Australian fintech firm EML Payments's chairman Peter Martin told shareholders on Wednesday he is "confident" that the Irish Central Bank's concerns about anti-money laundering and counter-terrorism controls at its Irish-founded Prepaid Financial Services will be resolved without any long-term impact on the group.
Mr Martin told the group's virtual annual general meeting in Sydney that a comprehensive remediation plan by its Irish-regulated subsidiary PFS Card Services (Ireland) Limited unit, or PCSIL, "is on track to be substantially completed by Christmas, with any residual items in place by March 2022".
EML expects that “any residual concerns will be resolved”, he added.
The group acquired Prepaid Financial Services last year from Co Meath couple Noel Moran and Valerie Moran. The fast-growing area of prepaid cards, which facilitate 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 accelerated by the Covid-19 pandemic.
Shares in EML plunged almost 46 per cent in a single day on May 19th when the company said that the Central Bank had raised concerns about PCSIL's "Anti-Money Laundering/Counter Terrorism Financing (AML/CFT), risk and control frameworks and governance".
EML said at the time that the regulator may restrict the activities of the unit, which was responsible for PFS’s European business and accounted for 27 per cent of group revenues in the first three months of the year.
EML clarified in August that the Central Bank had not identified any instances of financial crime, AML or CTF events, nor deficiencies with respect to safeguarding, capital adequacy, or solvency measures.
“The remediation plan that we have committed ourselves to is focused on our control frameworks and it is the position of the Central Bank that unless control frameworks are to their expectation, then an unacceptable risk of AML/CFT exists,” Mr Martin said.
"Our advisers in Ireland understand Ireland's unique regulatory landscape and are accustomed to dealing with the [Central Bank of Ireland], which regards e-money institutions as 'inherently high risk' and expects these institutions to have very strong AML and CFT frameworks in place to mitigate risk."
Meanwhile, EML told investors in early October that the Central Bank had raised issues about the Irish unit’s growth plans, which were “higher than what the Central Bank would want to see”. PCSIL responded to the regulator in writing on October 28th but has yet to receive formal feedback, Mr Martin said.
EML agreed in late 2019 to buy PFS, which was founded by Mr and Mrs Moran in 2008, for an up-front payment of AUS$453.6 million (€291.2 million). However, it subsequently secured a AUS$189.1 million discount on the deal before it was completed in March last year, due to “economic realities” brought about by the Covid-19 crisis.