Payments app Wise has been fined $360,000 by United Arab Emirates’ financial regulator over failures in its anti-money laundering controls, piling pressure on the fintech just as rising rates and costs threaten the sector.

The Financial Services Regulatory Authority of Abu Dhabi Global Market, an international financial centre, imposed the fine on Wise Nuqud, a wholly-owned subsidiary of the remittance fintech, over a series of failures in its AML systems.

The failures included only carrying out enhanced due diligence on customers identified as high risk after they had established a business relationship with the company, and a failure to consider customer nationality as part of its assessment of their potential risks.

“The FSRA is committed to ensuring that all regulated entities maintain high standards to address money laundering risks and, where appropriate, the FSRA will take strong action to ensure firms comply fully with the anti-money laundering requirements in ADGM,” said Emmanuel Givanakis, the regulator’s chief executive, in a statement seen by the Financial Times.

The regulator is expected to announce the fine as soon as Tuesday.

Other issues identified include a failure to properly obtain approval from senior managers to establish business relationships with high-risk customers. The regulator said Wise also did not identify the expected volume of business from these clients.

The watchdog said it did not identify any instances of money laundering resulting from the failures, and said Wise and its senior management had co-operated with its inquiries. The fine was reduced by 20 per cent as Wise did not dispute the findings and agreed to settle at the earliest opportunity.

“Wise takes its responsibility to protect its customers and prevent money laundering very seriously. We have worked closely with the Abu Dhabi Global Market’s Financial Services Regulatory Authority to resolve their concerns, and no instances of money laundering or other financial crime were identified by Wise or by the FSRA,” said the fintech in a statement.

Wise, formerly known as TransferWise, was valued at almost £9bn when it went public in July 2021. In its latest quarterly results released last month, the company reported a 50 per cent increase in revenues year on year, as customers brought forward money transfers amid fears of greater volatility later in the year.

But the company, whose listing in London was seen as a rare coup for the UK market, has struggled over the past year.

The Financial Conduct Authority is investigating chief executive and co-founder Kristo Käärmann after he was fined by HM Revenues & Customs for deliberately defaulting on tax payments.

After the HMRC penalty, Wise completed an investigation with its legal advisers at the end of 2021, before passing its findings to the regulator.

Its share price has fallen almost 50 per cent since its listing, despite being profitable since 2017. Similar to other fintechs, it has faced a brutal market sell-off, as investors have ditched growth stocks in the face of rising interest rates.

Revolut is under pressure from its auditors to improve internal controls after UK regulators highlighted significant flaws in the auditing of its accounts, including an “unacceptably high” risk of “material misstatement”.

The rapidly growing payments group, which has suffered a string of high-profile defections in its risk and compliance teams in recent months, is the unnamed “financial services provider” whose audit by BDO was criticised by the Financial Reporting Council in its latest audit quality inspections, people familiar with the matter told the Financial Times.

BDO’s audit of the unnamed company suffered from an “inadequate” approach to revenue recognition and “as a result, the risk of an undetected material misstatement was unacceptably high”, the FRC said in its annual report on the quality of the accounting firm’s work, published in July.

The watchdog also highlighted deficiencies in how Revolut’s payment processes were tested by BDO, the UK’s fifth-largest audit firm by revenue, which it said could have led to “material misstatements”.

“The auditors are being significantly more challenging now, because they’re getting beaten up by their regulators,” one of the people familiar with the situation told the Financial Times, adding that BDO’s more rigorous approach could lead to delays in filing accounts for key Revolut subsidiaries.

Revolut Group Holdings Ltd, the group’s parent company, and Revolut Ltd must file 2021 accounts by the end of September. Accounts have been overdue since June 10 for Revolut NewCo UK, the entity intended to house the UK banking licence applied for by Revolut in January 2021, but which it still has not received. Other UK subsidiaries including Revolut FIC Ltd, which handles digital assets, and Revolut Travel Ltd, are also due to file at the end of September.

While delays in filing accounts are rarely punished, they can lead to the prosecution of company directors, which include Revolut chief executive Nikolay Storonsky, and civil penalties against the company itself under UK law.

Revolut must improve “unsexy things like its back office and controls” because it “needs to have a back office like a bank and it’s got the culture of a tech firm”, said a second person familiar with the situation.

The FRC had concluded that the fintech group “needs to have the control environment of a bank”, said this person, adding that Revolut was “definitely trying to do all the right things” and that management understood they needed to invest in processes and controls.

A company’s internal controls include the systems and processes that ensure its financial reporting is reliable and that it complies with its legal and regulatory obligations.

Revolut is Europe’s second most valuable private fintech, securing a price tag of $33bn in an $800mn funding round led by SoftBank and Tiger Global last year. It recorded a net loss of £168mn in its most recent annual results, for 2020.

It suffered an exodus of senior staff in recent months, including its UK money laundering reporting officer, UK chief risk officer, UK data protection officer and both UK and global heads of regulatory compliance. Revolut is still awaiting its banking licence in the UK.

Revolut is also the last company that applied that is still awaiting permanent approval by the FCA to offer cryptocurrency services in the UK. The FCA, which is looking solely at whether crypto groups have adequate anti-money laundering processes, in March announced that a “small number” of companies could remain on a temporary register for crypto firms until their applications had been fully processed.

BDO, which was paid £650,000 for checking Revolut’s 2020 financial statements, was criticised by the FRC in July for the “unacceptable” quality of its audits. Just seven of its 12 company audits reviewed in the FRC’s most recent annual inspections were deemed up to scratch.

Auditors are under increasing pressure from the regulator to resist companies’ demands to sign off accounts on time if management has not provided the necessary information. The shares of UK-listed groups such as S4 Capital and Revolution Beauty have been suspended this year because of delays in publishing their annual results.

Revolut declined to comment. BDO said it could not comment on individual companies it worked for. The FRC declined to comment.