Revolut needs to address AML lapses, says Japanese regulators

The order came after the Japanese watchdog conducted an on-site inspection of Revolut Technologies Japan. The raid found “serious problems” in the challenger bank’s internal control for governance, management of outsourced contractors, as well as money laundering and terrorist financing risk management.

The agency went on to say that Revolut’s safeguards against money laundering contain holes that can be exploited by criminal organizations and terrorist groups. The Japanese subsidiary also failed to create sufficient governance for offering funds transfer services properly and consistently.

Japan’s regulator added that Revolut, which is valued at $33 billion, did not correctly and consistently examine the core services, such as money transfer services, that it outsourced to its London-based parent.

Moreover, Revolut Japan did not implement adequate checks on customers’ purpose of transaction and lacked a robust transaction verification mechanism and there were no guidelines for detecting suspicious transactions.

The statement further reads: “The Company outsources a large part of its main services, such as verification at the time of transaction, to Revolut Ltd, its parent company. However, the Company did not check how the outsourced services were actually operated; for example, the Company did not know that the outsourced services were further outsourced to subcontractors, even multiple times (e.g. to sub-subcontractors). In addition, the Company did not verify whether the contractors operate the outsourced services in a proper and steady manner, and thus it did not provide guidance to the outsourcees or take other necessary measures to ensure the proper and steady operation of the services as provided in Article 50 of the Act.”

Revolut, which bills itself as a ‘digital banking alternative’, launched its app and service in Japan back in 2020, which marked its first leap into a non-English speaking market.

Japanese authorities have been already preparing new restrictions that would bring crypto service providers, including Revolut, under the purview of its Foreign Exchange and Foreign Trade Act.

For this purpose, a representative to the country’s cabinet said that the government plans to introduce a bill to revise its foreign exchange and trade law to include crypto exchanges. Under this new proposal, crypto exchanges will act like regular banks in a sense that it would be obliged to verify and flag suspicious activities, including transactions related to sanctioned countries.

According to officials, unauthorized payments to sanctioned entities or individuals, even with digital assets, whether NFTs or crypto, will attract punishment.

This compliance aims to tackle concerns that oligarchs in Belarus and Russia may resort to crypto to avoid the financial sanctions imposed over Ukraine invasion.

Available information shows that many Russian entities and individuals are looking to liquidate their assets to acquire properties in crypto-friendly regions, like the UAE, through crypto.