Starling Bank Takes Debtors To Court Amid UK Watchdog Probe

Starling Bank is reportedly taking several debtors to court amid a U.K. financial watchdog’s investigation.

The neobank has filed petitions against 24 companies that have defaulted on their loans, the Financial Times (FT) reported Wednesday (June 19), citing court records.

The publication said its analysis of these companies’ filings show that most of them have had virtually no business activity, three had never filed accounts and another six had laid dormant since being incorporated.

Starling recently noted a jump in defaults, and said in its annual report last week that it was under investigation by the U.K. Financial Conduct Authority (FCA), which was examining “aspects of its anti-money laundering and financial crime systems and control framework.” The bank cautioned that the impact of the probe could be material.

A spokesperson for Starling told the FT the bank takes a “proactive stance on recovery of defaulted loans” and was taking measures to “identify and report suspected fraud and wrongdoing to law enforcement and other agencies and to work with them as appropriate.

The FinTech also said it was cooperating with the FCA and has already “identified and reported areas of improvement” to regulators.”

Last week, Starling announced it had just finished its third profitable year, with the annual report showing a 54.7% increase in pre-tax profits, to 301.1 million pounds ($384.3 million).

Earlier this month, incoming Starling CEO Raman Bhatia — set to take up that role June 24 — said the company would not seek a banking license in Europe, but would instead focus on expanding internationally with the help of its software business.

“I am very bullish about this approach around internationalization of what is the best of Starling, the proprietary tech versus market by market, idiosyncratic regulatory regime, capital requirements, and building trust and brand extension, which is unproven for any plan,” Bhatia said in an interview with CNBC.

Meanwhile, PYMNTS spoke recently with a trio of experts — Chris Caruana, vice president of strategy at Hawk AI; Ramon Ramirez, director of AML/KYC operations at Western Alliance Bancorporation; and Miguel Navarro, head of client identity verification and authentication at KeyBank — about the use of artificial intelligence in banks’ anti-money laundering (AML) efforts.

Navarro argued it’s now time for AI to find its place within AML efforts, as the “simplest implementations of AI are happening today, and it’s all going to get more complicated.”

Financial institutions that don’t invest in AI now, he said, risk falling behind their peers and losing ground to fraudsters.

“It’s not about plucking the ‘fruit’ from AI today, but rather about ‘planting the tree’ today,” Navarro told PYMNTS.