Starling Bank Faces £29M Fine Over AML Failures
U.K.-based digital bank Starling has been fined £29 million (~$39M) by the Financial Conduct Authority (FCA) for significant shortcomings in its financial crime prevention systems between 2021-2023. The penalty highlights growing regulatory scrutiny on fintech compliance standards.
Key Findings from the FCA Investigation
- Inadequate controls: Starling failed to implement proper anti-money laundering (AML) and financial sanctions screening
- High-risk exposure: Approximately 54,000 accounts were opened by high-risk customers during the review period
- Regulatory breach: Continued onboarding of 49,000 high-risk clients despite an FCA directive to pause such activity
“Starling’s financial sanction screening controls were shockingly lax,” stated Therese Chambers, FCA’s Joint Executive Director of Enforcement. “It left the financial system vulnerable to criminals and sanctioned entities.”
Regulatory Context and Industry Impact
The FCA’s action comes amid heightened oversight of challenger banks following the 2020 Wirecard collapse. Regulators are taking a tougher stance on fintech compliance, particularly regarding:
- Customer due diligence processes
- Transaction monitoring systems
- Risk assessment frameworks
Starling’s case follows similar investigations into compe*****s:
- Monzo: FCA dropped a criminal probe after two years
- Revolut: Received banking license in 2024 after addressing compliance concerns
Starling’s Response and Remediation
The digital bank cooperated with regulators, resulting in a 30% fine reduction. Chairman David Sproul acknowledged the failures:
“We have invested heavily to put things right, including strengthening our board governance and capabilities. These are historic issues, and we’re confident in our improved risk management framework.”
Moving Forward: Compliance in Digital Banking
This case underscores critical lessons for fintechs:
- Scalability challenges: Starling grew from 43,000 to 4.2M customers during the review period
- Regulatory alignment: Rapid growth must be matched with compliance infrastructure
- Industry standards: Digital banks face the same AML obligations as traditional institutions
The FCA’s action signals continued vigilance as challenger banks mature, balancing innovation with financial system integrity.
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