Revolut, a digital banking startup which last week said it had 7m customers, has cancelled plans to set up a hub Luxembourg. Photo credit: Ascannio / 

The news was first reported by The Telegraph on Sunday evening.

According to The Telegraph, Revolut stopped its Luxembourg application after questions about its compliance systems were raised in the Chamber of Deputies by the MP Laurent Mosar (CSV) in April. Revolut has refuted this characterisation.

Without citing any company names, Moser stated in a parliamentary question to the finance minister, Pierre Gramegna (DP), that:

“Fintech companies are subject to a host of national and international rules. However, it would seem that these rules are not always respected by fintech companies, so that some of them get their approval, even though they do not meet financial and banking regulatory requirements. According to my information, at least one major company that has recently applied for approval, would be flagged in its country of origin for non-compliance with existing regulations as well as for non-transparency.”

Mosar asked Gramegna what the finance ministry was doing to ensure compliance with fintech rules. Gramegna responded that the Financial Sector Supervisory Commission (CSSF) and not the finance ministry was in charge of regulating financial institutions.

The Telegraph reported that the CSSF “began conducting spot checks on financial technology firms headquartered in the country earlier this year,” to verify that board and staff members were truly located in the grand duchy.

Founded in 2015, Revolut provides banking services, including pre-paid Visa and Mastercard debit cards, peer-to-peer payments and currency exchange. It needs regulatory approval from one of the EU27 in order to maintain its access to the single European market after Brexit.

Revolut said it did not withdraw its application due to questions about its compliance technology. Rather it took a “strategic decision” to focus on its license application in Ireland. A spokesman said the firm “had a very positive and open dialogue” with the CSSF, as well as the promotion body Luxembourg for Finance.

The spokesperson told Delano on 9 September that:

“Following the successful completion of the review in Lithuania, our focus remains on building out our local banking team there. As recently reported, we have also decided to explore the creation of a payments and technology hub in the Republic of Ireland, which is well known for its technology focus and talent pool. Our investments in both these European countries has been driven by what is in the best interests of our 7 million customers. We’re excited to be working with some of the most highly regarded tech and financial services talent in both these countries.”

A spokesman for the CSSF told Delano on Monday that Revolut applied “to obtain a licence as [an] electronic money institution” on 24 December 2018. “The file was withdrawn by Revolut on July 25th 2019.” He said the regulator could not provide further details because its discussions with applicants “are deemed to remain confidential.”

Mosar filed a follow-on parliamentary question to Gramegna on 9 September, asking “for which reasons did this company withdraw its application for approval in Luxembourg?” and “is this withdrawal definitive?” Gramegna has a month to respond.

Updated with CSSF statement and second parliamentary question, 10 September at 9:30am.