UK Regulators Slam Crypto-Friendly Revolut Over Flawed Audits: Report

UK digital bank Revolut has come under the regulator’s scrutiny for inconsistencies in its auditing process. Citing sources familiar with the matter, FT reported that the Financial Reporting Council (FRC) criticized an audit by accountancy firm BDO of an unidentified “financial services provider” as “inadequate.”

The FRC further revealed that the “risk of an undetected material misstatement” was unacceptably high. It was later identified by FT that Revolut was, in fact, the “financial services provider.”

Tensions Between Revolut and Regulators Spill Over

FT’s source noted that the British fintech firm must improve its internal controls because it “needs to have a back office like a bank and it’s got the culture of a tech firm.” One of the sources reportedly said,

“The auditors are being significantly more challenging now because they’re getting beaten up by their regulators.”

According to the report, the stringent approach adopted by the BDO may lead to additional delays with regard to filing accounts for Revolut subsidiaries. The group’s parent company – Revolut Group Holdings Ltd – as well as Revolut Ltd., are required to file their 2021 accounts by September-end. The filings from Revolut Travel Ltd. and Revolut FIC Ltd. are also expected around the same time.

However, the company is running behind in filing Revolut NewCo UK’s accounts which were due on June 10. The person familiar with the matter also said these delays could lead to the prosecution of Revolut founder and CEO Nikolay Storonsky.

Revolut Departures and Hires

The news comes a little over a month after Revolut was hit by a slew of resignations from its UK risk and compliance chiefs as it remained at crossroads with regulators and delays to the company’s banking license.

Revolut, which happens to be Europe’s second most valuable fintech, witnessed the departure of five top-level executives. These include UK chief risk officer Victoria Stubbs, UK Head of Regulatory Compliance, Justine Wootton, and UK Money Laundering Reporting Officer (MLRO) Mathew Seneviratne, in addition to the UK Data Protection officer and UK Deputy MLRO.

The resignations may have struck a major blow to the London-headquartered fintech as it was now looking to increase crypto-focused staff by 20% across the UK, US, and Europe over the next six months.

CryptoPotato earlier reported that Revolut was advertising for 13 industry-related roles, such as software engineers, crypto legal professionals, and financial compliance and crime prevention experts, after already increasing its crypto team’s headcount by nearly 200%.