Global electronic payments disruptor Revolut is facing a race against the clock to put its recently launched Australian financial services business on a sustainable regulatory footing.
As reported previously in Banking Day, the UK-based fintech was granted an exemption by the Australian Securities and Investments Commission earlier this year to offer electronic money services without a financial services licence.
However, the exemption was granted for only nine months from the start of February, which means Revolut must secure ASIC licensing before the end of October or risk having the plug pulled on its big investment in the Australian market.
Revolut currently operates in Australia through its London-based parent that is recognised as an official “electronic money institution” by the UK’s Financial Conduct Authority.
Banking Day understands that the company is at an advanced stage in the ASIC licensing process, which may also involve it having to obtain separate clearance from the Reserve Bank.
Earlier this month Revolut incorporated two entities in Australia – a holding company, and an operating arm that proposes to trade as Revolut Payments Australia Pty Ltd.
The trading arm last week was registered as a member of the Australian Financial Complaints Authority – a prerequisite for any institution applying for a financial services licence.
However, there might be an additional hurdle for Revolut to overcome before ASIC grants the licence.
UK media reports earlier this year raised questions about the company’s compliance record over its anti-money laundering processes.
One BBC report in April cited allegations made by a former Revolut employee who claimed that Revolut CEO Nik Storonsky refused to take advice from his compliance team in 2016.
The company responded to the former staff member’s claim by saying that it was “categorically untrue”.
It is important to highlight that since the allegations were raised by various media outlets including the Telegraph and the BBC, no regulatory or law enforcement action has been taken against Revolut.
ASIC’s decision to grant special licensing relief in January was made before the public controversy over Revolut’s AML practices flared in London.
The Australian regulator told Banking Day in early March that it “may monitor the situation” regarding the company in the UK.
The fact that the company has continued to trade in Britain and most of Europe since the furore erupted is a strong indication that Revolut’s home market regulators are at least mostly satisfied with its compliance record.
Nevertheless, the stakes are high for Revolut and its expanding register of shareholders who are likely to be asked to pump a further $US 500 million into supporting the business later this year.
While Storonsky and other Revolut executives continue to defend the company against charges of AML non-compliance, there is little doubt that the controversy has had a sobering effect on the firm’s once “in your face” public image.
Storonsky has also made a point of adding some well-known figures from the mainstream of London’s financial services community to his group board, such as the company’s new chairman, Martin Gilbert.
According to The Financial Times, Gilbert - a founder of Aberdeen Asset Management – was recruited to help steer Revolut’s governance policies and widen the appeal of the business to investors.
His appointment might also help assuage any lingering concerns that regulators in Australia and other countries might hold about a startup that seems to have cornered a booming market for digital cross-border money transfers.
Banking Day has sought comment from Revolut about its Australian licence application.