One of the UK’s top challenger banks has been fined £29m by the UK financial regulator for “shockingly lax” financial screening controls.

The FCA has fined Starling Bank £28,959,426 for financial crime failings. The regulator also said the challenger bank, founded by Anne Boden, had “repeatedly breached a requirement not to open accounts for high-risk customers”.

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

Starling, which has over four million customers and has raised around $1.1bn in funding, said it “fully accepts” the findings and “regrets” and “apologises” for its shortcomings.

Starling disclosed earlier this year that it was being probed by the City regulator saying the impact of the investigation could be “material”.

The regulator began its probe in 2021, identifying “serious concerns” with the anti-money laundering and sanctions framework in place at Starling. 

It said Starling agreed to restrictions on opening new accounts for high-risk customers until this improved. 

But the regulator said Starling breached the agreement and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

The regulator added:

“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 said the challenger bank had now set up programmes to “remediate these breaches and to enhance its wider financial crime control framework”.

Starling said it had “completed both a detailed re-screening of transactions and an in-depth back book review of customer accounts in respect of the contraventions”.

David Sproul, chairman, Starling Bank, said:

“I 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. 

“We want to assure our customers and employees that these are historic issues. We have learned the lessons of this investigation and are confident that these changes and the strength of our franchise put us in a strong position to continue executing our strategy of safe, sustainable growth, supported by a robust risk management and control framework.”