Starling Bank‘s recent £29 million fine shows the true cost of “cutting corners” on digital ID verification, according to Regtech and Fintech industry professionals.
As reported just last week, this past Wednesday 2nd October, the UK’s challenger bank Starling had been fined nearly £30 million by the City watchdog for “shockingly lax” financial crime controls that “left the financial system wide open to criminals and those subject to sanctions.”
As one of the UK’s major challenger banks, “measures to tackle financial crime did not keep pace with its growth” following steady expansion – leading to the bank opening 54,000 accounts for 49,183 “high-risk customers” between timeframe of September 2021 and November 2023.
Inna Lyubashevskaya, Chief Customer Officer at Sumsub said that Starling’s fine highlights a “recurring” issue in financial services: the cost of “cutting corners” on verification.
Inna noted that not carrying out adequate or proper verification checks is like “instinctively locking” your front door but still leaving windows “wide open for criminals” to sneak in.
Inna also mentioned that whether it’s overlooking vital verification measures such as proof of address (PoA) or not implementing proper transaction monitoring, such gaps allow illicit actors to bypass systems, “exposing businesses and customers alike.”
Inna further noted that effective or robust compliance measures are not simply about ticking boxes. Instead, Inna said that financial institutions need to establish an ongoing fraud protection system that will aim to cover “all bases.”
According to the Sumsub team member, consequences like this fine should be a “wake-up” call for all banking institutions and fintech companies, “reiterating that cutting corners on financial crime prevention not only opens doors to fraud, but also harms reputation and weakens trust.”
Sumsub also shared that robust anti-fraud measures are vital not only for safeguarding the bank’s operations but also for “protecting customers” from significant financial losses as well as damaging identity theft.
They added that screening scammers/fraudsters during the onboarding phase alone is not enough, as the majority or 70% of fraud occurs following know-your-customer (KYC) checks.
Banks must have ongoing and reliable monitoring capabilities that enable them to detect suspicious activity.
According to the update shared by Sumsub, there is no ‘magic tool’ that can solve all fraud; however, implementing AI-powered multi-layered protection at “all stages of the user journey will undoubtedly help to eliminate threats.”