EML Payments Money Laundering Governance Investigation to cost less than $2mn this financial year

In my previous post on EML Payments (EML) (see here) we noted that EML had advised that its Irish regulated subsidiary, PFS Card Services (Ireland) Limited ('PCSIL'), had received correspondence from the Central Bank of Ireland ('CBI'), including a letter received on Friday 14 May 2021 (Australian time) raising significant regulatory concerns ('Correspondence'). The CBI's concerns relate to PCSIL's Anti-Money Laundering / Counter Terrorism Financing ('AML/CTF'), risk and control frameworks and governance. 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.

A few days ago, EML provided the Australian Stock Exchange with a trading update.  The trading update also included its Quarter 3 FY2021 update in which EML confirmed:

"Current Status:
 

• EML advised the market on 19 May 2021 that it had received correspondence from the CBI raising significant regulatory concerns (‘Section 45 Letter). EMI responded to the CBI's Section 45 letter within the deadline on 27 Moy 2021. 
• EMA remains in an ongoing dialogue with the CBI in relation to their concerns through substantial responses, data and access to our teams.  
• There ie no statutory timeframe for the CBI to finale its consideration of the matters.
• A project governance structure has been established to assist our local team in Ireland, including subcommittee of the EML Board, members of the EML executive team, external regulatory consultants and legal resources.

Communication:

• We are working co-operatively with the CBI and it authorised officers.
• Communications with the CBI are confidential and we will provide updates when appropriote, . 
• EML is proactively communicating with, and providing information if and when requested, with other regulatory in the regions where EML operates.

Business Impact:  

• We continue to focus on EMI's strong pipeline of new customers and support out existing customers, yet we are aware that ongoing uncertainty is a risk and a challenge.
• Immediate one-off costs incurred for legal (Arthur Cox) and professional advisory (PriceWaterhouseCoopers) fees are expected to be less than $2 millon in FY21. In addition, we may see an impact of delayed program launches on establishment income and transaction fees which we cannot quantify at this time.
• Financial impact for FY22 can not be fully determined at this time." 

 
Some observations:

• This statement, and in particular the fees, relates to the current financial year for EML which ends on 30 June 2021 and a new financial year starts in Australia for the company on 1 July 2021, i.e. FY22. Thus, as we all know, CBI enquiries and investigations last for many years, so one could expect the 'less than $2 million' figure to go northwards. 
• There will be costs in terms of management time and that of Board involvement, as EML points out.
• Furthermore, there is a potential loss of revenue from "an impact of delayed program launches on establishment income and transaction fees which we cannot quantify at this time.

Further reading - EML Payments Q3 FY21 Trading Update June 2021 (dated 7 June 2021)