boden, who founded Starling in 2014, and also its pursuit of a London stock market listing.
Boden, 64, a former Royal Bank of Scotland and Allied Irish Banks executive, announced her departure in May 2023 and left as chief executive the following month. She stepped down from Starling’s board in June 2024.
An unnamed consultancy firm hired by Starling to look into the issues reported in September 2023 that “Starling’s senior management lacked the experience and capability to effectively implement” the agreement not to open new accounts and “failed to adequately oversee and monitor” compliance with it.
Boden was a government adviser until January this year.
Starling and a spokeswoman for Boden declined to answer a series of questions about the matter, including whether Boden or other executives could face pay clawbacks; whether Boden took responsibility for the failings; and whether there was any link between her departure from the bank and the issues.
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said: “Starling’s financial sanction screening controls were shockingly lax. It left the financial system wide open to criminals and those subject to sanctions.
“It compounded this by failing to properly comply with FCA requirements it had agreed to.”
A source at a rival high street bank said they would consider the possibility of legal action against Starling over fraud reimbursement costs associated with customer payouts where Starling was the receiving bank for a suspected fraudulent payment.
In June, The Times reported that Starling had disclosed that the City regulator had opened an investigation into the bank’s compliance with the UK’s anti-money laundering rules.
Starling said it “regrets and apologises for the events and shortcomings” between December 2019 and November 2023.
David Sproul, Starling’s chairman, said the bank had “invested heavily to put things right, including strengthening our board governance and capabilities”.