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20200701 Wirecard : the FCA's freezing of assets.

Nigel Morris-Cotterill

The announcement without warning that the UK's Financial Conduct Authority was freezing assets of German FinTech Wirecard has caused consternation.

But while the fall-out has been severe for many individuals, it was both temporary and fits the profile of interventions. There were also good and prudent reasons for it.

Here's why.

(this article was amended later the same day to correct several grammatical errors and for minor clarifications)

On 29th May 2019, Loot Financial Services Limited entered administration.

Loot was an agent of Wirecard Card Solutions Limited, a Authorised Electronic Money Institution regulated by the Financial Conduct Authority in the UK. It was not a Wirecard subsidiary. However, the term "agent" is FCA-speak and in the real world it is misleading. The actual arrangement was that Wirecard operated the back end for a prepaid card business operated by and in the name of Loot. Remember that: it is relevant later.

The FCA said "As of 28 May 2019, customers of Loot Financial Services have been given 60 days’ notice that the product will be closing (by 26 July 2019) and services no longer provided beyond that point. As a result, customers of Loot Financial Services have been asked to withdraw their electronic money funds and to make alternative arrangements. Customers should still be able to access their funds and prepaid cards should remain functional during this period, subject to regulatory and legal obligations." (our emphasis)

The FCA, in a statement dated 29 May 2019 said "We explain what this means for customers." Well, no, they didn't. Not really.

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