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Dive Brief:
- A payment flaw allowed criminals to steal more than $20 million from fintech company Revolut, which offers digital banking services, over a period of several months last year, according to the Financial Times, which cited sources with knowledge of the incident.
- Differences in the firm’s U.S. and European systems meant the neobank would use its own money to erroneously refund certain declined payments, the outlet reported.
- The loophole was closed in early 2022 after a U.S.-based partner bank notified the company that it was holding less cash than it anticipated, sources told the publication.
Dive Insight:
Organized criminal groups took advantage of the loophole by encouraging individuals to make expensive purchases that would go on to be declined, according to the Financial Times. The criminals would then withdraw the refunded amount via ATMs.
Criminals stole about $23 million before the flaw was fixed, the outlet reported. Revolut was able to recover some of the stolen funds, resulting in a net loss of about $20 million.
The fraud affected the fintech’s corporate funds, and not its customer accounts, sources told the publication.
Before Revolut’s U.S. subsidiary fixed the flaw in spring 2022, the firm made requests for multimillion-dollar cash injections from its parent, according to the publication.
The company did not immediately respond to Banking Dive’s request for comment.
The reported theft comes as the London-based firm, which has been waiting for approval of a U.K. banking license for more than two years, is facing regulatory challenges, including concerns surrounding its 2021 financial statements.
Revolut CEO Nik Storonsky, who has pointed to the recent turmoil in the banking industry as a reason for the current delays, said in early March the license would be coming “any day now,” according to the Financial Times.
The fintech’s independent auditor, BDO Global, also flagged concerns about Revolut’s delayed 2021 financial accounts. In a report, BDO said it was unable to independently verify three-quarters of the €636 million in revenue Revolut reported in its delayed 2021 accounts.
The company has also had several high-profile departures in recent months.
James Radford, the former CEO of Revolut NewCo UK — the entity designed to host the fintech’s U.K. banking license — left the company in late April.
Citing “personal reasons,” Revolut CFO Mikko Salovaara left the firm in May, after two years in the top financial seat.
Joel Kass, chief of staff and head of banking products for the company’s U.K. entity, is also on his way out, according to the Financial Times.
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