Prepaid Financial Services buyer says Central Bank now querying growth plans

The Australian buyer of Ireland’s Prepaid Financial Services has been dealt yet another blow after the Central Bank of Ireland (CBI) raised a question mark over plans to grow the Irish business bought last year and already under intense and expensive regulator scrutiny.

n an update to the Australian stock exchange, EML said it has “received more correspondence” from the CBI about regulatory concerns.

EML has previously said Central Bank concerns originally flagged back in May relate to the Irish subsidiary Prepaid Financial Services’ anti-money laundering/counter-terrorism financing, risk and control frameworks and governance.

While EML said the latest potential regulator directions are more limited than originally flagged, the regulator had raised questions over growth plans for the Irish business.

“As presently framed, EML considers that the direction could materially impact the European operations of the Prepaid Financial Services (PFS) business,” EML said.

The company said the Central Bank has advised it that the Irish unit should have certain limits applied to programs that, if implemented, EML says would have a negative impact.

The Central Bank has invited a response from the company regarding the latest developments by October 28.

EML bought Noel and Valerie Moran’s PFS last year in a headline-grabbing €171m deal. The final price is now expected to be lower again with the Morans expected to receive just £8m (€9.4m) of a potential £55m earn out from the sale, because that higher figure was contingent on Prepaid Finance Services (PFS) achieving agreed earnings targets for three years from 2021 which are no longer expected to be hit.

Instead of growing the business, EML has become embroiled in a major regulatory rehabilitation programme. The company said in August that costs and provisions of responding to the Central Bank investigation were currently running at AU$11.4m (€7m).

Those costs relate to remediation, advisory, and “other expenses” relating to the investigation.

EML has hired law firm Arthur Cox and professional services group PwC for work in relation to the investigation.

In addition, it set up a project governance structure to assist its team in Ireland, including a subcommittee of the EML board and members of the company’s executive team.

The CBI has investigated various aspects of the Prepaid business “from a governance, resourcing, reporting, risk methodologies, controls and risk frameworks, capital adequacy, safeguarding and transaction monitoring perspective”, EML said in its annual report in August.

In May, shares in EML plunged almost 50pc after a two-day halt in trading, following an announcement from the company of the probe into PFS. The shares have recovered somewhat since then, however they remain down 15.3pc in the year-to-date.

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