EML shares crash on Irish central bank’s AML regulatory concerns
20 May 2021

The share price of EML Payments cratered after the Brisbane-based player in niche parts of global payments markets said the Central Bank of Ireland had raised “significant regulatory concerns” about anti-money laundering compliance in its Irish-based subsidiary, which EML acquired in late 2019.

EML entered a trading halt before the market opened on Monday, and cancelled its full-year guidance on Wednesday because it was unable to estimate the cost or outcome of the Irish regulatory action. Shares in the one-time payments darling plunged 49 per cent when they resumed trading, and closed down 45.63 per cent at $2.80 for the day.

The falls wiped about $850 million off EML’s market capitalisation as the fintech – which operates all over the world in areas including digital gift cards, sports betting and salary packaging – said discussions with the Irish central bank were at an “early stage”.

The Central Bank of Ireland’s letter to EML came after it issued warnings across the payments sector last December, flagging a low level of compliance with anti-money laundering laws. In a bulletin issued last October, the central bank said it had found widespread problems with transaction monitoring across the industry and wanted stricter risk assessment.

RBC Capital Markets analyst Garry Sherriff downgraded his target price for EML after the Irish action. “We cautiously apply a 40 per cent discount to our fundamental valuation, in line with PFS’s contribution (to group margin),” he said.

Mr Sherriff reduced RBC’s price target to $4.15 from $6.75 per share previously, and downgraded EML shares to ‘Sector Perform’ from ‘Outperform’.

EML, whose CEO is Tom Cregan, told the ASX it had received a letter from the Central Bank of Ireland on Friday May 14 Australian time, expressing concerns about PFS Card Services’ compliance with anti-money laundering and counter-terrorism financing laws. EML purchased Prepaid Financial Services in Ireland in late 2019 for $425 million as part of a global expansion.

It said on Wednesday a potential direction that may be issued by the Irish central bank could “materially impact the European operations of the Prepaid Financial Services business, including potentially restricting [the Ireland subsidiary’s] activities ….” EML is expected to respond to the central bank’s concerns via a submission by May 27.

Between January 1 and March 31, about 27 per cent of EML’s global consolidated revenue came from its Irish business operations, after it shifted its non-UK business out of Britain after Brexit so all of its European business has been going through the Irish-regulated entity.

EML operates in about 28 countries. Mr Cregan has spent almost a decade on the EML board, after joining from NetSpend Corporation, a US prepaid card player. Previously he founded E-pay Australia, which provided prepaid mobile top-up cards, gift cards and money transfer services, and before that he worked at Westpac, Singtel Optus and Mobil Oil Australia.

By James Eyers and Hans van Leeuwen, The Australian Financial Review, 19 May 2021

Read more at The Australian Financial Review

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