Citi can rest easy in the knowledge that Starling Bank's incompetence is greater
Citi has had recent some issues with its controls and is trying to remedy them by shuffling its existing staff and hiring lots of new ones. It's not alone. Starling Bank has some issues too and is trying something similar. However, Starling's issues seem even greater.
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Starling was today fined £28,959,426 by the UK's Financial Services Authority for its "shockingly lax" customer checks and for failing to fix issues first identified in 2020. This is nearly 4% of its most recently reported annual revenues.
Citi was fined $136m in July for its lax data management and its failure to fix issues also identified in 2020. That was less than 0.2% of last year's revenues.
Starling seems to have got itself in a pickle over rapid growth and widespread senior management incompetence. In 2017, it had 43,000 customers. By 2023, it had 3.6m of them.
Starling's systems didn't keep pace. The FCA noticed this and in 2021 it hit Starling with a notice called a VREQ telling it not to open any more accounts for high risk customers who might be engaged in money laundering. But then this happened:
High risk accounts opened by Starling
Source: FCA
After the FCA told Staling to stop opening high risk accounts in 2021, it opened another... 54,359 of them. It only stopped doing so altogether in April 2024.
The FCA doesn't name any names, but senior managers at Starling don't receive glowing commendations. Not only did they fail to make any single person responsible for remedying the issues, but the FCA says the engineering teams who were "responsible for making the key changes to Starling’s systems and controls to implement the VREQ – were not informed of the existence of the VREQ or the seriousness and potential consequences of not implementing the VREQ appropriately."
At the same time, the "3LOD" (third line of risk defence) which should have been responsible for reporting to the board and the audit committee and for liaising with the regulators about the improvements, didn't even know the VREQ existed until late 2022.
Maybe Starling should be letting go of some senior managers as a result?
Seemingly not. In a statement today, the bank says it's "significantly increased" its resources "across lines of defence." It appears to have hired Nicola Hopkins as head of AML operations in January. Hopkins was head of HSBC's call centre in Swansea before taking a career break in 2022. It also appears to have hired Jessie Harrington Bourne, also formerly of HSBC, as head of financial crime and operations in 2022. Neither Bourne nor Hopkins is mentioned in the FCA's report, and there's no suggestion that either was directly implicated in the failings.
Other people have been shuffled around. Steven Newson, who describes himself as a founding member of Starling and who was CTO between 2019 and 2023, is now COO instead. Newson is also not mentioned in the FCA report.
Compliance, risk, or data people who want a challenge but who don't want Citi, could therefore try Starling instead. It's hiring: Starling currently wants a first line of defence risk and control manager based out of London, and is inviting applications from people "who love working together to solve problems."
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