(Bloomberg) -- The European Central Bank is pressing Revolut Ltd. to improve the financial crime controls and governance of its unit in the bloc, after a review flagged concerns similar to those delaying the UK fintech’s bid for a banking license in its home market.
The ECB, which earlier this year assumed direct supervision of the firm’s European Union subsidiary Revolut Holdings Europe UAB, has been carrying out a thorough assessment of the unit, people familiar with the matter said. The regulator has already identified several shortcomings in the control environment and is pushing for improvements, they said, asking not to be named discussing the private information.
While the assessment is standard for any lender that comes under ECB supervision, its intensity and thoroughness have been a bigger adjustment than usual for Revolut, partly because of its strong growth in previous years, some of them said.
An ECB spokesperson declined to comment. A representative for Revolut said the firm works “closely with regulators around the world, ensuring that we maintain strong governance and compliance practices across our business.”
The ECB assessment comes as Revolut faces scrutiny from UK financial regulators over similar topics. The company applied for a banking license in the country more than three years ago and has been waiting for approval ever since, causing founder Nikolay Storonsky to lash out publicly and threaten to take business elsewhere.
Boosting financial crime and money laundering controls is often expensive due to the cost of adding people to do the work and investing in technology. Revolut has already announced plans to hire substantially in an effort to fortify its crime defenses, UK Chief Executive Officer Francesca Carlesi said earlier this year.
“We’re working very, very well with regulators,” Carlesi said in a Bloomberg TV interview on Wednesday, referring to the UK application, in a market where approvals typically take 12 months. “Things are moving forward, we are working well and we have no concerns at this point.”
Revolut’s EU unit forms a big part of its business, accounting for more than 40% of total revenue. It’s also Lithuania’s third-biggest bank, with €12.1 billion ($13.2 billion) in assets at the end of last year.
The lender’s position as one of the country’s largest is the reason why the ECB took over supervision from the Bank of Lithuania at the beginning of this year.
European officials have since been combing through the firm, and they are now in intense talks with it over issues including controls and governance, the people familiar with the matter said.
Firms that migrate to direct ECB supervision, including the EU subsidiaries of foreign banks set up in the aftermath of Brexit, are typically part of much older financial institutions than Revolut, which was founded nine years ago. That usually means their governance and financial crime systems are more established.
Revolut’s license in Lithuania, which has less than 3 million residents, allows the firm to offer banking services across the vast EU market with around 450 million people in it.
Revolut more than doubled its loan book to £528 million ($682 million) last year, partly by rolling out credit cards and consumer loans across some of the biggest EU members such as France, Germany and Spain. It has announced plans to offer mortgage lending in Ireland from next year, which would mark its first foray into home loans.
--With assistance from Milda Seputyte.
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