FCA fines Starling Bank £29m for failures in financial sanction checking

With the Authority describing Starling’s financial sanction screening controls as ‘shockingly lax’ this should act as a wake-up call to others in the financial sector

Starling Bank has been fined £29m for failings in financial crime systems, which saw the bank open 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

This shocking figure comes at a time when sanctions are at their most extensive and being policed more closely than ever.

Against this backdrop of an increasingly complex sanctions landscape, banks are being asked to keep constantly up-to-speed with changing sanctions lists.

It is also clear with this action that the FCA is policing and enforcing the sanctions stringently and so the huge fine facing Starling should act as a wake-up call to others in the financial sector.

However, the very nature of financial sanctions means that it is an ever-changing beast, which makes it extremely challenging for companies to ensure that they are adhering to the latest lists as Stuart Favier, Insurance Client Manager at Northdoor plc explains:

“This is a huge fine and one that exemplifies just how seriously the Government and the FCA are enforcing adherence to the financial sanctions process. In the immediate aftermath of the Russian invasion of Ukraine, there was a huge effort from most in the financial sector to check their accounts and close any that were sanctioned due to being aligned with the Russian regime. However, over the years, there has been some relaxation as the focus has turned away from sanctions.

“What is clear from Starling’s fine is that there has been no such relaxation by the regulatory authorities. It seems that the automated system put in place by the bank had been failing to pick up on the current client accounts as well as seemingly unable to keep up-to-date with the changes on the lists. To open up 54,000 accounts for 49,000 high-risk customers is a huge problem.

“Whilst other banks will not have had the same numbers, even a small number of accounts opened for customers on sanctions lists is a real problem. Keeping up-to-date with the changing lists manually is almost an impossible task, and as we have seen with Starling, implementing deficient technology can also cause huge issues.

“However, some companies have turned to automated solutions that can provide accurate screening processes, helping to ensure that individuals or companies on sanctions lists are identified. These solutions can also help banks and financial institutions prove their adherence to regulation.

By automatically creating reports for every search and providing a full audit trail of all the searches conducted, all the hard evidence needed to show compliance is done very easily. The Starling fine shows that companies need to get on top of sanctions. If they do not have a solution in place that automatically does the job, then one needs to be implemented quickly, as manual searching is no longer good enough. If there is a solution in place, companies need to ensure that it is doing the job they expect it to be doing. With fines reaching tens of millions of pounds, it is not worth leaving to chance,” Favier concludes.