Starling Bank: Lessons Learned in Fintech Growth

Starling Bank, a digital bank backed by Goldman Sachs and once considered one of the UK's most promising startups, has recently been fined £29 million by the Financial Conduct Authority (FCA). The fine was imposed due to the bank's failure in preventing financial crimes such as money laundering and terrorist financing. Starling admitted it didn't keep up with its rapid growth when it came to implementing controls against these crimes. Despite this, they assured customers and employees that these issues have been addressed.The FCA's investigation revealed a bigger problem within the fintech industry. Many digital banks seem unable to prevent fraud and money laundering as they quickly add new customers. Starling agreed to stop opening accounts for high-risk individuals in late 2021 but went ahead and opened over 54,000 accounts anyway. Making matters worse, their automated system only screened clients against a tiny fraction of the full list of sanctioned individuals since 2017. Since then, Starling has made efforts to fix these issues and strengthen its financial crime control systems. However, this news might worry investors who were looking forward to a Starling IPO. The bank had planned an initial public offering for as early as 2023 but has since delayed it. The FCA's findings send a strong message: fintech giants must not prioritize fast growth over solid compliance frameworks against financial crimes. Other digital lenders should take note and review their own risk management procedures.