EML Payments Shares Sink on Regulatory Update about Irish Subsidiary (ASX:EML)

The EML Payments Ltd [ASX:EML] updated investors regarding its ongoing discussions with the Central Bank of Ireland (CBI) regarding its Irish subsidiary.

EML advised that its Irish-regulated subsidiary, PFS Card Services Ireland Ltd (PCSIL), received further correspondence from the CBI.

The correspondence related to PCSIL and potential directions to be made by the CBI.

EML noted these potential directions are more limited compared to those originally foreshadowed by the CBI in May 2021.

EML Payments Ltd [ASX:EML] shares are currently trading at $3.26 per share, a drop of 11.89% at the time of writing.

ASX EML - EML Payments Share Price ChartSource: TradingView.com

Regulatory concerns over PFS Card Services have reversed EML’s early momentum, with EML shares now down 25% year-to-date.

EML’s regulatory issues: a refresher

The latest news on EML’s Irish subsidiary build on the initial regulatory concerns raised by the Central Bank of Ireland back in May.

As we covered then, EML’s stock plunged 40% on the day CBI raised ‘significant regulatory concerns’ over lax anti-money laundering and counter-terrorism financing, risk controls, and frameworks.

The news was enough for EML to scrap its FY21 guidance, as EML was unsure how to estimate the direct or indirect costs of the matter.

EML did say in May that during the period from 1 January 2021 to 31 March 2021, approximately 27% of its global consolidated revenue (unaudited) came from programs operating under PCSIL’s Irish authorisation.

So risk to the profitability of PFS Card Services is risk of large hits to EML’s coffers.

How to Limit Your Risks While Trading Volatile Stocks. Learn more.

EML provides PCSIL update

EML Payments advised the market today that the Central Bank of Ireland issued new correspondence flagging potential directions ‘including but not limited to the remediation plan and material growth’.

While EML said the potential directions are more limited than originally foreshadowed in May, EML still thinks the directions ‘could materially impact the European operations of the Prepaid Financial Services business’.

EML admitted the CBI has advised that PCSIL’s proposed material growth policy is higher than what the CBI would want to see.

Moreover, CBI has proposed that certain limits be applied to programs, if implemented, ‘could have a negative impact on the PCSIL business’.

The CBI has invited PCSIL to provide it with submissions in relation to the potential directions, which PCSIL intends to lodge by 28 October 2021.

What’s the outlook for EML shares?

EML aimed to reassure investors by noting PCSIL’s regulatory issues do not concern EML’s Australian or North American operations, nor the UK operations of PFS’ UK Subsidiary.

EML further noted today:

Subject to endorsement from the PCSIL Board, it is due to present to the CBI a significant and detailed analysis of limits applied across almost 27,000 programs in the next week along with a proposed recalibration of limits for certain programs.

EML Payments concluded by reiterating it takes regulatory compliance, including anti-money laundering and counter-terrorism financing, risk management, and governance very seriously.

EML’s regulatory troubles serve as a stark reminder of the volatile nature of these highly-regulated financial service providers.

But that’s the risk you take when you deal with these kinds of stocks because the opportunities are often far greater when they do in fact do things by the book.

You can read all about the high-flying fintech sector in our latest report, which includes three recommendations to get you started.


Kiryll Prakapenka,

For Money Morning

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Kiryll Prakapenka is a research analyst focusing on investigating the biggest trends in investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from the University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies..

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