Starling Bank fined for ‘shockingly lax’ buyer checks | USAEMALL.com

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The toughest challenge when setting up a UK neobank is to achieve critical mass.

Starling Bank did it, growing from nothing in 2016 to 3.16mn customers and £452.8mn in revenue by its 2023 year end. Having been been profitable for the past three years, the Chrysalis-backed lender is widely expected to seek a public listing at a market value of up to £10bn.

The FCA today offers an insight into one driver of this rapid growth: AML policies you could drive a bus through.

“Starling’s financial sanction screening controls were shockingly lax,” said Therese Chambers, FCA’s Joint Executive Director of Enforcement and Market Oversight, in a press release.

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, which were put in place to lower the risk of Starling facilitating financial crime.

The FCA said it has fined Starling £28,959,426 for failings with its financial sanctions screenings and repeatedly breaching a requirement not to open accounts for high-risk customers. The fine would have been £41mn but Starling agreed not to fight the rap sheet in exchange for a 30 per cent discount.

From the press release:

When the FCA reviewed financial crime controls at challenger banks in 2021, it identified serious concerns with the anti-money laundering and sanctions framework in place at Starling. The bank agreed to a requirement restricting it from opening new accounts for high-risk customers until this improved. Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions. A subsequent internal review identified systemic issues in its financial sanctions framework. Starling has since reported multiple potential breaches of financial sanctions to the relevant authorities.

The FCA’s final notice is here.

Further reading:
— Can Starling Bank make tech its business? (FT)