Controversial London-based fintech Revolut is poised to launch a range of prepaid Visa cards and currency transfer services in the Australian market - but without a financial services licence after ASIC granted the company a special exemption.
The unusual relief, which deviates from ASIC's normal practice of requiring financial service providers to be licensed, means that Revolut will not have to partner with an authorised domestic financial institution to begin offering its core products in the Australian market.
However, the special dispensation afforded to Revolut could trigger another public relations headache for ASIC after a whistleblower inside the fintech's London headquarters leaked details of alleged money laundering compliance breaches to the British press.
A report in London's Telegraph newspaper last week claims that an automatic system designed to prevent money laundering activity was switched off for three months in the middle of 2018.
Revolut's board was notified of the potential compliance breach by a whistleblower last year, but the matter was never reported to British regulators.
The Financial Conduct Authority revealed on Friday that it had sought information from Revolut about matters raised in the Telegraph article.
"We have been in contact with the firm to understand and assess the issues the article raises," the FCA said.
"The FCA expects all firms to have appropriate systems and controls in place at all times to monitor and counter the risk their services are abused for financial crime."
Revolut founder Nik Storonsky defended the company's compliance record, saying a formal notification was not sent to the regulator after an audit of transactions from the affected period found no suspicious transactions had been processed.
" We conducted a thorough review of all transactions that were processed during this time, which confirmed that there were no breaches," Storonsky wrote on the company's blog page.
However, The Financial Times reported on Friday that the FCA was scrutinising whether Revolut had failed in its duty to be fully transparent with the regulator.
The regulatory concerns over Revolut's AML compliance could potentially affect the company's planned launch in Australia this month.
Banking Day understands that the ASIC exemption took effect at the start of February on a condition that Revolut holds all Australian clients' money in trust through accounts operated by an authorised local bank.
It is believed that this requirement would only involve Revolut entering a transactional banking relationship as a client of an Australian financial institution, rather than a strategic business partnership with an authorised ADI.
All transactions initiated by Australian customers using Revolut's pre-paid Visa spending cards would effectively be settled through money moving in and out of the trust accounts held at the relevant bank.
However, if the allegations relating to non-compliance with British anti-money laundering laws trigger a formal investigation by UK regulators there could be fallout in Australia.
Such an investigation might give an Australian bank sufficient cause to review its transaction banking arrangements with Revolut to ensure that it remains compliant with local anti-money laundering requirements.
Banking Day has been told by several industry sources that Revolut's transaction banker in Australia is ANZ Banking Group.
If the FCA decides that Revolut did breach its AML reporting duties then ANZ might have to consider suspending or withdrawing service provision to the fintech to meet legal obligations to Austrac.
ASIC might also review the status of the licensing exemption, which has been granted to the end of October.
Under the exemption Revolut is required to operate its Australian business as if it was operating in the UK where it holds an electronic money licence issued by the FCA.
"Revolut must take all reasonable steps to provide the financial services in…this jurisdiction in a way that would comply with the UK regulatory requirements," ASIC states in the exemption notice.
Revolut's senior management revealed late last year that they were planning to launch an Australian operation before the end of March.
Since January the company has placed job advertisements on leading recruitment sites for senior management and business roles in Melbourne.
Revolut last week posted a vacancy for an Australian "head of operations" and a "country growth manager".
The advertisement for the head of operations role described the company's culture in the following way: "To put it bluntly, it's about getting shit done and owning what you do."