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What is the reason behind the suspension of ePayments operations?

Feb 18, 2020

Last week brought a surprise for the payment space. An electronic money institution ePayments Systems has suspended all activity on its customer accounts following the UK’s financial watchdog order. As a result, one million user accounts cannot be accessed and users are unable to transfer, deal, withdraw, deposit their funds, or use their ePayments cards.

According to ePayments Systems, the operations had been suspended due to weaknesses in the company’s anti-money laundering procedures. It was reported that the FCA (Financial Conduct Authority) detected a loophole in the ePayments system that may be used by criminals to their advantage bypassing the regulations.

Following a regulatory review of the company’s anti-money laundering system, the financial regulator forced the electronic money institution to freeze all accounts, suspend new account opening, and refrain from AIS or PIS for an undefined period. Requirements placed on the company will have effect until the remedial measures have been taken to the satisfaction of the FCA.

The announcement gave rise to speculations about the actual reason behind the freeze. One assumption is that because the electronic money institution remains one of the largest processors for “high-risk” industries which traditional banks tend to avoid.

Many industry participants view that ePayments’ connection to a crypto exchange called Digital Securities Exchange (DSX) could possibly lead to suspension of operations of the regulated e-money company.

Another speculation explains that the suspension might be a result of yet unknown issues such as issues with client funds. And finally, there is a theory that banks are placing pressure on the financial regulator to take out the competition.

In its message to the customers, the company said that it will work on remediation to ensure the safety of the platform and resume the operations as soon as possible.

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