Irish-founded fintech’s Central Bank skirmish raises questions for regulator too

Market Beat: Prepaid cards are of use to drug cartels, terrorists and petty fraudsters

Noel and Valerie Moran, the Meath-based fintech multimillionaires that have taken the horse racing world by storm in recent years, may be focused on the jumps. But that doesn't stop them fantasising about one the world's most prestigious flat races.

“I’d like to win the Melbourne Cup,” Valerie told the Irish Field in an interview late last year. “When you do something, you must aim as high as you can. It’s very good to dream.”

The Morans were already the toast of the Australian financial pages – and beyond – in November 2019 when they agreed to sell Prepaid Financial Services (PFS), an e-money company they founded in 2008, in true fintech fashion, at the kitchen table of their London apartment in Paddington.


By the time the deal closed in March last year, however, EML had beaten down the upfront value of the cash-and-stock deal by about 40 per cent to £131.5 million (€153 million), citing the “economic reality of Covid-19”. A further £55 million was earmarked to be paid over three years to June 2023 subject to PFS meeting stretching earnings targets.


The Morans, who owned 81 per cent of PFS, received a 6.9 per cent stake in EML as part of last year’s deal.

On Wednesday, some 58.5 million Australian dollars (€37.3 million) was wiped off their holding as EML's stock plunged 46 per cent when it emerged that the Central Bank of Ireland had raised anti-money laundering and counter-terrorism concerns at PFS's Irish-regulated subsidiary.

The Central Bank’s concerns extend to the firm’s risk, control frameworks and governance, EML said.

The Central Bank has warned that it is minded to issue an order that could restrict the activities of PFS Card Services (Ireland) Limited if EML doesn’t address supervisors’ “significant regulatory concerns”.

The Brisbane-based firm has said that it will make submissions by next Thursday and that it is “committed to co-operating with the [Central Bank] and is taking steps to address concerns raised”.


Prepaid cards have been around since the 1990s. But this segment of the financial world, which facilitates cashless shopping and digital transactions for people who do not have access to other forms of electronic payments such as standard debit or credit cards, has been growing rapidly in recent years.

Covid-19 has only accelerated the trend, with US-based Allied Market Research estimating the global prepaid card market will grow from $1.85 trillion (€1.51 trillion) in 2019 to $5.51 trillion by 2027.

Prepaid cards may make life easier for millions, but they are also long been beloved pf drug cartels, terrorists and petty fraudsters. The US trial of Mexican drug lord Joaquin "El Chapo" Guzman in 2019 heard that his organisation routinely used them to move drug proceeds from New York to Latin America.

Terrorists involved in the 2015 Bataclan attacks in Paris infamously used prepaid cards to anonymously pay hotel bills and other expenses – paving the way for the EU to lower the monthly transaction limit on such cards to €150 before providers are required to carry out client due diligence.

Brendan Carrig, an analyst with Macquarie in Sydney, said uncertainty will likely hang over the stock in the near term, as it could be "some time" before the Central Bank responds to EML.


“Our base case is for EML to satisfactorily respond to the CBI’s concerns and be able to continue operating, albeit with an increase to its existing cost base,” he said, adding that with about 27 per cent of group revenue coming from the Irish-licensed unit, about 25 million Australian dollars of annual operating earnings are at risk, if its licence was unexpectedly revoked.

Another firm, Wilsons Advisory, reckons the Irish unit will have to increase spending on systems and face increased regulatory oversight – though there is a risk that its licence could be suspended until adequate remedies are taken.

But – worryingly – this is the third time in the past two years that PFS has been caught in the crosshairs of regulators.

PFS was fined €1 million by the French banking regulator in September 2019 for several lapses in its anti-money-laundering controls, including failures to block hundreds of cash withdrawals and foreign transactions using anonymous cards and the non-reporting of suspicious card activity to authorities.

In March, PFS's UK unit, Mastercard and Allpay provisionally agreed to pay fines in the UK totalling more than £32 million (with PFS's coming to £1 million) for their alleged role in a cartel exploiting prepaid cards used to distribute welfare funds to the homeless and victims of domestic abuse.

Both of these cases were known to EML at the time of the original 2019 takeover agreement and referred to in investor documents at the time as it went about raising money in the market to help fund the deal.


While banks have been the main focus of regulatory action – for good reason – over the past decade or so, e-payments companies are falling increasingly under regulators’ sights.

The Central Bank’s list of authorised e-money firms has gone from zero to 17 in less than three years.

PFS Card Services (Ireland) Limited was granted its licence in April 2019. However, its business grew massively just before Christmas when PFS moved all of its non-UK activities in Europe to the Irish-regulated firm as a result of Brexit.

The Central Bank is declining to comment on what it calls “an ongoing regulatory engagement”. But it begs the questions whether the issues that are now the subject of investigation only cropped up in recent months – or if the regulator had a proper look under the bonnet of PFS’s European business before the transfer.