Starling should be investigated for pandemic cash says former minister

Former minister calls on government to investigate whether Starling Bank should “clawe back” money in light of regulatory investigation which found that the bank had left the financial system “widely open to criminals”. Lord Agnew, of Oulton, called for a review of the bank’s pandemic lending scheme of £47 billion after a City regulator fined it £29 million.

Starling’s financial crime controls were “shockingly” lax, according to the Financial Conduct Authority. In 2021, the watchdog first brought up the issue with Starling. Anne Boden, Starling founder and chief executive in 2022, accused Lord Agnew making “wild allegations”.

In 2022 Anne Boden, Starling’s founding and former chief executive, sent a letter to Agnew threatening legal action after Agnew accused the bank of “one of worst” lenders in preventing abuses with the bounceback loans scheme. The program ran from 2020-2021 and was designed to keep small business afloat. She didn’t disclose that the FCA wrote to Starling in March of the previous year to express “wide-ranging concerns” about its anti-money-laundering and sanctions systems.

Starling and the FCA had agreed in September 2021 that Starling would not open new accounts for customers with high risk while improving its controls. The fine was a result of Starling’s failure to comply with this agreement. Boden demanded that Agnew withdraw his “defamatory comments” in the letter he sent to Agnew on June 20, 2022. In the letter she said that Starling had “substantial checks in place to ensure money wasn’t misused”.

The FCA announced this week that Starling failed to “design and implement adequate systems and controls in order to mitigate financial crime risk” and had “left financial system wide open for criminals and those who are subject to sanctions”. FCA stated that the bank’s control systems “failed” to keep up with its rapid growth, which saw it go from having its first customer in July 2016 to 3.6 million by last year. The FCA did not mention the bounceback program in its findings.

Starling was an active user of the scheme. It lent more than £1.6bn to almost 54,000 institutions. Starling opened approximately 14 percent of its new business accounts between May 2020 to March 2021 in connection with the scheme. The emergency programme offered a 100% state guarantee for loans up to £50,000. Starling, according to official figures has claimed £84million on the taxpayer guarantee citing “fraud”. This is one of the largest claims among large lenders.

Starling believes that comparisons to other lenders can be misleading, as each bank has different types of borrowers and no standardised metrics are used for what is flagged as fraud. The banks were asked to skip many of their normal checks in order to send money quickly to the companies.

Agnew, who quit in January 2022, accusing the government for failing to monitor the scheme, said to The Times that the government should examine the FCA findings and determine if any taxpayer funds paid to Starling need to be clawed back to cover fraud losses. Starling’s loan book and account number grew significantly as a result of the government scheme. It’s quite shocking.”

Starling spokeswoman said that the FCA (fine) relates to violations of [the agreement not to open new accounts high risk] and sanctions controls. The bounceback program involves regular audits, and we have always been given a clean report. We would expect that if we find out that ineligible loans were provided and claims made against them, they will be repaid.

Boden was contacted for a comment.