Revolut app displayed on smartphone. Image: Afotoeu/Depositphotos
Questions about its alleged ties to the Kremlin may see Revolut lose its coveted European banking licence.
Digital challenger bank Revolut is reportedly at risk of losing its European banking licence as it grapples with renewed concerns over its alleged links to the Kremlin.
Revolut secured the banking licence in December 2018, leading many to laud the rapidly growing fintech firm as a major disrupter in the world of finance. At the time, it announced ambitious plans to roll out consumer lending and commission-free stock trading.
Revolut had its licence granted in Lithuania, an obvious choice in the eyes of many due to the country’s EU member state status and its simplified process for obtaining licences for e-money and payments services. Its seamless process is the product of a campaign mounted by the Bank of Lithuania to attract fintech firms the world over, hoping to assure its position as a fintech superpower.
Yet this ostensibly wise decision may be Revolut’s undoing, or rather the company’s alleged Russian ties, which are running afoul of the Lithuanian parliament, may be.
Lithuania was formerly under the thumb of the Russian empire and subsequently the Soviet Union so, as one can imagine, there are still residual tensions between the two nations, with Russia seen as a constant threat to Lithuania’s stability.
So when details emerged that Revolut’s chief executive, Nikolay Storonsky, had ties to Russia, this caused existing tensions to reach fever pitch. Russian-born Storonsky is the son of the director of a division of Gazprom, a Kremlin-controlled company that is the world’s largest gas producer as of 2018.
Russia has been subject to US and EU sanctions since 2014 when it invaded Ukraine’s Crimean peninsula. Gazprom has soldiered on totally undeterred in the face of this, reporting huge profits exceeding 400pc and continuing its seemingly unassailable growth.
Storonsky’s own enterprise, however, may not prove to be as impervious to legislative harms. First reported in The Telegraph by technology correspondent James Cook, the Lithuanian parliament is gearing up to debate a draft resolution that asks whether these Russian ties leave Revolut “politically vulnerable”.
The Lithuanian government has accused Revolut of having Kremlin ties before, which reached boiling point when it was reported that the company would be moving its servers to Russia.
Today’s resolution will request that a Lithuanian national security committee investigates Revolut in order to determine whether its activities are “in line with the national security interests of the Republic of Lithuania”.
A representative from Revolut has responded to the impending discussion in Lithuanian parliament, saying: “We have always approached our application and our dealings with the Lithuanian regulatory authorities with complete transparency and will continue to do so.”
The spokesperson added: “We do not have anything to hide and actively invited the commission to work with us to further address any of the points raised in the draft resolution.”
The company has also denied the alleged Russian ties and says that it strongly refutes “any suggestion that [its] strict compliance processes would be compromised by a move into that market”.
The committee is also set to discuss revelations made earlier this year that the digital banking app may have allowed illegal transactions to pass through it over the course of three months after an automated system to flag suspicious transactions was disabled.
The system was turned off after it was found to be overzealous in its detection, erroneously flagging legitimate transactions as fraudulent and frustrating its customers in the process. The bank tried a different screening process that retroactively checked transactions in order to circumvent this.
This inspired Revolut’s head of legal, Tom Hambrett, to draft a letter to the Financial Conduct Authority (FCA) to alert it to this possible “failing”. The letter, a Revolut spokesperson subsequently admitted, was never sent.
The company has roundly denied that any illegal transactions got through its filters and has insisted that it never “failed to meet [its] legal or regulatory sanctions requirements”.
Revolut app displayed on smartphone. Image: Afotoeu/Depositphotos
Updated, 1.01pm, 25 April 2019: This article was updated to include comments from a Revolut spokesperson.
