On Thursday June 25, 2020, Wirecard AG opened insolvency proceedings at the Munich District Court.
Wirecard Card Solution Ltd. (“WDCS”), a subsidiary of Wirecard AG, is an e-money institution based in the United Kingdom, and is regulated by the Financial Conduct Authority (FCA).
The WDCS is the issuer of the cadoozCard plus.
We were informed on June 26, 2020 that the British Financial Conduct Authority (FCA) has temporarily suspended the business operations of WDCS. In addition, we were informed that at present WDCS is not permitted to perform regulated activities, and that as a result the FCA has temporarily had WDCS accounts blocked. This means that cadoozCard plus customers cannot currently use their cards, and do not have access to their funds (Wirecard is currently implementing the technical steps required to restrict use of the cards).
On June 27, 2020 we received the following official statement from the WDCS Marketing department:
You will have seen the recent press regarding Wirecard AG filing for administration in Germany. In light of this we wanted to update you urgently with respect to the current situation regarding Wirecard Card Solutions Limited (WDCS) in the UK.
The FCA has, today, imposed restrictions on WDCS's licence. Those restrictions can be found on the FCA Register, but we have included them at the end of this communication for you to see. Please be aware that some of these suspensions also apply to our agents and distributors. For the avoidance of doubt and for the time being, you must not accept money in relation to creating e-money under WDCS’ permissions
The impact of these requirements is that WDCS has temporarily suspended its electronic money issuing, card issuing and acquiring business with immediate effect and until further notice. In practical terms what this means for card programmes is that customers will not be able to use their cards and accounts while the suspension continues and, specifically, it will not be possible
for customers to load funds, redeem funds, make card transactions or make any other account-based transactions. The practical impact for the merchant acquiring business, is that there will be no authorisation or processing of transactions and no payouts to merchants while the suspension is in place.
WDCS appreciates this will have an impact on you and your customers. WDCS is working hard to have the steps in place which will enable the suspension to be lifted so business can resume as usual.
We will provide further updates to you as soon as we can. Please note, we will also be updating our website so further developments can also be found there.
1) Wirecard must not, without the written consent of the Authority, issue any electronic money or accept any funds in consideration for the issue of electronic money;
2) Any monies received by Wirecard in contravention of requirement 1) must be immediately returned to the customer.
3) Wirecard must not, without the written consent of the Authority or in order to comply with these requirements, carry out any payment services (as defined in regulation 2(1) of the Payment Services Regulations 2017);
4) By 12pm on 26 June 2020, Wirecard must display, in a prominent place on its website, a notice that it is no longer permitted to issue electronic money or to conduct any regulated payment services. The wording and format of this notice is to be approved by the Authority prior to its being placed on the website.
5) Wirecard must secure all books and records and preserve all information and systems relating to electronic money and regulated payment services, and must retain these in a form and at a location, within the United Kingdom, to be notified to the Authority in writing by 12pm on 29 June 2020, such that they can be provided to the Authority, or to a person named by the Authority, promptly on its request.
6) Wirecard must take all necessary steps to ensure that all Relevant Funds are appropriately safeguarded in designated accounts held at credit institutions authorised by the Prudential Regulation Authority in the United Kingdom.
7) By 12pm on 26 June 2020, Wirecard must provide the Authority with details of all safeguarding accounts in which Relevant Funds are held and evidence of the steps taken to comply with sub-paragraph 6) above.
8) Wirecard must take all necessary steps to ensure that all other monies held in banks by it overseas are transferred to accounts held at credit institutions authorised by the Prudential Regulation Authority in the United Kingdom.
9) Wirecard must not, without the written consent of the Authority and save as is necessary to comply with these requirements, in any way dispose of, withdraw, transfer, deal with or diminish the value of any of its own assets, and any funds it holds for, or to the order of its clients (whether in the United Kingdom or elsewhere).”
On June 29, 2020, we were informed that the British Financial Conduct Authority has granted written authorization for WDCS to resume issuing e-money and providing payment services as of June 30, 2020. The authorization of the FCA means that customers will be able to use their cards as normal immediately or shortly. Based on this current information, we assume that cadoozCard plus customers will also be able to use their cards again as normal either immediately or shortly.
We have been informed by WDCS that all customer funds are being held in “safeguarding accounts”. According to British regulatory law, this is designed to protect your funds in compliance with British e-money regulations.
Details are available in a statement provided by WDCS (Annex: Safeguarding Customer Funds) and on the website of the FCA (Financial Conduct Authority):
„Safeguarding is a key consumer protection measure within the EMRs and the PSRs. The purpose of safeguarding is to protect and return customer money if a firm was to fail.
Wirecard is required under the EMRs to maintain appropriate measures to safeguard customers money. It does this by holding it separate from its own money in accounts with banks (or another credit institution). Effective safeguarding arrangements are critical to help ensure that customers’ money is protected and returned if a firm fails. Adequate safeguarding arrangements which are compliant with the regulatory requirements are a condition of Wirecard’s ongoing FCA authorisation.”
As WDCS acts as a service provider and issuer of the cadoozCard plus, and as much of its business activity was suspended by order of the FCA (access to card funds was blocked), the cadoozCard plus was temporarily unusable. For some customers, the app stated their card status as “destroyed” – this is reversible and was just a part of the suspension process.
On June 26, 2020, we were informed that the British Financial Conduct Authority (FCA) granted written authorization for WDCS to resume issuing e-money and providing payment services. The restriction on activity will be lifted at 00:01 on June 30, 2020. The authorization of the FCA means that customers will be able to use their cards as normal immediately or shortly. Based on this current information, we assume that cadoozCard plus customers will also be able to use their cards again either immediately or shortly.
According to the statement issued by the FCA, the Authority will continue to monitor the activities of WDCS, and certain requirements will remain in place. These will include restrictions regarding the holding of customer funds and the ability of WDCS to transfer its own assets. The FCA will continue to work with the company to bring these matters to a conclusion. However, the FCA states that this is not expected to impact the services that WDCS provides to its customers. We therefore assume from this information that customers will be able to use the cadoozCard plus either immediately or at shortly.
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