An absurdity of consumer protection in the Australian financial services industry was revealed last night after ASIC confirmed that financial institutions could legitimately make customers lodge complaints to offshore addresses or international phone numbers.
ASIC confirmed the problematic reality in answers to questions put by Banking Day concerning controversial UK mobile payments company, Revolut Ltd.
According to a listing on the website of the Australian Financial Complaints Authority (AFCA), local customers wishing to file a complaint against Revolut are required to send written grievances to the company’s London office or to ring a British phone number.
ASIC has granted Revolut a nine-month exemption to operate in Australia as a financial services provider without a licence.
A condition of that exemption is that the company must join AFCA, but ASIC would not rule out the possibility Australian customers might have to take their complaints to staff in London.
“Revolut must have an internal dispute resolution scheme that complies with the same standards that would apply if it were a licensee,” the ASIC spokesperson said in a written answer to Banking Day.
“Revolut is also required to be a member of AFCA – it has current membership with that body.”
While a legal loophole appears to exist under the current arrangements, industry sources said they would be surprised if a foreign-based company ever tried to exploit the regulatory weakness.
Revolut’s licence exemption is also contingent on it meeting other conditions, including retention of its licence from the Financial Conduct Authority in the UK to act as an Electronic Money Institution.
That licence might be imperilled if an FCA investigation finds Revolut failed to report an alleged breakdown in its anti-money laundering monitoring systems last year.
The FCA said last week that it was “assessing” matters raised in an article published by London’s Telegraph newspaper.
Citing internal company documents, the newspaper claimed that Revolut’s money laundering prevention switch had been turned off for three months in the middle of last year.
The controversy, which could potentially undermine the company’s standing with regulators around the world, comes as Revolut prepares to launch a range of prepaid Visa spending cards in the Australian market.
ASIC confirmed on Monday that it would monitor the response of UK regulators to the allegations.
“In Australia AML/CTF requirements are administered by Austrac, rather than by ASIC,” the spokesperson said.
“However, ASIC may monitor the situation.”
The AML controversy has also put some heat on ASIC to justify its decision in January to allow Revolut to distribute prepaid money cards to domestic consumers without a formal licence.
The ASIC spokesperson said the conditions attached to the exemption would require Revolut to act as if it held a financial services licence.
“The instrument (exemption notice) gives relief from the requirement to hold an AFS licence for a limited period of time that is sufficient to enable it to lodge, and for ASIC to make a decision on, an application for a licence,” the spokesperson told Banking Day.
“The terms of the relief apply key protections of the licensing regime to Revolut as if it held a licence.”
ASIC also confirmed that Revolut would be required to provide prospective customers with product disclosure statements and financial services guides.
More than 20,000 Australian customers have already pre-registered their interest with the company by downloading its mobile transaction app.
The download is free but requires prospective customers to provide personal details and mobile phone numbers, even though the financial services guides and product statements are not yet available on the website.
Privacy advocates might also raise concerns about the practice of collecting personal information from app downloaders without alerting them to the company’s rights and obligations for using the data.
Under European laws that might apply to Revolut’s practices in Australia such disclosure might be required before customers begin handing over details.