Why provision of the UK banking license to fintech startup Revolut is delayed

21.02.2023 | 10:04 Home / News / Fintech /
#Revolut #UK #license
Staff turnover, delayed filing of accounts and Russian links are among the reasons British fintech startup Revolut, founded by Russian-born Nikolay Storonsky, has not obtained a UK banking license yet.

Russian Forbes reports that The Observer (owned by The Guardian) writes about this, citing sources among officials, bankers as well as Revolut’s current and former employees.

Revolut, which is valued at $33 billion, applied to the Financial Conduct Authority (FCA) for a license back in 2021 and has been waiting for a decision ever since. Meanwhile, its smaller competitors received permissions in a shorter period of time.

One of the reasons for the delay by the regulator is the corporate culture of the startup and staff turnover, the paper writes. In 2019, it emerged that the FCA had investigated Revolut after a whistleblower claimed in 2016 that it was failing to conduct adequate money-laundering checks. The FCA closed the investigation in 2017.  Several compliance staff at British high street banks said some peers in the industry were still concerned about the company. One said working at the fintech company was a “reputational risk too far for most well-regarded staff who work within compliance”. In addition, since 2019, former and current employees of the company have complained to media about difficult working conditions and a “toxic environment”.

The company said it complied fully with anti-money-laundering and has a “sophisticated suite of financial crime detection systems, including customer due diligence and transaction monitoring.” Revolut denied that it had a toxic workplace culture or a problem with departures from key positions, noting that they “have a high-performance culture.” Earlier this year Revolut announced about hiring a psychologist for its staff.

Another reason for the delay is the UK regulator’s awareness of Revolut’s problems in Lithuania, where the company received an EU banking license in 2018, the newspaper writes. Since then, the startup has been fined twice: €200,000 for failing to gather adequate information about customers and their transactions, and €70,000 for failing to file audited financial accounts on time. Revolut said at the time that it had taken actions that would fix and help prevent future breaches and claimed that the delay in filing the accounts was due to “technical reasons.”

In UK Revolut faces a fine too for missing a deadline for group accounts covering its 2021 financial year, the paper writes. The startup said that its auditors from BDO should be held accountable for the delay.

Another problem is the Russian origin of the founder of Revolut. Born in the Moscow region, Storonsky emigrated to the UK in 2004, received British citizenship, and in 2022 renounced Russian citizenship. His father (also named Nikolay Storonsky), manages Gazprom Promgaz and was placed under Ukrainian sanctions.

People familiar with the matter told The Observer that intelligence officials are worried about it: embassy staff working in sensitive roles within the Five Eyes alliance – the intelligence-sharing network comprising Australia, the US, Britain, Canada and New Zealand – are discouraged from using Revolut. The Lithuanian parliament continued to raise concerns over Revolut’s operations, but failed to secure backing for a third inquiry in spring 2019. They eventually concluded there was no evidence to suggest Revolut posed a threat to national security.

Revolut stressed that Storonsky’s father – who is of Ukrainian descent – was “entirely unconnected with Revolut”.

Despite the string of controversies, Revolut’s approval for a banking license may be granted within weeks, it is rumored. “We can’t understand how that could be the case,” a source at a rival bank told The Observer.

A Treasury spokesperson said the chancellor had “ambitious plans for the UK to become a technology superpower” and that talks are held with “a range of promising tech firms in the UK to explore how we can grow the sector.” An FCA spokesperson said that all firms seeking authorisation must be able to prove to us they meet minimum standards. “This is crucial to the UK’s competitiveness, as it helps ensure people and businesses can trust the financial services being provided,” he noted.

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