Abdulali Jiwaji comments on the FCA fining Starling Bank GBP 28.96m over financial crime controls

Abdulali was also interviewed in the FT's Banker on 10 October 2024, here.

Commenting on the fine, Abdulali said, "The FCA has been crystal clear that financial crime is a key area of focus for supervision and enforcement – it is one the FCA’s pillars, and will remain so for the next several years.

While the FCA wants to support challenger banks and promote the UK financial services industry, this cannot come at the expense of damage to the reputation of the UK markets – we cannot be seen as a lax jurisdiction.

The action against Starling follows the review of financial crime controls at challenger banks in 2021. The FCA wants challenger banks to put resources into financial crime control, commensurate with a bank’s expansion. There can be a risk based approach to AML controls, but these need to be fit for purpose as the business grows. In this, the FCA recognises that it is open to challenger banks to take advantage of new technologies, but focus needs to remain on basic aspects such as checking customer income and occupation and identifying politically exposed persons. While there may be pressure to grow the business, that cannot be at the expense of for example identifying the ultimate beneficial ownership in high risk corporate structures.

As a consequence, there has been pressure on challenger banks to exit customer relationships where financial crime red flags arise – the flipside is that taking that step and filing a suspicious activity report may put the bank in the firing line as to the adequacy of the original onboarding!

For Starling, it is a story of remarkable growth in recent years, and the practical problem is that systems and controls can sometimes not keep pace with phenomenal growth.

The action against Starling also demonstrates that the FCA is putting muscle into high priority investigations – 14 months from opening the investigation to outcome, which is much faster than the average of 42 months for cases closed in 2023/2024.

One suspects that this would be the type of case that the FCA would look at closely if it pushes through its plans for more transparency in the investigation process – early publicity about such an investigation to align with the FCA’s aims of educating the market in this area.

We have seen the FCA approach this from a number of angles, from bringing criminal proceedings in relation to fraud, forgery and money laundering, through to the recent fine of PwC of GBP 15 million for failing to alert the FCA to suspected fraudulent activity at London & Capital Finance. There is certainly more to come from the FCA in this space."