FinTelegram recently reported on Revolut‘s de-risking strategy, which involves mass terminating client relationships deemed high-risk. The FinTech unicorn has found itself at the center of a legal dispute. This report examines the legal arguments and implications of the ongoing lawsuit filed against Revolut by Ildar Uzbekov, as well as the broader context of Revolut‘s strategic approach to risk management.
Legal Dispute: The Case of Ildar Uzbekov
Revolut has petitioned London’s High Court for the dismissal of a lawsuit initiated by Ildar Uzbekov, son-in-law of the deceased mining magnate Alexander Shchukin. Uzbekov alleges that Revolut inappropriately froze his account in 2020 based on unfounded accusations. Revolut has characterized this action as “disproportionate” and raises significant questions about the handling of high-profile clients by UK financial institutions, particularly those who may present reputational risks.
Allegations of Unjust Account Termination
The UK attorney Patrick Green, representing Uzbekov, contends that Revolut terminated his client’s account on the grounds of inaccurate information and questionable allegations. Uzbekov seeks to restore his reputation and rectify the distress and inconvenience resulting from the account suspension.
In contrast, Tony Singla, representing Revolut, asserts that the company had grounds to suspect Uzbekov of potential involvement in money laundering activities. He argues that Revolut is not obligated to further investigate these suspicions, referencing the company’s compliance with anti-money laundering and financial crime regulations.
Divergent Arguments
Singla emphasized the distinct nature of Revolut‘s de-banking approach, asserting it diverges from cases tied to the expression of political views. He also noted Uzbekov’s lack of pursuit for financial compensation, acknowledging that no financial loss was incurred due to the account closure.
Conversely, Green challenged the basis of Revolut‘s actions in written submissions, questioning the legitimacy of the sources underpinning Revolut’s concerns about money laundering. He argued that the motion to dismiss Uzbekov’s claim lacks merit.
The court’s forthcoming decision on Revolut‘s application for dismissal will likely have consequential implications for the company’s operational practices and reputation management.
Revolut’s Strategic Approach to Risk
Concurrently, Revolut is anticipating a decisive verdict on its application for a UK banking license, submitted three years prior. The acquisition of this license would considerably enhance Revolut‘s stature in its primary market. The firm has previously come under scrutiny from the UK’s Financial Conduct Authority (FCA) for purported failures to suspend transactions in accounts marked as suspicious.
As per recent reports from FinTelegram, Revolut appears to be actively implementing a de-banking or derisking strategy aimed at disassociating from clients deemed high-risk. This strategy, manifested in the mass closure of accounts and business relationships, is ostensibly an effort to comply with regulatory pressures and to advance towards securing the much sought-after banking license in the UK.
Key Take Away
Revolut‘s ongoing legal battle and its broader de-banking and de-risking strategy highlight the intricate balance that FinTech companies must maintain between innovation, customer relations, and regulatory compliance. The outcomes of these legal proceedings and strategic decisions will be pivotal for Revolut and the evolving landscape of financial technology and its regulation.
