Revolut auditor waves the red flag over £477m of unverified revenues

Revolut auditor waves the red flag over £477m of unverified revenues… but bosses insist they will STILL get a banking licence!

Revolut is close to receiving a UK banking licence despite its auditor highlighting major problems with its accounts.

In a long-delayed report, the £28billion firm said it made its first profit in 2021 as turnover tripled in the cryptocurrency boom.

But in a huge embarrassment for the financial services giant, auditor BDO said £477million of revenues – three-quarters of its £636million turnover – could not be verified and may have been mis-stated.

In the spotlight: Revolut is close to receiving a UK banking licence despite its auditor highlighting major problems with its accounts

Despite that, Revolut believes it will still be granted a UK banking licence ‘imminently’, potentially within days, by regulators at the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).

The news – first revealed by The Mail on Sunday last week – sparked concern among MPs and industry experts. 

Baroness Altmann, a former pensions minister, said: ‘If the regulators decide not to press the pause button on granting a licence, they need to give a clear public explanation of why they have confidence in going ahead.’

Will Wragg, Conservative MP and co-chairman of the all-party parliamentary group on banking, said: ‘It is extraordinary that a firm of Revolut’s size, and a financial technology company, has had questions raised about its internal IT system and that its auditor is unable to verify the source of three-quarters of its profits.

‘Being granted a banking licence comes with huge responsibility and failing to account for almost £500million is not exactly small fry.

‘I would urge the regulators to think very carefully about this.’

Revolut’s accounts for 2021 were due to be published by the end of September. This was delayed until December 31, a deadline it missed.

Yesterday, BDO said the group’s IT and accounting systems were not sophisticated enough to track its revenues for most of 2021 when the company was growing rapidly.

This meant the auditors could not confirm which parts of the business three-quarters of the revenue came from – putting it at risk of ‘material mis-statement’.

The error was put right in late 2021, a source said, and it is not expected to be a problem again. The source said regulators were ‘well aware of the issues’.

Finance boss Mikko Salovaara said Revolut ‘outgrew’ its IT systems, adding: ‘It’s a one-off. We don’t expect further delays on an ongoing basis in our accounts.’

Revolut was launched in 2015 by former Lehman Brothers and Credit Suisse trader Nikolay Storonsky, 38, and Vlad Yatsenko, 39. I

t is now a sprawling digital finance group with 27m customers worldwide offering everything from holiday home rentals to stock trading.

It has a full banking licence in the EU but can only offer some services in the UK. A licence would allow it to take deposits and lend money. 

Revolut said it made a £40million profit in 2021, up from a loss of £221million in 2020. In an update on current trading, it said revenues had jumped by another third to £850m in 2022 – and were far less dependent on crypto.

Storonsky, who is also the chief executive, wants it to be the ‘Amazon of banking’.

Angela Eagle, a Labour MP on the Treasury Select Committee, said: ‘I would certainly worry about what on Earth had gone on in an organisation which can’t account for where three-quarters of its income has come from trying to become a bank.’

BDO is working on the 2022 accounts, expected to be released before this year’s September deadline.

Revolut has been on a hiring spree, taking on around 300 people a month since last summer, boosting its total headcount from 2,900 people at the start of 2022 to around 6,000.

Gaffe hits grandees on board of fintech 

The Revolut debacle is an embarrassment for City big-hitters who joined its board.

Most prominent is Martin Gilbert, 67, who is founder of Aberdeen Asset Management, which merged with Standard Life to create Standard Life Aberdeen, now Abrdn. 

He is Revolut chairman, and was appointed in 2019 to help boost its credentials.

Revolut chairman Martin Gilbert (pictured) was appointed in 2019 to help boost its credentials

Revolut chairman Martin Gilbert (pictured) was appointed in 2019 to help boost its credentials

Michael Sherwood, 57, a former top Goldman Sachs executive, is a non-executive director and chairs its remuneration committee. 

He arrived in 2020 to bolster its governance after it was criticised for a potential breach of transparency rules.

Revolut’s risk and compliance committee is headed by John Sievwright, who was chief operating officer at investment bank Merrill Lynch. 

Another non-executive director is Ian Wilson, who previously worked at RBS, Santander, Tesco Bank and Monzo. 

Caroline Britton, who heads Revolut’s audit committee, spent 18 years as a partner at accountant Deloitte.

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