Fintechs, Neo Banks, PrePaid, Debit and Credit Cards at risk
EML a white label provider in trouble in Europe.
Australian Fintech EML is in trouble with Irish regulators regarding card issuing and probably AML issues.
EML is a global issuer of prepaid, virtual cards, debit and credit cards which support many organisations including Fintechs, gambling companies, card issuers and banks.
This highlights the threat to Fintechs, Neo banks, Card Issuers, BNPL apps and Banks using third parties to ‘white label’ payment cards.
The central bank of Ireland has raised serious questions about how EML conducts its business in Europe and requested detail information.
Since the collapse of Wirecard a year ago regulators are belatedly started paying detailed attention to third party processors, white labeling and the risks associated.
The Wirecard US$12 .5 billion fraud last year exposed many card issuers who were caught out by the demise – clearly demonstrating a systemic risk.
In a UK alone those impacted by Wirecard included Payoneer Inc., the global prepaid cards issuer; Curve, a popular card that lets users group all accounts on one debit card; Crypto.Com Inc. a provider of cryptocurrency-enabled debit cards; and remittance and prepaid card company Pockit Ltd.
Under EU regulations all financial companies are expected to adopt a risk management program that provides a thorough evaluation of the nature and extent of risks to which they are exposed. Central to this is Enterprise Risk Management (ERM) which applies to all parts of a business including outsourcing or ‘white labeling’
ERM articulates and codifies how an organization approaches and manages risk. The ERM framework needs to include articulating risk appetites, putting formal policies into place, conducting risk assessments, establishing strong internal controls, and ensuring oversight by both senior management and boards of directors.
It’s tough enough for banks and other lenders, good luck getting Fintechs and their ‘rock star’ boards to do this.
Investors braced for details of 'regulatory concerns' on EML arm
BANKING DAY 19 May 2021 George Lekakis
The ASX-listed scrip of pre-paid and loyalty card provider EML Payments is expected to come under pressure when trading resumes this morning.
EML’s shares were placed in a trading halt before the market opened on Monday after the company revealed that an Irish subsidiary was being monitored by the Central Bank of Ireland.
In the filing to the ASX requesting the trading halt, EML said it had received a notification from the central bank that raised “significant regulatory concerns” about Prepaid Financial Services Limited (PFSL) – a company it acquired in March last year.
EML did not explain what the regulatory concerns related to but indicated it expected to release further information this morning.
PFSL is a provider of white label payments products and banking-as-a-service technology to clients in the UK, Ireland, Spain and other parts of Europe.
One of its core products is a prepaid Mastercard marketed to customers of leading European retailers.
EML said it requested the ASX trading halt to “facilitate an orderly market in EML’s securities pending a further announcement”.
Pre-market quotes for EML scrip on Monday indicate that the share price was poised to take a tumble with sellers offering to offload their holdings at a discount to the last traded price of A$5.15.
EML’s share price has surged this year after the release of the company’s interim results in February which revealed a net loss of $32 million for the six months to the end of December compared to a profit of $6 million in the previous corresponding period.
The company also reported a current asset deficiency of around $300 million at the end of December.
In the weeks following the release of the half year accounts a string of institutional investors including REST Super, Challenger and Greencape Capital ceased to be major shareholders in the business.
However, retail shareholders appear to have poured into the stock, with the share price climbing more than 30 per cent since the interim profit announcement on 17 February.
EML is based in Brisbane and boasts a high-profile board that includes former Bank of Queensland chief, David Liddy and former Rothschild Australia Asset Management CEO, Peter Martin.
Concerns emerge over Irish-founded Prepaid Financial Services
Shares in new owner EML Payments suspended in Sydney on ‘regulatory’ worries
Joe Brennan IRISH TIMES
EML agreed originally to buy Prepaid Financial Services, which was founded by Co Meath couple Valerie and Noel Moran in 2008, for an upfront payment of AUS$453.6m. File photograph: The Irish Times
Shares in Australian fintech EML Payments were suspended in Sydney on Monday as it raced to deal with a notification from the Central Bank of Ireland highlighting “significant regulatory concerns” surrounding the Irish-founded Prepaid Financial Services (PFS) it acquired last year.
EML agreed originally to buy PFS, which was founded by Co Meath couple Noel and Valerie Moran in 2008, for an upfront payment of AUS$453.6 million (€289 million in late 2019) with the equivalent of an additional €60 million subject to the company hitting certain earnings targets.
However, EML secured a €121 million discount on the purchase price before the deal closed in March last year due to the “economic realities” brought about by the Covid-19 crisis.
EML said in a statement to the Australian Securities Exchange (ASX) on Monday that it wanted to suspend trading in its shares until Wednesday morning, pending the release of “an announcement”.
It told the ASX said the trading stoppage was being sought “to facilitate an orderly market in EML’s securities pending an announcement in relation to significant regulatory concerns notified by the Central Bank of Ireland, received by EML on Friday 14 May 2021, relevant to the Prepaid Financial Services business”.
A spokeswoman for EML declined to comment beyond the ASX statement. “When we are in a position to provide more information, we will do so via the ASX announcements platform and the information will be publicly available at that time,” she said.
Efforts to reach Mr Moran, who controlled more than 81 per cent of the company with Ms Moran before the EML deal, were unsuccessful.
Firm founded by the Morans
A spokeswoman for the Irish Central Bank said it “cannot comment on any regulatory or supervisory engagement with the firms it regulates”.
PFS was founded by the Morans in London in 2008. It became one of Europe’s largest issuers of e-money with a presence in 25 countries by the time it was sold, with bases in Trim, Co Meath, Malta, London and Manchester.
In March, the PFS, Mastercard and Allpay provisionally agreed to pay fines in the UK totalling more than £32 million (€37.2 million) for their alleged role in a cartel exploiting prepaid cards used to distribute welfare funds to the homeless and victims of domestic abuse.
The trio engaged in anti-competitive behaviour by agreeing not to compete or poach each others’ clients, said the UK’s payment systems regulator in its preliminary findings of March 31st. Two other firms also accused of wrongdoing, APS and Sulion, have not reached a settlement, it added.
PFS’s provisional fine amounted to £1 million, well below the £5 million contingency that was set aside for an expected penalty when the business was sold to EML.