UK financial regulators have identified flaws in the auditing accounts of Revolut, a British neobank offering crypto investment services. The Financial Times media reported the matter on Monday.
According to the Financial Times, The Financial Reporting Council (FRC), a UK watchdog responsible for regulating auditors, accountants, and actuaries, recently issued a report showing that an audit conducted by BDO accountancy firm on Revolut was insufficient and therefore runs a “high risk of material misstatement, which can risk undetected material misstatement.”
Revolut is, therefore, now under pressure from its auditors to improve internal controls (the systems that ensure its financial reporting is reliable) so that it complies with legal and regulatory requirements.
The UK’s regulator also identified deficiencies in how Revolut’s payment processes were tested by the BDO, one of the country’s largest audit firms by revenue.
According to the agency, such deficiencies could have caused compromised results in the audit and, therefore, created an unrefined picture of the fintech company.
However, the latest attempt for a more rigorous approach by BDO on Revolut’s working model might lead to delays in filing its accounts for key Revolut subsidiaries, the majority of which are due at the end of the month.
The firm is currently late on filing accounts for Revolut Newco UK Ltd., the entity delegated for holding its delayed banking license applied for the fintech in the UK.
The neobank is also due to file accounts of its other UK subsidiaries, including its digital assets and travelling branches, at the end of September 2022.
Although delays in filing accounts are rarely punished in the UK, it could lead to the prosecution of the company’s directors and civil penalties against the firm under British laws.
The Firm Facing Growth Challenges
Early last month, Revolut launched a digital currency trading service in Singapore amid a tightening regulation from regulators.
In July, Revolut was struck by the exit of five key executives, including its UK regulatory and risk bosses, amid uncertainty over its banking license.
The departures come as Revolut, which is currently regulated as an electronic money institution, is seeking to be authorized with a UK banking license and get full approval to offer crypto services in the UK.
Revolut, which applied for a UK banking license in January 2021, sees getting a UK banking license as a key step in its plan to become a global super app.
Earlier this year, Revolut CEO and co-founder Nik Storonsky criticized the Financial Conduct Authority (FCA) for its delay in awarding it a UK banking license. The executive described the FCA as being slower compared to other regulators.
The digital bank is also seeking to be fully approved for its crypto services by the regulator, as it is only currently on a temporary register.
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