U.K. Regulators Suspend Wirecard's British Operations--Update
By Paul J. Davies
U.K. financial regulators froze the British operations of
Wirecard AG, disrupting an upstart digital bank that depended on
the now-insolvent German payments company.
Wirecard Card Solutions, based in Newcastle Upon Tyne in
northeast England, isn't allowed to 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 served as a backbone for other digital
payments businesses. Some customers in the U.K. won't be able to
access money on existing Wirecard prepaid cards or held
The financial regulator also said 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
Curve, a U.K.-based fintech, said its customers would be
temporarily unable to use their cards because Wirecard had been
Curve, which has called itself the Netflix of banking, links
users' various banking accounts in a single card or app. The
company said it was already in the process of moving customers to
its own card-issuing and e-money operations rather than rely on
Curve announced a deal this week to run Samsung's phone-based
payments app in the U.K.
A Samsung spokesman couldn't immediately be reached for
"Curve customers have today been informed that they are likely
to see a temporary disruption to their service and are advised to
carry an alternative payment method," Curve said in a statement.
"This disruption is expected to last for a limited time only."
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 can serve as gift cards, and some
employers distribute them 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 last week. Its market capitalization plunged
to EUR250 million ($280 million) from nearly EUR13 billion, and on
Thursday the company filed for insolvency in Germany.
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
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
Germany's financial regulator said Thursday it had appointed a
special representative to oversee Wirecard Bank, a company
subsidiary with EUR1.7 billion in deposits that wasn't part of the
wider insolvency proceedings. The company faces ongoing government
investigations in Germany, Singapore and the Philippines.
German prosecutors arrested Wirecard's 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 11:18 ET (15:18 GMT)
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