Digital challenger bank Revolut has faced concerns over the possibility that thousands of illegal transactions were allowed to pass through the app over the course of three months.
Peter O’Higgins, the chief financial officer of unicorn fintech start-up Revolut, resigned in January as questions were raised over the firm’s ability to screen suspicious transactions.
In a story first reported by The Telegraph, Revolut confirmed that O’Higgins left the company at the start of the year, though maintained that the resignation was not connected to issues over compliance. O’Higgins joined Revolut in 2016 after 12 years at finance goliath JP Morgan.
The resignation news arose soon after details emerged about an internal investigation launched by Revolut’s board into a “failing” of the bank’s screening system.
The board was informed in 2018 that automated systems to block suspicious transactions had been disabled for months, meaning that thousands of illegal transactions may have flowed through the app’s systems between July and September.
The automated system had reportedly been blocking many legitimate transactions that were cropping up as “false positives”, much to the chagrin of users. This inspired the bank to disable its blocking system and switch over to a screening process, which allowed suspicious transactions to be made and then later reviewed.
Revolut’s head of legal, Tom Hambrett, drafted a letter to the Financial Conduct Authority (FCA) to alert it to the “failing”, yet a spokesperson from Revolut has said that this letter was never sent.
Revolut now says it never actually contacted the FCA last year. The company's head of legal drafted a letter on its compliance "failing" but didn't send it
— James Cook (@JamesLiamCook) February 28, 2019
Nikolay Storonsky, co-founder and CEO of Revolut, claimed that the monitoring system was a “systems enhancing project” the company was rolling out “in parallel with [its] existing systems and controls”.
Storonsky continued: “Like any technology company, we always seek to improve our systems. The new systems were not calibrated to a standard that we would expect, so we reverted to our existing process until calibration was complete.
“At no point during this time do we believe that we failed to meet our legal or regulatory sanctions requirements. A thorough review has been undertaken of the transactions that were processed, which has confirmed that there were no sanctioned transactions.” Storonsky also confirmed that the company had not formally notified the FCA of these events.
The ‘human cost’ of Revolut
Revolut has experienced a meteoric rise since it was first founded in 2015, attracting millions of customers and achieving a valuation of almost $2bn last year. Its position as the most promising digital challenger bank seemed assured when the company secured a European banking licence in late 2018.
Yet this week has seen the firm faced with numerous controversies about multiple aspects of its business, including an exposé from Wired, which detailed allegations that the company’s incredible growth came at a human cost.
Former Revolut employees have said that they were given impossible targets and asked to do unpaid recruitment work during interview stages. All of these factors have contributed to the firm’s reported high turnover – it is said that as many as 80pc of Revolut employees stayed in their role for less than a year.
Representatives from the company have said it intends to release an open letter addressing many of the issues recently spotlighted in the press.
Today (1 March), hundreds of Revolut customers have reported problems while using the challenger bank app. Users have found themselves unable to withdraw funds, transfer funds, top up their accounts or, in some cases, log into their accounts at all.
Revolut has yet to release an official statement regarding the root of the issues, but the company has been responding to customer queries via Twitter with a message stating that it is “aware of issues which have prevented [users] from using the app”.
Same generic message to everyone I see.. Can you please give a time frame? I NEED my money that is in my Revolut account ASAP
— Willow Green (@_willow_green_) March 1, 2019
The company has, however, sent out a tweet admitting that it is experiencing some “technical issues which are affecting [the] app’s functionality”. It confirms issues with top-ups, exchanges and other features but claims that card payments are currently processing normally.
⚠️ We’re currently facing some technical issues which are affecting our app's functionality – including top ups, exchanges and other features. Our engineers are on the case and we will update you as soon as possible. Card payments are currently processing normally.
— Revolut (@RevolutApp) March 1, 2019
Speaking to Siliconrepublic.com, a spokesperson for the company reiterated what has been released via Twitter regarding the app’s functionality and has said that engineers are “working to deploy a fix”.
Kiran Wylie, UK and Ireland PR and communications manager for Revolut, explained that there are issues with Revolut’s “retail API” , leading to the various problems experienced by users. The company denied the assertion that the blocks on withdrawals or other functions were in any way related to the news stories released this week. “It’s a case of really terrible timing.”
Wylie continued: “Despite the incident, Revolut cards should be working without issues, but we recommend customers carry an additional card with them as a precaution.”
Updated, 1.38pm, 1 March 2019: This article was updated to clarify that Revolut was last year valued at almost $2bn, not that it raised $2bn in funding, and also to confirm that Peter O’Higgins joined the company in 2016, not 2012.
Updated, 4.13pm, 12 March 2019: This article was updated to clarify that Revolut’s sanctions screening systems, not its anti-money laundering systems, were switched off. The two systems were previously erroneously conflated.