FCA Fines Starling Bank GBP 28.96 Million for Sanctions Screening Failures and VREQ Breach

The Financial Conduct Authority fined Starling Bank £28,959,426 in a Final Notice dated 27 September 2024 and published on 2 October 2024 for serious deficiencies in its financial sanctions screening systems and for breaching a Voluntary Requirement agreed with the regulator. The FCA found that Starling had contravened Principle 3 of its Principles for Businesses — which requires firms to organise and control their affairs responsibly and effectively with adequate risk management systems — and had contravened a Voluntary Requirement, a relevant requirement under section 204A of the Financial Services and Markets Act; the penalty was imposed under section 206 of the Act.

SANCTIONS SCREENING INADEQUATE FOR NEARLY FOUR YEARS

The FCA's investigation found that Starling operated with inadequate financial sanctions screening systems from December 2019 to November 2023, a period of nearly four years. During this time, Starling's automated system screened new and existing customers against only a fraction of the names on the Consolidated List, a fault dating back to 2017 that Starling identified in January 2023. The regulator concluded that these shortcomings left Starling exposed to the risk of providing banking services to sanctioned individuals or entities without detection.

The FCA treated as an aggravating factor that it had written to Starling and thousands of other firms in February 2022 reminding them of the need for robust sanctions controls.

As the bank expanded its customer base from tens of thousands to several million accounts, its sanctions controls did not keep pace with the volume of customers and transactions being processed.

THOUSANDS OF ACCOUNTS OPENED IN BREACH OF VREQ

Separate from the screening failures, the investigation found that Starling had breached a Voluntary Requirement — a binding regulatory commitment — that prohibited the bank from opening accounts for certain categories of higher-risk customers. Starling opened 54,359 accounts for 49,183 high-risk or higher-risk customers who fell within the scope of the prohibited categories.

Voluntary Requirements are regulatory tools that the FCA uses to obtain binding commitments from firms where supervisory concerns have been identified. The combined effect of the Principle 3 breach and the VREQ contravention is reflected in the total fine of £28,959,426. The FCA published the action on its website as part of its 2024 fines disclosures.