Regulators Suspend Wirecard's British Operations
By Paul J. Davies
U.K. financial regulators froze the British operations of
insolvent German payments group, Wirecard AG, in the latest
government effort to contain a $2 billion-plus scandal.
Wirecard Card Solutions, based in Newcastle Upon Tyne in
northeast England, can't dispose of any funds or assets, or carry
on its normal financial business, the U.K.'s Financial Conduct
Authority said Friday.
Wirecard's U.K. business issued prepaid cards and electronic
wallets for consumers and other businesses. Customers in the U.K.
won't be unable to access money on existing Wirecard prepaid cards
or held electronically.
The FCA said that Wirecard's U.K. business wasn't covered by the
Financial Services Compensation Scheme, which protects consumers
from financial businesses that go bad.
A Wirecard spokesman didn't immediately respond to a request for
Wirecard's prepaid card service was an add on to its main
business providing software and terminals that collect credit-card
payments for retailers in stores and online.
Prepaid cards store a set amount of value and can be used for
shopping like credit cards. They are used as gift cards. Some
employers distribute prepaid cards as incentive bonuses for
workers. They can also be used by people without bank accounts or
as a type of modern travelers check.
In 2017, Wirecard purchased Citigroup's U.S. prepaid card
business for an undisclosed sum.
Wirecard shares crashed after auditors revealed a $2 billion
hole in its accounts June 18. The company filed for insolvency in
Germany on Thursday. Its market capitalization plunged to EUR250
million ($280 million) from nearly EUR13 billion last week.
It didn't appear that Wirecard's troubles were rippling through
the wider payments industry. Though it counted hundreds of
companies as partners and customers, many are likely to have backup
payment processing providers.
It is also possible that Wirecard's legitimate business was
smaller than it appeared. The company's auditor Ernst & Young
GMBH said Thursday there were "clear indications that this was an
elaborate and sophisticated fraud, involving multiple parties
around the world in different institutions, with a deliberate aim
German financial regulator BaFin said Thursday it had appointed
a special representative to oversee Wirecard Bank, a company
subsidiary that had EUR1.7 billion in deposits and wasn't part of
the wider insolvency proceedings. The company faces ongoing
government investigations in Germany, Singapore and the
German prosecutors arrested the former chief executive, Markus
Braun, alleging he helped the company generate fake revenue and
profit. He was released on bail Tuesday. His lawyer didn't respond
to requests for comment.
Write to Paul J. Davies at email@example.com
(END) Dow Jones Newswires
June 26, 2020 09:22 ET (13:22 GMT)
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