The financial watchdog has stepped in to order the UK arm of payments firm Wirecard to freeze customer funds, after its German parent company filed for insolvency amidst a €1.9bn (£1.69bn) alleged accounting fraud.
The Financial Conduct Authority has ordered the UK arm of Wirecard, which is authorised to issue e-money and provide payment services including loading prepaid cards, to cease all regulated activity and freeze all assets and funds.
The FCA said that as soon as the company admitted last week that €1.9bn was missing from its accounts, Wirecard UK was told it should not pay out or reduce any money it holds for its customers except on its instructions.
“On 26 June, we took additional measures to require the firm to cease all regulated activities in order to further protect customer money,” the FCA said. “This now means customer money cannot be accessed. Our primary objective is to protect the interests and money of consumers who use Wirecard.”
Companies that use Wirecard services and will be affected include Revolution, Pockit, Soldo, Anna Money and Curve.
The finance regulator said UK customers’ funds would not be protected by the Financial Services Compensation Scheme (FSCS), which covers consumers for up to £85,000. “FSCS only applies to certain types of activity which does not include issuing electronic money or payment services,” the FCA said. It said that under the Electronic Money Regulations 2011 Wirecard was meant to safeguard customers’ money, holding it separate from its own money to ensure it could protect and return it if the firm failed.
The FCA’s action comes as the former number two executive of Wirecard has fled to China.
Jan Marsalek, a former board member and chief operating officer under suspicion in Germany over Wirecard’s accounting scandal, reportedly flew to the Philippines on Wednesday.
Menardo Guevarra, the Philippine secretary of justice, had ordered authorities to look for Marsalek after his arrival and investigate his involvement in the alleged fraud that caused the collapse of Wirecard.
Bureau of Immigration records showed that Marsalek, who had been fired from Wirecard on 22 June, arrived in Manila on 23 June and left for China from Cebu the next morning, Guevarra told CNN Philippines.
He added that there were no signs of Marsalek on CCTV at Mactan-Cebu airport.
“What is really bothersome is the fact that it appeared in the database of [the Bureau of Immigration],” he said. “We want to find out exactly if he arrived here or there was only a glitch or something, but there were certain details appearing in the database, like the aircraft that carried him to Manila and his departure from Cebu via a specific airline going to China.”
Guevarra said Marsalek was accompanied by his Filipina wife which was why he was able to enter the country despite coronavirus travel restrictions.
Two local banks, BDO Unibank and the Bank of the Philippine Islands, had been said to hold money on escrow for Wirebank, but both said that Wirecard was never a client and that the missing €1.9bn had never entered the Philippines banking system.
On Monday, Wirecard admitted that the €1.9bn, which was supposed to be in trustee accounts, may have never existed.
On Thursday, Wirecard, which processes tens of billions of euros in credit and debit transactions every year, filed for insolvency. The company said it had failed to reach a deal with its lenders that could help it stay afloat. Earlier in the week Markus Braun, Wirecard’s former chief executive who resigned last week as the scale of the alleged fraud was exposed, was arrested after presenting himself to police. The 51-year old was bailed from police custody after posting a €5m bail.