Starling Bank has been hit with a £29 million fine by the Financial Conduct Authority (FCA) for significant failings in its financial crime controls. The regulator described the bank’s oversight as “shockingly lax,” stating that it had left the UK’s financial system vulnerable to criminals and those subject to international sanctions.
The FCA found that Starling Bank’s processes for screening customers and transactions for financial crime were inadequate, with gaps that allowed potentially illicit activity to go unnoticed. These failures were deemed severe enough to warrant a hefty penalty, highlighting the importance of rigorous financial crime compliance within the banking sector.
John Binns, Partner at BCL Solicitors, commented on the case, suggesting that the FCA’s strong stance on sanctions screening should not come as a surprise, particularly given the current regulatory climate. He noted that the fine serves as a clear warning to other financial institutions about the consequences of failing to follow through on commitments made to regulators.
“It should come as a surprise to absolutely no one that the FCA takes a dim view of lax sanctions screening, especially in the current climate,” said Binns. “Another key, though surely obvious, message from this case is that if you agree with your regulator to take steps to steady your own ship, and then don’t follow through, you can expect some pretty harsh treatment.”
The £29 million fine reflects the FCA’s frustration with Starling Bank’s non-compliance and the regulator’s commitment to enforcing stringent financial crime controls. The size of the fine is seen as a significant statement, underlining the FCA’s expectation that banks must prioritise the detection and prevention of financial crime.
Binns also pointed to the disparity in enforcement efforts across different areas of financial regulation. He drew attention to the Office of Financial Sanctions Implementation (OFSI), which recently issued a much smaller fine for sanctions breaches—amounting to just 0.05% of the size of Starling’s penalty.
“The timing is unfortunate for OFSI,” Binns added, “which recently published its own latest effort at enforcement of financial sanctions, but with a penalty roughly 0.05% of the size. The comparison between those figures may be unfair, but it’s stark and hard to avoid.”
Sean Curran, partner at Arnold & Porter said: “This outcome highlights the FCA’s critical role in enforcing sanctions compliance alongside other financial crime controls, especially at a time when the UK’s broader enforcement of financial sanctions breaches has been seen as underwhelming.
“It also exemplifies the continued trend of the FCA imposing substantial, revenue raising penalties for systems and controls breaches at regulated firms. The lesson for burgeoning UK fintechs is to embed a strong commitment to compliance early on and continually invest in systems that can keep pace with rapid growth.”
The case raises a broader issue within financial regulation – the contrast between the vast resources allocated to anti-money laundering (AML) and compliance frameworks, and the relatively limited efforts to address actual financial crime. While banks are expected to uphold rigorous standards for compliance, questions remain over how effectively the state itself polices financial crime.
This fine marks a significant moment for Starling Bank, which has been one of the UK’s rising fintech stars. As the bank works to address the FCA’s concerns and rebuild its reputation, the case serves as a reminder to the broader financial industry of the critical importance of maintaining robust financial crime prevention measures.
