A recent fundraiser valued Revolut at £24 billion, about the same as Natwest. Yet, with losses doubling to over £200m on revenue of just £261m, the digital banking newcomer is currently light years away from such a high price tag.
Storonsky knows that for Revolut to have any chance of justifying its huge valuation, it needs to break into the UK and US market. Yet it hasn’t obtained a banking license in either jurisdiction, and for good reason – there are red flags everywhere, many of which have been spotted by the regulator responsible for overseeing UK business accounting standards, this that will do little to boost his prospects.
Among the concerns flagged by the Financial Reporting Council were an “inadequate” approach to revenue recognition and a weakness in the way Revolut’s payment processes were tested by its auditor BDO. This meant there was an “unacceptably high” risk of “material misstatement” in its accounts, the watchdog said.
With BDO’s order to take a closer look at the company’s financial reports, it is now possible that several of Revolut’s main operating companies are late in filing their accounts, a failure that can lead to reprimands for directors.
Accusations of a culture of reckless conduct threaten to cast a lingering shadow over efforts to convince the Financial Conduct Authority that it deserves a banking license.
Meanwhile, attempts to tighten internal controls will not be helped by an exodus of senior executives who should have overseen much of the process. Over the past few months, the company has lost its money laundering reporting officer, chief risk officer and UK data protection officer.
The resignation of Deirdre Halligan, the digital bank’s head of global affairs, wealth and commerce, in July could prove to be the biggest blow. A big part of Halligan’s job was overseeing Revolut’s dealings with regulators, including the FCA, as well as being responsible for all of the company’s licensing applications.