ANNE BODEN ISN’T a name that the general public will likely be familiar with.

But it’s one which the Irish business world has followed with keen interest for years.

Boden used to be chief operating officer at AIB.

A Welsh native with a stellar banking career, she joined the Irish lender in 2012. Boden was a key figure tasked with trying to pull AIB out of the mess of its own state bailout and the broader financial crisis.

Boden left AIB after just 18 months, despite the bank steadying while she was helping with its operational turnaround – the underlying business returned to profit in 2013 and in 2014, it would post its first after-tax profit since 2008.

Her departure was met with widespread confusion – Boden was in charge of several important areas at AIB, such as the bank’s plans to digitise its offering.

Why did she give up one of the most prominent positions in Irish banking, at a point when there was an unprecedented opportunity for an AIB executive to make a name for themselves?

Firstly – despite her banking background, Boden has indicated that she’s always been more interested in technology, once telling the Financial Times that she felt “ashamed to be a banker” during the crisis-era bailouts.

Secondly, as it turned out, Boden had another very good reason – Starling.

Swift growth

Starling is a digital bank which was set up by Boden in 2014, shortly after she left AIB.

From a standing start, Starling grew to become one of the biggest financial institutions in the UK.

For a quick example of how quick its growth was – between 2017 and 2023, its customer base exploded, going from 43,000 to 3.6 million. Last year, it recorded pre-tax profits of £300 million (€359 million).

The company has now established itself as a key rival to Revolut, likely the digital bank that first comes to mind for Irish readers.

Starling is currently looking at an initial public offering (IPO), where it would sell its shares on the stock exchange. One of Starling’s main investors has suggested that the firm could be worth up to £10 billion.

That would mean Boden’s stake in Starling, currently at about 5%, would be worth around £500 million. The IPO was widely expected to happen this year.

But this month, a fly has emerged in the ointment.

Starling Bank was hit with a £29 million (€35 million) penalty by the UK’s top financial regulator, the Financial Conduct Authority (FCA). 

It turned out that during Starling’s incredible expansion phase, there were a few problems with how it acquired new customers.

The FCA said the breaches occurred between December 2019 and November 2023. Boden was CEO for most of this period, stepping down as Starling CEO in May 2023

The main problem uncovered by the FCA was – Starling simply didn’t properly check the backgrounds of new customers.

For an example of how weak its measures were – let’s look at how it screened new customers to see if they were affected by international sanctions.

There are over 3,000 ‘designated persons’ who UK lenders should be looking out for.

But Starling only screened against ‘designated persons’ who had UK citizenship or UK residency – just 39 out of the more than 3,000 on the list.

This means that people on the sanctions list – generally regarded as people who pose a serious risk of laundering money for criminal gangs and terrorists – could have opened an account with the lender.

The FCA said Starling identified that “at least” one such “designated person’ had indeed opened an account with them

But Starling didn’t just fall down on screening for sanctions – it failed to vet a slew of high-risk customers, who could range from those such as political figures to those with sketchy business dealings.

The FCA gave Starling a warning in 2021, saying that it should stop opening accounts for these customers until its controls were improved.

The result? From the time of the warning to the time of the fine, Starling opened accounts for nearly 50,000 of these people.

The scale of how bad this is can be seen in the FCA’s language when handing out the fine. Regulators often speak in vague generalities when talking about penalties – not this time.

“Starling’s financial sanction screening controls were shockingly lax,” the FCA said.

“It left the financial system wide open to criminals and those subject to sanctions. It compounded this by failing to properly comply with FCA requirements it had agreed to.”

That’s about as blunt as you’re going to get from a regulator and reflected very, very badly on Starling.

The bank’s top staff were also left with some red faces.

Individuals weren’t named, but the FCA’s report paints a picture of senior management who were, at best, clueless of how to properly screen high risk customers when rapidly opening new accounts.

Top staff were found to “lack the required skills or experience” they needed, while there were also multiple “key failings in the communications between senior management and the staff”.

On top of this, the report gives new context to the criticism Starling faced over how it handed out Covid-era loans.

In 2022, the firm was accused of running inadequate checks on borrowers before handing out UK taxpayer-backed loans during the pandemic.

The bank gave out £2.2 billion to customers as it saw an enormous surge in account numbers.

But many of these people never paid the money back. In 2022, Boden told the UK’s public accounts committee that 34.3% of the Covid ‘bounceback’ loans Starling provided were in “distressed” status — significantly higher than the average rate.

Politicians accused Starling of lax customer screening checks.

Former Tory minister Theodore Agnew claimed Starling acted “against the government’s and taxpayer’s interests” due to its lax efforts at controlling fraud.

This was strongly rejected by Boden, who said she was “shocked” by Agnew’s comments, which she described as “absolutely and utterly wrong”. Boden said Starling had been transparent about its approach to Covid loans and was one of the “most active and effective banks fighting fraud”.

However, the FCA’s report paints an uncomfortable picture around Starling’s customer screening efforts.

What now

So where has this all left Starling?

Well, jumping back to Boden. As mentioned, she stepped down as Starling CEO in May 2023, saying she wanted to remove any potential conflict of interest stemming from her 5% shareholding in the business.

It was seen as an odd move at the time, as plenty of CEOs own bigger stakes in the companies they run. 

It also slowed down Starling’s IPO plans – valued at £2.5 billion in 2022, the firm had been hoping to go to the market in 2023. When Boden stepped down, that plan was put on ice.

While hopes were high for 2024, the FCA fine has thrown up more doubts.

The big one is over Starling’s valuation – £10 billion is a lot of money.

While £300 million in pre-tax profits from Starling is nothing to sneeze at, the £10 billion price tag implied that the business was being valued more like a potential high-growth tech stock than a bank.

Boden’s departure as CEO slowed down its IPO plans. But hype for the deal had been building throughout 2024, with Starling seemingly back on the path to securing a high valuation later this year.

Which means the FCA fine has come at a terrible time for the company, raising serious questions around its valuation.

In retrospect, Boden’s departure from AIB all those years ago shouldn’t have come as a surprise.

With her well-flagged interest in technology, a bank with a greater digital focus made sense. As does her latest project after leaving Starling, reported to be a new artificial intelligence business.

But while not specifically named in the FCA report, Boden was CEO when the company’s screening process was riddled with issues.

Starling’s long-awaited IPO, whenever it finally materialises, will reveal the true value of the bank she ended up building – and the final impact of its amateurish customer controls.