Worldline Shares Plunge 14.6% Amid Fraud Control Failures

Worldline SA, a prominent European payment processing company, experienced a significant drop in its share price, falling by over 14.6% following reports that exposed failures in its fraud control mechanisms and its handling of risky clients. The reports specifically highlighted issues within Payone, Worldline's German subsidiary, which was found to lack adequate anti-fraud measures. This revelation led to a substantial decline in investor confidence, as the company's ability to manage fraud and protect its clients came under scrutiny.

The investigation revealed that Worldline had allegedly covered up instances of client fraud to safeguard its revenue streams. This cover-up not only compromised the integrity of the company's operations but also raised serious concerns about its commitment to ethical business practices. The news of these failures and the subsequent cover-up sent shockwaves through the market, leading to a sharp decline in Worldline's share price.

Worldline’s management has emphasized its commitment to compliance and risk prevention measures. The company 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.

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 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.

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.