Financial sanctions compliance: why it matters more than ever
The financial sector is under increased scrutiny as global sanctions evolve. The recent £29 million fine levied against Starling Bank is a stark warning to all financial institutions. With financial crime systems in place, Starling failed to prevent 54,000 high-risk accounts from opening between September 2021 and November 2023.
The growing complexity of financial sanctions screening
Starling’s inability to adhere to financial sanctions lists reflects the growing complexity of compliance requirements. The bank’s systems allowed 54,000 accounts to be opened for 49,000 high-risk customers, failing to adequately screen them against updated sanctions lists. With more entities being added to sanctions lists, it’s critical for financial institutions to stay updated. Yet, doing so manually or with outdated systems is no longer sufficient. This negligence occurred despite sanctions being at their most extensive and scrutinised in recent years.
Understanding Starling’s compliance failure
The Financial Conduct Authority (FCA) flagged Starling’s financial sanction screening controls as “shockingly lax.” This highlights that the issue was not simply one of oversight but systemic failure. The FCA’s enforcement action shows that regulatory bodies are closely watching and ready to penalise institutions that fall short.
Starling’s fine is a wake-up call—outdated tech creates major compliance risks. Share on XAutomated sanctions screening: a key solution for compliance
As sanctions lists are constantly updated, automated screening solutions can help. They offer financial institutions the tools to conduct precise, real-time checks. These solutions reduce the risk of human error and ensure that banks can maintain compliance without missing critical updates.
What other financial institutions should learn
Starling’s fine should be a wake-up call for others in the financial sector. Relying on outdated or deficient technology can lead to huge issues, as seen in this case. The systems used by Starling failed to detect clients on sanctions lists, opening up serious compliance risks.
Mitigating risks: best practices for sanctions checking
Financial institutions should prioritise robust financial sanctions screening processes. Here’s what you can do:
- Implement automated solutions: Invest in automated screening solutions that can stay updated with changing lists.
- Regular system audits: Regularly review and test compliance systems to ensure they function as expected.
- Detailed reporting: Use solutions that provide detailed reports and audit trails for every screening. This documentation can be essential when proving compliance.
- Compliance training: Keep staff trained on the latest sanctions and compliance policies.
Final Thoughts: act before it’s too late
Financial sanctions checking is not a one-time task. It requires constant vigilance and updated systems to avoid costly mistakes. If there’s one takeaway from Starling’s case, it’s this: stay proactive and invest in reliable compliance technology. The costs of non-compliance far outweigh the investment needed to implement robust screening processes.
