Regulator circles Revolut following alleged compliance lapse

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Revolut Ltd., the fast-growing financial technology startup, is facing regulatory scrutiny following an alleged compliance lapse that could have allowed illegal transactions on its app.

The U.K.’s Financial Conduct Authority said it reached out to London-based Revolut following a story in The Telegraph newspaper about the compliance issue. “We have been in contact with the firm to understand and assess the issues the article raises,” the regulator said in a statement Friday. “The FCA expects all firms to have appropriate systems and controls in place at all times to monitor and counter the risk their services are abused for financial crime.”

The Telegraph, citing documents it has seen, reported that Revolut had for three months in 2018 switched off an automated system designed to prevent people from using its money transfer platform to violate international sanctions.

Whistleblower claims
Revolut spokesman Chad West said this system was part of a “systems enhancement project” being tested in parallel with other compliance controls that the company had long had in place. “At no point did we fail to meet our legal and regulatory sanctions requirements,” he said. “We conducted a thorough review and that showed that all of the transactions that took place during that time period were compliant.”

West said the company investigated after a whistleblower went to Revolut’s board with concerns that the sanctions compliance system had been turned off.

The Telegraph also said Revolut’s chief financial officer, Peter O’Higgins, had left the company last month. West said O’Higgins had left the company but that “there is no relation whatsoever to the compliance issue suggested by The Telegraph.”

Branching out
Founded in 2015, Revolut has created a suite of retail financial service products available through its app. It started off with a pre-paid debit card that did not charge transaction fees while traveling, and quickly branched out into services such as foreign currency transfers, budgeting tools and cryptocurrency trading.

The company recently obtained its European banking license from the Bank of Lithuania and plans to begin offering checking and savings accounts as well as retail and business lending. It also plans to offer commission-free equity trading in the U.K. and Europe this year.

Revolut has raised about $340 million in venture capital funding from firms that include Index Ventures, Ribbit Capital, Balderton Capital and DST Global. It was last valued at $1.7 billion when it raised $250 million in April 2018.

Bloomberg News