What can ARs and Principal firms learn from the recent Starling Bank Case

The recent £29 million fine imposed by the FCA on Starling Bank serves as a stark reminder of what can happen when financial crime controls fall short, even for a well-established business. Starling’s fine was largely due to deficiencies in its financial sanctions screening, which failed to keep up with its rapid growth (https://www.herbertsmithfreehills.com/notes/fsrandcorpcrime/2024-posts/fca-fines-starling-bank-%C2%A329m-for-failures-in-financial-crime-controls#:~:text=On%2027%20September%202024%2C%20the,Principle%203%20of%20the%20FCA's). The FCA found that Starling was not adequately screening all of its customers, leading to the onboarding of high-risk clients and significant gaps in its financial crime controls  (https://www.fca.org.uk/publication/final-notices/starling-bank-limited-2024.pdf).

This case underscores that familiarity with clients or a perceived low-risk profile is no substitute for thorough CDD. As the FCA stated, businesses must ensure that their financial crime controls are fit for purpose, kept up-to-date, and applied consistently across all customers, whether they are new or well-known.

Implementing and maintaining comprehensive CDD processes is essential, even for known clients, to avoid being caught out by unexpected risks. Personal familiarity should never replace proper risk assessments, identity verification, and ongoing monitoring. Ensuring that you are fully compliant with CDD regulations will not only protect your firm but also help maintain a robust and secure financial system.

For those looking to strengthen their CDD and AML procedures, reviewing recent FCA enforcement actions, like Starling Bank’s, can provide valuable insights into how to structure effective controls and avoid similar pitfalls.

EAG can help with reviews of your CDD policies and procedures and with the completion of CDD, including sanctions checks, on your clients.