A Call for Enhanced Controls

The Financial Conduct Authority (FCA) is intensifying its scrutiny on firms falling short in their compliance efforts. In a recent example Starling Bank Ltd. was fined £28.9 million on 2nd October 2024 for inadequate anti-money laundering and sanctions controls. This penalty serves as a that financial crime compliance must keep pace with business growth. 

The fine reflects the seriousness with which the FCA views financial crime compliance requirements, especially as companies scale in size. A notable aspect of this case was the Voluntary Requirement (VREQ) imposed on Starling in September 2021, which prohibited the bank from opening new accounts for high-risk customers. Starling continued to open over 54,000 high-risk accounts from 2021 to 2024 in breach of the VREQ. This was a key factor in determining the magnitude of the fine, underpinning the FCA’s expectation that such agreements with regulators are mandatory, not advisory. 

Moreover, the FCA has mandated Starling and other entities to rigorously screen both existing and new customers against the full list of financial sanctions and to sever ties where financial crime red flags emerge. Admitting to past onboarding failures can tarnish a bank’s reputation, yet it is essential for transparency and reform. Firms are reminded of their obligation to file Suspicious Activity Reports (SARs) with the National Crime Agency for suspected financial crimes, as well as requesting a prior license from the Office of Financial Sanctions Implementation (OFSI) in the event a transaction involves a person or organisation subject to financial sanctions.  

An ongoing debate remains as the FCA seeks authority to publicise such investigations earlier in the enforcement process for transparency reasons. Opposition to this view stems from unfairly damaging firms’ reputations as some cases may even be subsequently dropped. Common failings by firms which should be monitored and re-tested include: 

• Customer Due Diligence (CDD) Failures; 

• Ineffective Risk Assessments; 

• Deficient Transaction Monitoring Systems; 

• Poor Governance and Oversight (including staff training); 

• Inadequate Record-keeping; 

• Lack of Effective Reporting Mechanisms; and 

• Compliance with Sanctions and Embargos. 

Ensuring robust systems and controls are in place in these areas is vital to meet rules and requirements and safeguarding against financial crime risks. Ongoing development and enhancement of systems, processes, and staff training are essential for implementing a robust financial crime risk management framework. 

At Objectivus, we provide expert consultation and advice regarding compliance with financial crime requirements. Our insights into common failings identified by the FCA can help you navigate these complex areas. For more details or assistance, do not hesitate to contact us at info@objectivus.com  

For further guidance or to discuss the content of this post, please contact Bhavisha Patel at bp@objectivus.com or Robert Hudson at rfh@objectivus.com or call Objectivus at +44 (0)2034 573 283