Revolut facing business improvement order in Japan
The Kanto Local Finance Bureau has issued a business improvement order for violation of the Funds Settlement Act to Revolut Technologies Japan.
Revolut started working on its Japan license application in 2017, and obtained in-principle approval in November 2018. It took almost two more years, and a test phase with up to 10,000 users, until the financial app was fully launched in September 2020.
Details of the business improvement order
(1) To take necessary measures for the operation of the business with respect to the following matters in order to ensure the proper and reliable execution of the fund transfer business:
- Establishment of a business management system (including the establishment of an internal management system and an internal audit system)
- Establishment of compliance with laws and regulations, etc.
- Establishment of a management system for outside contractors
- Establishment of a money laundering and terrorism financing risk management system
(2) Submit a business improvement plan (specifying specific measures and timing of implementation) regarding (1) above by October 3, 2022, and immediately implement the plan after submission.
(3) After the implementation of (2) above, report the progress and implementation status of the business improvement plan every three months by the 10th of the following month until the completion of the implementation of the plan (the first submission of the plan is due at the end of October 2022).
Reason for disciplinary action
The Financial Services Agency conducted an on-site inspection of the Company pursuant to Article 54, Paragraph 1 of the Act and requested reports. As a result, the Agency found serious problems with the Company’s management control system, outsource management system, and money laundering and terrorism financing risk management system, as described below.
(1) Business management system
The board of directors was not functioning adequately due to lack of involvement by management, and the internal control system and internal audit system, etc. were not properly developed. As a result, the systems, etc. to properly and reliably carry out the fund transfer business were not adequately maintained, including the deficiencies in the systems listed in (2) and (3) below.
(2) External parties entrusted to manage the situation first
The company had outsourced most of its major business operations, such as the confirmation operations at the time of transactions, to its parent company, etc. However, the company had not verified the status of implementation of the outsourced operations, such as by not ascertaining the fact of re-consignment or re-sub-consignment of such operations. In addition, the company did not take necessary measures to ensure proper and reliable execution of the entrusted business, such as providing guidance to the entrustee as stipulated in Article 50 of the Law, and other necessary measures to ensure proper and reliable execution of the entrusted business.
(3) Risk management system for money laundering and terrorist financing
As a result of not sufficiently establishing an appropriate money laundering and terrorism financing risk management system in accordance with the expansion of business scale, cases of violation of the Law Concerning Prevention of Transfer of Criminal Proceeds (Law №22, 2007), such as unconfirmed purpose of transactions and occupation, were found. In addition, there were also found to be inadequate measures to deal with matters required by the Guidelines on Anti-Money Laundering and Anti-Terrorist Financing, in addition to the lack of a system to conduct strict confirmation at the time of transactions and inadequate rules for judging suspicious transactions.
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