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British digital lender Starling Bank has been fined £29 million by financial regulators in the UK for failings in its financial crime prevention systems. The Financial Conduct Authority (FCA) stated that the fine was related to financial crime failings, particularly in financial sanctions screening, and opening accounts for high-risk customers. Starling Bank expressed regret over the outlined failings and mentioned that it had conducted a thorough review of customer accounts to address the issues.

Starling, known as one of the U.K.’s leading online-only challenger banks, has been considering an IPO but has postponed its plans. The FCA highlighted that as Starling’s customer base grew rapidly, its measures to combat financial crimes did not keep pace with this expansion. The FCA probe into digital challenger banks’ financial crime controls revealed concerns regarding anti-money laundering and know-your-customer compliance systems.

Following the investigation, Starling agreed to halt opening new accounts for high-risk customers until its internal controls were improved. However, the bank failed to comply with this agreement and opened accounts for over 49,000 high-risk customers. Additionally, Starling identified issues in its sanctions framework, leading to potential breaches being reported to authorities. The FCA noted that Starling has since taken steps to rectify the breaches and enhance its financial crime control framework.

The FCA’s investigation into Starling was completed within 14 months, a significantly shorter timeframe compared to the average of 42 months for cases closed in the same period. Starling’s chairman, David Sproul, apologized for the failings and emphasized the bank’s commitment to strengthening its governance and capabilities to prevent such issues in the future.

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