{"id":6309,"date":"2024-10-19T06:34:21","date_gmt":"2024-10-19T06:34:21","guid":{"rendered":"https:\/\/finderica.com\/starling-bank-fined-29mn-over-shockingly-lax-crime-controls\/"},"modified":"2024-10-19T06:34:21","modified_gmt":"2024-10-19T06:34:21","slug":"starling-bank-fined-29mn-over-shockingly-lax-crime-controls","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=6309","title":{"rendered":"Starling Bank fined \u00a329mn over \u2018shockingly lax\u2019 crime controls"},"content":{"rendered":"
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Starling Bank has received a fine of \u00a329mn from the UK financial regulator, which accused the challenger bank of \u201cshockingly lax\u201d controls against financial crime.<\/p>\n

Starling\u2019s efforts to identify potential money laundering, sanctions breaches and screen high-risk customers \u201cdid not keep pace\u201d with the bank\u2019s growth, the Financial Conduct Authority said on Wednesday<\/a>. Starling grew from about 43,000 customers in 2017 to 3.6mn in 2023, the watchdog said.<\/p>\n

\u201cStarling\u2019s financial sanction screening controls were shockingly lax,\u201d said Therese Chambers, joint executive director of enforcement and market oversight at the FCA. \u201cIt left the financial system wide open to criminals and those subject to sanctions.\u201d<\/p>\n

The FCA said Starling had repeatedly failed to comply with an earlier agreement it made with regulators to stop opening new accounts for high-risk customers until its financial crime controls had improved. <\/p>\n

Despite the agreement, the bank opened 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023, the watchdog said.<\/p>\n

Starling realised in January 2023 that its automated screening system had for six years \u201conly been screening customers against a fraction of the full list of those subject to financial sanctions\u201d, the FCA said.<\/p>\n

This led to an internal review that found \u201csystemic issues\u201d in its financial sanctions framework, with the bank since reporting \u201cmultiple potential breaches of financial sanctions\u201d to authorities.<\/p>\n

The fine, which is the first of its type against a digital bank, comes as the watchdog is stepping up its scrutiny of neobanks\u2019 financial-crime controls.<\/p>\n

The FCA warned in 2022 that a surge in reports to the National Crime Agency had raised \u201cconcerns about the adequacy of [neobanks\u2019] checks when taking on new customers\u201d. The watchdog is separately conducting a civil probe into money-laundering controls at Starling\u2019s rival, Monzo Bank, having downgraded it from a criminal matter, the bank said in its annual report in June.<\/p>\n

The FCA has issued some of its biggest fines in recent years for failings in big banks\u2019 systems to stop financial crime and money laundering, such as the \u00a3108mn penalty for Santander UK in 2022 and a \u00a3265mn fine for NatWest in 2021.<\/p>\n

Claire Cross, a partner at law firm Corker Binning, said: \u201cI expect we will see more action by the regulator against fintechs. They represent an area of the market that has been under close scrutiny by the FCA.\u201d<\/p>\n

Start-ups have struggled to scale up their financial crime controls at the same speed as they have attracted new users, while a wave of sanctions imposed after Russia\u2019s 2022 invasion of Ukraine raised the amount of due diligence banks have to conduct on new customers.<\/p>\n

Starling co-operated with the FCA and therefore qualified for a 30 per cent discount on a fine that otherwise would have been as high as \u00a341mn, according to the findings.<\/p>\n

Starling chair David Sproul said: \u201cI would like to apologise for the failings outlined by the FCA and to provide reassurance that we have invested heavily to put things right, including strengthening our board governance and capabilities.\u201d<\/p>\n

As well as Sproul, who led the UK practice of Big Four accountancy firm Deloitte, Starling\u2019s heavyweight board includes Tracy Clarke, the former head of Europe and Americas at Standard Chartered.<\/p>\n

Kathryn Westmore, a senior research fellow at the Centre for Finance and Security at the Royal United Services Institute think-tank, noted that the FCA was \u201cvery critical\u201d of Starling\u2019s senior management.<\/p>\n

The FCA said the bank\u2019s \u201csenior management as a whole lacked the experience and capability\u201d to effectively implement their voluntary agreement around high-risk customers with regulators. <\/p>\n

\u201cChallenger banks and fintechs often seem to struggle to get senior buy-in when it comes to financial crime compliance, including understanding the threats and ensuring there are adequate resources for compliance,\u201d said Westmore.<\/p>\n

\u201cThis is a substantial fine and one that many firms, particularly digital banks and payment firms, should take notice of,\u201d she added.<\/p>\n

Starling founder Anne Boden stepped down as chief executive last year after a row with investors over fund manager Jupiter\u2019s decision to sell its holding in the bank at a price that cut Starling\u2019s valuation from \u00a32.5bn to between \u00a31bn and \u00a31.5bn in February 2023.<\/p>\n

Sproul said the failings were \u201chistoric issues\u201d and that it had learned the lessons of this investigation.<\/p>\n<\/div>\n

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Unlock the Editor\u2019s Digest for free Starling Bank has received a fine of \u00a329mn from the UK financial regulator, which accused the challenger bank of \u201cshockingly lax\u201d controls against financial crime. Starling\u2019s efforts to identify potential money laundering, sanctions breaches and screen high-risk customers \u201cdid not keep pace\u201d with the bank\u2019s growth, the Financial Conduct<\/p>\n","protected":false},"author":2,"featured_media":6310,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[206],"tags":[1041,136,1044,538,1040,1043,1042,1039],"class_list":{"0":"post-6309","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-financial-crime","8":"tag-29mn","9":"tag-bank","10":"tag-controls","11":"tag-crime","12":"tag-fined","13":"tag-lax","14":"tag-shockingly","15":"tag-starling"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/6309","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6309"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/6309\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/6310"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6309"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6309"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6309"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}