Worldline Shares Drop Over 10% After Customer Fraud Cover-Up Reports

According to a June 25 Bloomberg report, shares of Worldline SA fell sharply after reports revealed flaws in its fraud controls. Trading in the French payment firm was briefly paused before shares dropped by as much as 14.6%. The decline followed an investigation by the European Investigative Collaborations (EIC) network. The reports stated that Worldline processed payments for banned and high-risk clients. They also said the company did not stop fraudulent transactions effectively. This raised questions about Worldline’s ability to manage compliance and risks in payments.

Enhanced Oversight and Staffing Implemented for High-Risk Clients

Worldline’s management said it remains fully committed to compliance and risk prevention measures. The company stressed its zero-tolerance policy for violations and enforcement of strict rules. It operates under heavy regulations, especially for High Brand Risk (HBR) sectors like gambling and adult content. Since 2023, Worldline has reviewed these merchants, which make up about 1.5% of its transaction volume. It ended business relationships with those failing to meet its updated risk framework.

All active HBR clients now face enhanced supervision with stricter verification and documentation requirements. To support this, Worldline SA increased its compliance staff under a Financial Crime Compliance (FCC) strategy. The approach involves regular checks and cooperation with regulatory authorities. When signs of non-compliance appear, the company said it acts swiftly. Actions may include terminating customer relationships to reduce risks and meet regulations.

Investigation Highlights Payone Payment Service Role in The Controversy

Much of the controversy centers on Payone payment service, Worldline’s German subsidiary with thousands of payment terminals. The investigation revealed that Payone processed payments for risky clients like pornography, gambling, and subscription scams. It reportedly lacked proper anti-money laundering controls for several years. Internal documents showed customers in these sectors processed hundreds of millions of euros without required checks. These findings raised concerns about Payone’s risk management.

Ray Akhavan, known as the “porn baron,” was named in the investigation as part of this network. He has a history of legal problems in the US. German regulators flagged concerns in 2021 about Payone’s anti-money laundering controls. Few employees managed these duties despite having many sensitive clients. In 2023, Payone was told to cut ties with high-risk clients. However, some problematic merchants reportedly moved under Worldline’s direct management, raising new concerns.

Worldline Responds with Compliance Measures and Merchant Terminations

Worldline acknowledged the seriousness of the situation and highlighted its compliance improvements. The company said it ended suspicious commercial relationships and strengthened monitoring of HBR clients. It noted that high-risk sectors represent a small portion of its revenue. According to Worldline, its fraud rate remains below the payment industry average. This suggests controls are mostly effective despite recent findings.

Investor Concerns Impact Worldline Share Price Amid Ongoing Scrutiny

The sharp fall in Worldline share price reflects investor concerns following these revelations. While Worldline SA affirms its commitment to regulation and risk management, scrutiny continues. The case underlines the challenges payment firms face in fraud control in risky sectors. It shows the complex environment payment providers work in. Strong oversight is vital to prevent misuse of payment platforms.