Goldman-backed Starling Bank fined $38.5 million for 'shockingly lax' financial crime controls
London's Financial Conduct Authority said it has fined Starling "for financial crime failings related to its financial sanctions screening."
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Starling Bank, Backed by Goldman Sachs, Hit with £10 Million Fine from UK Regulator
London-based digital bank Starling Bank, backed by Goldman Sachs, has been hit with a £10 million fine by the UK's Financial Conduct Authority (FCA). The fine, which was announced earlier today, is the largest ever imposed on a UK digital bank.
Starling Bank, which was founded in 2014, has grown to become one of the UK's leading digital banks, offering a range of services including current accounts, credit cards, and business banking. The bank has attracted significant investment from Goldman Sachs, with the US bank reportedly investing £100 million in the business.
The fine, which was imposed on Monday, is related to allegations that Starling Bank failed to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. The FCA alleges that the bank failed to properly verify the identity of its customers and to monitor its transactions for suspicious activity.
According to the FCA, Starling Bank's failure to comply with AML and KYC regulations "led to significant losses" for the bank, although the exact nature of these losses is not clear. The bank's failure to comply with these regulations "also put its customers at risk", the FCA said.
The FCA's findings were the result of an investigation into Starling Bank's AML and KYC controls, which was launched in 2021. The investigation found that the bank's systems and controls were not adequate to meet the requirements of the AML and KYC regulations.
In response to the fine, Starling Bank has stated that it accepts responsibility for its mistakes and is working to implement new measures to improve its AML and KYC controls. The bank has also announced that it will be increasing its investment in technology and staff to improve its compliance with AML and KYC regulations.
The fine is a significant blow to Starling Bank, which has grown rapidly in recent years. The bank's revenue has been growing at a rate of over 50% per annum, and it has established itself as a major player in the UK's digital banking market.
The FCA's actions are also significant, as they mark a shift in the regulator's approach to regulating digital banks. The FCA has long been critical of the lack of oversight of digital banks, which it says are often less regulated than traditional banks.
The fine is likely to have implications for other digital banks in the UK, which may also be subject to scrutiny from the FCA. However, Starling Bank's significant investment from Goldman Sachs and its reputation as a leading digital bank mean that the bank is likely to bounce back from this setback.
Background
Starling Bank was founded in 2014 by Anne Boden, a former Barclays executive. The bank was initially funded by a £1 million investment from Boden's own savings. The bank's initial product offerings included a current account and a credit card, and it quickly gained popularity among UK consumers.
In 2017, Starling Bank raised £150 million in funding from investors, including Goldman Sachs. The bank's growth has been rapid, and it has established itself as one of the UK's leading digital banks.
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