Even with 30% off, FCA fine is a biggy
In a major regulatory setback, Starling Bank, the UK-based digital challenger bank that owns buy-to-let mortgage specialist Fleet Mortgages and that was founded by Anne Boden in 2014, has been fined nearly £29 million by the Financial Conduct Authority (FCA) for its failure to adequately address financial crime risks. Despite its rapid growth, expanding from 43,000 customers in 2017 to 3.6 million by 2023, Starling's anti-money laundering (AML) and sanctions screening measures fell far behind its customer growth and operations. This led to serious breaches in compliance.
Starling, headquartered in London and known for offering personal and business banking services through its mobile app, first came under FCA scrutiny in 2021 when a review of financial crime controls across challenger banks revealed weaknesses in Starling’s anti-money laundering and sanctions frameworks. The bank agreed to a voluntary restriction, or VREQ, preventing it from opening new accounts for high-risk customers until these issues were resolved. However, Starling violated this agreement by onboarding over 54,000 high-risk customers between September 2021 and November 2023, breaching the FCA’s requirements.
In addition to the onboarding violations, a 2023 internal review revealed that since 2017, Starling’s automated sanctions screening system had failed to check customers against the full UK financial sanctions list, exposing the bank to potential misuse by sanctioned individuals. The FCA condemned these lapses, with Therese Chambers, the Joint Executive Director of Enforcement, describing Starling’s financial crime controls as "shockingly lax" and a significant risk to the financial system.
Starling’s rise to prominence as a challenger bank was driven by its focus on technology and user experience, offering services through its app and positioning itself as an alternative to traditional high street banks. However, as the FCA’s investigation showed, the rapid expansion came with systemic issues in its financial crime controls. Starling has since launched remediation programmes, including enhancements to its sanctions screening processes, third-party audits, and increased compliance resources.
Despite these regulatory challenges, Starling continues to thrive in the competitive financial sector. Under new CEO Raman Bhatia, who replaced founder Anne Boden in 2023, the bank reported a substantial revenue increase to £682.2 million in 2024, with net profits of £220 million. Starling remains a significant player in the UK banking industry, operating without physical branches but serving customers nationwide through partnerships such as one with the Post Office for cash deposits.
