The U.K.’s markets regulator has told challenger banks to improve their financial crime controls, saying some are failing to carry out adequate checks on new customers.
The Financial Conduct Authority said Friday that a review conducted last year had showed suspicious activity reports filed by the banks had risen, raising concern about the adequacy of checks that they carry out when taking on new customers. It said some failed to adequately check even basic details such as the occupations and income of customers.
The review focused on relatively new challenger banks with quick and easy application processes. This included six challenger retail banks, which primarily consist of digital banks and covering over 8 million customers. The FCA didn’t name the firms, but Starling Bank Ltd. said it was one of the firms reviewed.
“Starling has been extremely vocal in raising awareness on these matters and in January this year announced that it would no longer be advertising on Meta platforms,” a spokesperson for the company said. “We hope that the government will ensure enforcement is prioritized and that regulators are properly funded to discharge their duties.”
The firms where material issues were identified have established remedial programs to address the FCA’s concerns, the regulator said. The changes may result in higher rejection rates of new customers and may also result in the termination of existing banking relationships with customers.
“There cannot be a trade-off between quick and easy account opening and robust financial crime controls,” said Sarah Pritchard, executive director of markets at the regulator. “Challenger banks should consider the findings of this review and continue enhancing their own financial crime systems to prevent harm.”
