UK financial watchdogs are questioning whether Revolut failed to abide by rules requiring it to be open and frank with its regulator, piling further pressure on the British digital bank after mis-steps and high-profile departures. Revolut is facing growing doubts over its ability to effectively manage its rapid growth after it emerged that the company had “erroneous[ly]” switched off an automated system for flagging potential money-laundering for several months last year.The report quoted a draft letter to the Financial Conduct Authority from Revolut’s head of legal explaining the situation. But the letter was never sent.The FCA is now scrutinising whether Revolut failed in its duty to be fully transparent — one of the key principles regulated companies must abide by — over such a key issue, said people familiar with the situation. Revolut said it did not comment on matters pertaining to the regulator. However, in a blog post earlier on Friday, before news of the regulatory probe, Revolut said “at no point . . . did we fail to meet our legal or regulatory requirements”.
The FCA said: “We are aware of the article but had not received the letter that was referred to in it. We have been in contact with the firm to understand and assess the issues the article raises.“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 concerns follow the discovery of a spate of suspected money laundering on Revolut’s network last year, which was reported to the FCA and National Crime Agency at the time. They also come the same day it emerged that the chief financial officer had stepped down in January in order for the company to find a replacement with more retail banking experience.
Peter O’Higgins joined Revolut in 2016 after more than a decade as an investment banker at JPMorgan.Revolut has expanded exponentially during Mr O’Higgins tenure, from a start-up that had only recently raised its Series A funding round, to a licensed bank with more than 3m customers.However, recent setbacks have raised concern about the company’s internal culture and the quality of compliance controls.
Chief executive Nikolay Storonsky has long been public about the intensity of working for the company, once telling the Financial Times, “I can’t see how work-life balance will help you to build a start-up”. But last year Revolut was criticised for demanding prospective employees work for free as part of a job application process, and it has suffered from high levels of staff turnover, including in key positions such as head of compliance and the people in charge of its expansion into individual countries.
The Advertising Standards Authority in February referred it to the city watchdog over a “spoof” advertising campaign, and it also faces a parliamentary probe in Lithuania, where it secured its banking licence in December. Its local head of business development in Lithuania left the bank shortly after the furore began.Revolut stressed that Mr O’Higgins’ departure was not linked to any compliance issues. Mr Storonsky said: “As someone who has worked side by side with Peter for almost three years, he has been absolutely pivotal to our success, and I cannot begin to express my gratitude for his commitment, enthusiasm and accomplishments to date.”Mr O’Higgins said: “As Revolut begins to scale globally and applies to become a bank in multiple jurisdictions, the time has come to pass the reins over to someone who has global retail banking experience at this level.”