The recent £29 million fine imposed on Starling Bank by the Financial Conduct Authority (FCA) for financial crime failings offers important lessons for businesses in the e-money and payments industry. As regulatory expectations rise, companies must ensure they have robust compliance frameworks in place, particularly when scaling rapidly.
For more details, you can read the FCA’s Final Notice on Starling Bank’s failings here.
Compliance must keep pace with growth
Starling’s rapid growth, from 43,000 customers in 2017 to 3.6 million in 2023, is impressive, but their compliance measures did not keep pace. Financial crime controls, such as anti-money laundering (AML) systems and sanctions screening, were not updated or strengthened to handle the complexities of a larger, more diverse customer base.
Key takeaway: Businesses experiencing rapid growth must proactively invest in scaling their compliance systems. Outdated or inadequate processes can quickly become a liability, exposing the company to financial crime risks and regulatory action.
High-risk customers require extra vigilance
One of the core issues for Starling was its failure to adhere to a requirement to stop opening accounts for high-risk customers until improvements were made to its financial crime framework. Despite this mandate, Starling opened over 54,000 accounts for 49,000 high-risk customers over a two-year period.
Key takeaway: If your business deals with high-risk clients, it’s crucial to implement enhanced due diligence procedures. High-risk customers present greater exposure to financial crime, and failure to manage these risks can result in severe regulatory penalties.
Automated systems need regular review
Starling’s financial sanctions screening system had been flawed since 2017, with the automated system checking only a fraction of customers against relevant sanctions lists. This systemic failure was only discovered in 2023, leaving Starling exposed to potential financial crime for years.
Key takeaway: Automated compliance systems are essential for efficiently managing large-scale operations, but they are not infallible. Companies must regularly audit and stress-test their systems to ensure they function as intended, particularly as regulatory requirements change.
Non-compliance can lead to significant reputational damage
The FCA’s comments on Starling Bank were blunt, with the regulator describing the bank’s controls as “shockingly lax” and highlighting its repeated failure to comply with agreed requirements. While Starling has since taken steps to remediate the situation, this high-profile case has inevitably impacted its reputation.
Key takeaway: The cost of non-compliance is not just financial. The reputational damage caused by regulatory failures can erode trust with customers, investors, and partners. Maintaining strong compliance controls is critical to protecting your brand’s reputation.
Regulators are becoming faster and more effective
One silver lining from the Starling case was that the FCA was able to close the investigation in 14 months, compared to the typical 42-month timeline for cases in 2023/24. This indicates that regulators are becoming more efficient in their enforcement processes, potentially reducing the time businesses spend under investigation.
Key takeaway: The speed of regulatory investigations is increasing, meaning companies must be prepared to act swiftly in case of non-compliance. Developing an agile response plan to deal with regulatory inquiries or breaches can help limit damage and ensure quick resolution.
How Neopay can help
The Starling Bank fine is a stark reminder of the consequences of failing to maintain a robust compliance framework. At Neopay, we provide a range of services designed to help businesses stay on top of their compliance requirements, no matter how quickly they grow.
Here’s how we can assist:
- Proactive risk management: We help businesses assess their current risk exposure and ensure that compliance frameworks are in place to address the challenges associated with growth, high-risk customers, and changing regulations.
- Comprehensive audits and reviews: Our team conducts regular audits of your financial crime prevention systems, including AML, sanctions screening, and customer due diligence processes. This ensures your automated systems are functioning as intended and up-to-date with the latest regulatory expectations.
- Tailored compliance solutions: Every business is different, and we tailor our compliance solutions to your specific needs. Whether you are a small start-up or a rapidly growing enterprise, we provide solutions that scale with your business.
- Training and continuous support: Compliance is an ongoing process. We offer training for your staff, keeping them informed about the latest regulatory changes and ensuring they understand the best practices to mitigate financial crime risks.
In today’s regulatory environment, the cost of non-compliance is too high to ignore. Contact Neopay today to ensure your business has the systems and controls in place to stay compliant, protect your reputation, and grow safely.