Challenger Bank Revolut under fire…

Unicorn Revolut, one of the most promising challenger banks from the UK, has been accused of violating basic banking rules by failing to block thousand of potential suspicious transactions on its platform. 

The Telegraph published about documents that show that between July and September 2018 Revolut switched off an automated system designed to stop dubious money transfers. As a result loads of illegal transactions may have passed through their digital banking system.

Revolut launched an internal investigation in late 2018 after a whistleblower contacted Revolut’s board over serious issues with its sanction screening system. Soon after this investigation Revolut reported the issue to the British Financial Conduct Authority (FCA).

For some time now, there have been rumors about major AML problems at Revolut. People questioned the rapid growth of around 10.000 new sign-ups a day. How is it possible for a startup FinTech to keep up with the necessary AML and KYC rules and regulations any bank needs to abide to? Also according to insiders they replaced their Chief Risk Officer three times in 18 months time. 

There have been more negative rumors about Revolut recently. Wired quotes a former employee that says Revolut’s high-speed growth has come at high human cost, with unpaid work, unachievable targets and high staff turnover. 

On top of that, there are claims that Revolut has links with the Russian government that are causing controversy in Lithuania at the moment. 

Soon after Revolut got its banking licence in Lithuania, Lithuanian politics started muddying the waters. To grasp what happened next, it’s important to understand the politically sensitive relations between Lithuania and Russia. Lithuania was under the iron fist of the Russian empire for 123 years, and then part of the Soviet Union until its independence in 1990. Russia is therefore perceived as a constant threat to the country’s stability.

Stasys Jakeliūnas, chair of the Lithuanian parliament’s budget and finance committee has accused Revolut of being involved with the Kremlin. This led to calls for an official investigation into Revolut’s activities by Jakeliūnas’s office. Jakeliūnas claimed the “potential existence of persons related to Russian policy among the Bank’s shareholders”. His stated concerns were that the father of Revolut CEO Storonsky was a director at a division of Gazprom, a company with close ties to the Kremlin, and that one of Revolut’s shareholders (DST Global Fund) was owned by Russians. This investigation could ultimately result in Revolut’s banking license being revoked.

On a more positive note; Revolut is in talks with Softbank about a 500 million USD funding round. And they recently presented their growth plans that should bring them to a total of 100 million accounts. They want to achieve this ambitious goal by opening 19 more offices, one of them in Amsterdam, and hiring 300 new recruits. 

Never a dull moment in the challenger bank space.

To be continued…