Thousands of people have been locked out of online banking accounts after the City watchdog ordered the UK arm of payments firm Wirecard to freeze customer funds.
The Financial Conduct Authority ordered Wirecard’s British unit, which provided payment services including loading prepaid travel money cards for businesses such as Asda and British Airways, to cease all regulated activity and freeze all its assets and funds.
The move, which came after Wirecard’s German parent company filed for insolvency amidst a €1.9bn (£1.7bn) alleged accounting fraud, also hit customers of banking apps Pockit, Anna Money and Curve, which used the firm for their services.
Curve, which allows people to use a single card to make payments from any of their bank accounts, told its 1.3 million customers to carry an alternative card because transactions and money transfer would not be possible as a result of the freeze.
Curve said Wirecard provided infrastructure for its service, but did not hold any of its cardholders’ money.
It was already in the process of moving to its own systems and said its cards were likely to be out of action for days rather than weeks.
Anna Money, a digital banking app aimed at businesses, does hold customer money which has been caught up in the freeze. On its website it told accountholders that their cash was “completely safe”, but it did not know when it could be accessed.
It added: “It’s still there, ringfenced in a dedicated Barclays account, but you can’t use it for now.”
Travel money providers FairFX and Asda Money said holders of their prepaid foreign currency cards were not able to use them. FairFX said it was looking for a solution for customers, but their money was safe.
The FCA said that as soon as the company admitted last week that €1.9bn was missing from its accounts, Wirecard UK was told it should not pay out or reduce any money it holds for its customers except on its instructions.
“On 26 June, we took additional measures to require the firm to cease all regulated activities in order to further protect customer money,” the FCA said. “This now means customer money cannot be accessed. Our primary objective is to protect the interests and money of consumers who use Wirecard.”
The finance regulator said UK customers’ funds would not be protected by the Financial Services Compensation Scheme (FSCS), which covers consumers for up to £85,000.
“FSCS only applies to certain types of activity which does not include issuing electronic money or payment services,” the FCA said.
It said that under the Electronic Money Regulations 2011 Wirecard was meant to safeguard customers’ money, holding it separate from its own money to ensure it could protect and return it if the firm failed.
It could not say when customers’ money would be released.
The FCA’s action comes as the former number two executive of Wirecard has fled to China.
Jan Marsalek, a former board member and chief operating officer under suspicion in Germany over Wirecard’s accounting scandal, reportedly flew to the Philippines on Wednesday.
Menardo Guevarra, the Philippine secretary of justice, had ordered authorities to look for Marsalek after his arrival and investigate his involvement in the alleged fraud that caused the collapse of Wirecard.
Bureau of Immigration records showed that Marsalek, who had been fired from Wirecard on 22 June, arrived in Manila on 23 June and left for China from Cebu the next morning, Guevarra told CNN Philippines.
He added that there were no signs of Marsalek on CCTV at Mactan-Cebu airport.
Guevarra said Marsalek was accompanied by his Filipina wife which was why he was able to enter the country despite coronavirus travel restrictions.
Two local banks, BDO Unibank and the Bank of the Philippine Islands, had been said to hold money on escrow for Wirebank, but both said that Wirecard was never a client and that the missing €1.9bn had never entered the Philippines banking system.
On Monday, Wirecard – a member of Germany’s blue-chip DAX index and until recently regarded as having huge potential in the growing fintech sector – admitted that the €1.9bn, which was supposed to be in trustee accounts, may have never existed.
On Thursday, Wirecard, which processes tens of billions of euros in credit and debit transactions every year, filed for insolvency. The company said it had failed to reach a deal with its lenders that could help it stay afloat. Earlier in the week Markus Braun, Wirecard’s former chief executive who resigned last week as the scale of the alleged fraud was exposed, was arrested after presenting himself to police. The 51-year old was bailed from police custody after posting a €5m bail.
Gareth Shaw, head of money at Which?, said: “This will be deeply concerning for people who have been thrown into limbo and left unable to access their money, particularly as it is currently unclear when they will be able to do so again.
“This decision could have a severe short-term impact on those who have limited or no other options available.”
He said affected firms should tell customers how long the disruption might last and what help they can provide to help them access their funds.
