The Revolut loophole arose due to differences between European and US payment systems.

A flaw in the Revolut payment system in the US allowed criminals to steal over $20 million of the company’s funds last year, according to undisclosed sources. The incident, which has not been publicly disclosed, adds to the challenges faced by the fintech firm, including senior departures and a qualified audit.

The problem arose due to differences between European and US payment systems, leading to Revolut mistakenly refunding accounts when certain transactions were declined. Organized criminal groups exploited this flaw in early 2022, encouraging individuals to make expensive purchases that would be declined and then cashed out through ATMs. .  (FT)

Revolut was unable to detect the mass fraud, and the fraud was discovered when a US partner bank noticed a cash shortfall. Revolut’s systems failed to identify the problem, and the company had to inject multimillion-dollar cash injections to cover the losses. While Revolut managed to recover a portion of the stolen funds, the net loss amounted to around $20 million, equivalent to two-thirds of its annual net profit in 2021.

The fraud primarily affected Revolut’s own corporate funds rather than customer accounts. Revolut has declined to comment on the case.

The company is still awaiting a banking license in the UK and has faced regulatory scrutiny over its policies to prevent financial crime. Furthermore, auditor BDO expressed concerns about the accuracy of Revolut’s reported revenues for 2021.

Revolut’s valuation has also been reduced by venture capital firm Molten Ventures and asset manager Schroders.

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