The watchdog says: “Starling grew quickly, from approximately 43,000 customers in 2017 to 3.6 million in 2023.

“However, measures to tackle financial crime did not keep pace with its growth.”

The regulator says in 2021 it identified serious concerns with the anti-money laundering and sanctions framework in place at Starling, which also owns Fleet Mortgages.

The FCA says Starling agreed to restrict opening new accounts for high-risk customers until this improved.

But it says Starling “failed to comply” with this agreement and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

The regulator adds that In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions.

A subsequent internal review identified systemic issues in its financial sanctions framework.

Starling has since reported multiple potential breaches of financial sanctions to the relevant authorities.

FCA joint executive director of enforcement and market oversight Therese Chambers, says: “Starling’s financial sanction screening controls were shockingly lax.

“It left the financial system wide open to criminals and those subject to sanctions.

“It compounded this by failing to properly comply with FCA requirements it had agreed to, which were put in place to lower the risk of Starling facilitating financial crime.”

The watchdog says Starling has since “established programmes to remediate these breaches” and upgraded its wider financial crime control framework.

Starling bought Fleet Mortgages for £50m in 2021 and has also purchased home loan books from Masthaven and Kensington Mortgages.

The regulator points out that this case took 14 months from opening to close – compared to an average of 42 months for cases that were settled in 2023/24, adding that “this is an example of how the FCA is improving the pace of its enforcement investigations”.