EML has confirmed in a filing to the ASX that the Central Bank of Ireland sent it a letter advising it could restrict the authorisation of PFS Card Services (Ireland) Limited (PCSIL) because of “significant concerns” over the subsidiary’s non-compliance with anti- money laundering laws.
The disclosure prompted a sharp sell-off of EML shares, as ASX investors digested the prospect of the Irish regulator revoking the licence of the key subsidiary.
PCSIL was acquired by EML in March last year as part of the acquisition of the Irish-based Prepaid Financial Services group.
PCSIL generates revenue by issuing physical and digital prepaid cards on behalf of leading retailers and online gambling providers.
“The CBI’s concerns relate to the PCSIL’s anti-money laundering/counter terrorism financing (AML/CTF) risk and control frameworks and governance,” EML told the ASX.
“The correspondence states that the CBI is minded to issue directions to PCSIL pursuant to section 45 of the Central Bank(Supervision and Enforcement) Act 2013.
“The directions, if made, could materially impact the European operations of the Prepaid Financial Services business, including potentially restricting PCSIL’s activities under the Irish authorisation.”
The enforcement action could have a significant impact on EML’s revenue because the Brisbane-based business relies on the Irish payments licence to operate throughout the European Union.
EML estimates that about 27 per cent of its group revenue is derived from payments programs tied to the Irish licence.
The company did not amend its earnings guidance for the current year, saying it was unable to estimate the potential direct and consequential costs of the CBI action on group revenue.
Disclosure of the Irish regulatory problems triggered a brutal sell-off of EML shares on the ASX for most of Wednesday.
Investor support for company’s scrip tapered in the final hour of trading and resulted in the share price closing down more than A$2.35 or 45.6 per cent to $2.80.
Trading was frenetic, with more than 41 million shares or 11 per cent of the issued scrip changing hands.
EML has been given until 27 May to make submissions to the Central Bank of Ireland before the regulator makes a final decision to amend or revoke the PCSIL’s electronic money licence.