According to a study by the Observer, the online bank singled out by a former government minister for the efficiency of its anti-fraud safeguards was “onboarding” an average of 15,000 new business customers each month during the Covid crisis.
According to data from Starling Bank’s most recent annual report, the eight-year-old lender has increased the number of business accounts it serves from 87,000 before the pandemic to 330,000 as of last spring.
In order to stop fraud and money laundering, banks are required by law to perform thorough checks on new customers.
Between November 2019 and March 2021, the bank added up to 243,000 new customers, or an average of more than 15,000 every month, according to an analysis of its annual report that was confirmed by Starling. Despite only having 1,245 employees, just a portion of whom would have been monitoring for potential issues, this was the case.
Compared to the largest main street lenders in the UK, there are much more new accounts. According to sources at several of those banks, they often sign up 1,500 to 8,000 new business clients each month.
When most large lenders closed their branches and were having trouble meeting the demands of their existing customers during the Covid lockdown, Starling claimed that it had profited from the situation. The online lender said that because of its technology, it could enroll new clients more quickly than larger banks depending on antiquated technology would have been able to, particularly those looking for government-backed Covid loans.
However, the number of new clients and the increase in loans given by Starling during the pandemic have prompted concerns about its capacity to do adequate checks.
Former minister Lord Agnew accused the bank last month of not thoroughly screening customers before making taxpayer-backed loans, but Starling’s CEO Anne Boden has since vowed to sue the Tory peer for making what she called “defamatory comments.”
The head of the all-parliamentary group for fair business banking, Kevin Hollinrake, stated that Starling had inquiries to address. “Public funds should always be subject to public scrutiny. “Starling must promptly respond to very valid questions, including its present and projected default and fraud rates on government-backed loans, even if I have yet to see any concrete proof of illegal lending,” he said.
Starling has only made loans totaling £23m prior to the outbreak, excluding loans acquired from other businesses. According to a corporate trading update, it has dispersed bounce-back loans totaling £1.6 billion by June 2021. The chancellor, Rishi Sunak, created the program, which provided up to £50,000 per client. High street banks provided the loans; in exchange, they charge interest, albeit at a reduced rate of 2.5 percent. If borrowers default, however, the taxpayer is responsible for full repayment.
Former Royal Bank of Scotland and Allied Irish Banks executive Boden established Starling, which claimed its systems were built to regularly process customer volumes at this level and higher. According to a company spokeswoman, it has “one of the best banking platforms in the world, which we created from the ground up,” and its systems “were planned and built to consistently process customer volumes at this level and much more.”
Starling said that every loan application had been examined for signs of fraud and that it had implemented more controls than many other lenders and more than what the plan called for. It claimed that, as an illustration, it automatically cross-referenced bounce-back applicants with the Companies House register to confirm the date the company was formed.
On June 19, 2022, the headline of this article was changed to remove a reference to the bank issuing 15,000 Covid loans every month; that statistic relates to the monthly average of new business clients acquired during the Covid issue.