Crypto-Friendly Revolut under Pressure after UK Regulators Find Audit Flaws

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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BTC Markets taps licensed neobank Volt for integrated banking features

The banking capabilities of fintech have met cryptocurrencies in a new partnership between Australian crypto exchange BTC Markets and the local neobank Volt.

With a license to operate in Australia as an authorized deposit-taking institution since 2019, Volt will provide corporate cash management accounts for BTC Markets users to manage their Australian dollar funds. Those accounts allow real-time payments on the New Payments Platform, Australia’s national infrastructure for fast payments.

“This means near-instant trading opportunities for our crypto clients, as they can rapidly fund AUD into their BTC Markets account,” BTC Markets CEO Caroline Bowler told Cointelegraph, adding that in the future, the partnership would also allow BTC Markets users to open Volt bank accounts without leaving the exchange:

“It gives stability to our clients and builds out a key piece of market infrastructure which is vital to our industry development. […] It also goes to show that innovation is alive and well within Australian financial services.”

Speaking on the regulatory approach in Australia, Bowler reiterated the need for proportionate regulation that protects the investor without stifling innovation. “I think our partnership with a regulated entity here in Australia goes to show it is possible,” she added.

Related: Australia, Singapore, Malaysia and South Africa launch joint CBDC pilot

Highlighting the displeasure of the crypto users regarding “the games being played by banks,” Volt co-founder Steve Weston explained, “The total of all deposits in Volt accounts are covered by the protection of up to a maximum of A$250,000 (US$185,900) per account holder under the Financial Claims Scheme.”

Despite the increasing adoption of crypto, where 17% of Australians own crypto according to a recent survey, regulators’ warnings on crypto exchanges have lead to a reluctant approach by traditional banks.