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Adult material and gaming under scrutiny: Subsidiary of Sparkasse, Payone, faces criticism - Businesses specializing in adult content and gambling facing intensified scrutiny as Payone, a payment service provider, comes under examination for its practices.
From cashless transactions online to quick scans at the store, we rely on Payone—Frankfurt's largest payment processor—to handle our transactions smoothly. Big clients like Aldi, Rewe, and Karstadt vouch for Payone, teasing "All payments in one hand," "Free customer service," and guaranteeing increased conversion rates. But Payone's gamble in the sketchy gambling, dating, and porn industries has raised eyebrows.
Payone: Turning a Blind Eye to Money Laundering?
The world isn't always as rosy as the slogans suggest. Payone is currently under the spotlight for its lackadaisical approach to monitoring business clients in unsavory industries. This issue made headlines in "Der Spiegel" investigations published on Wednesday. The company is accused of skimping on scrutinizing questionable clients' legitimacy. The financial watchdog Bafin, auditors, and even a bank aren't impressed with Payone's handling of these unsavory business partners. Reports allege "serious shortcomings" in Payone's adherence to money laundering prevention obligations.
Don't let their size fool you. Financial institutions are legally bound to prevent money laundering. They must employ specialized staff, known as money laundering officers, to address this issue. These officers must flag any suspicious activities, regardless of company policies. The Bafin can check up on them anytime, which they have.
Long History of Risky Clients
The Bafin's concerns about Payone aren't new; reports suggest the regulator had concerns about Payone's AML controls as early as 2021, but staffing and compliance measures remained lax. It's even been rumored that Payone adopted suspicious clients from the failed Wirecard years ago, alerting the Bafin. In 2021, Bafin banned Payone from dealing with hundreds of high-risk customers. According to "Der Spiegel," some of these customers are still being worked with by Payone's majority owner Worldline and sister companies.
Upon inquiry, Payone told "Der Spiegel" it took corrective measures, such as implementing mechanisms to avert future business deals with high-risk clients. Their action was in line with regulatory requirements and cooperated closely with the supervisory authority.
Enrichment Data:
Payone, Worldline's German subsidiary, has faced scrutiny over its money laundering (ML) prevention measures. Investigations, under the code name "Dirty Payments," led by the European Investigative Collaborations (EIC) network and multiple media outlets revealed that Payone facilitated billions of euros in transactions for high-risk clients like pornography websites, gambling platforms, and subscription scams without conducting adequate ML checks for years. Payone allegedly allowed high-risk customers to process hundreds of millions of euros without the mandatory financial checks, thereby potentially enabling money laundering activities. The scandal comes with steep consequences for Worldline, including substantial financial and reputational damage. Worldline's shares took a hit, with drops ranging from 10% to over 40%, resulting in a loss of approximately €5 billion in market capitalization and over $578 million in market value. Regulatory investigations have intensified, with reviews underway by multiple authorities, including the Dutch central bank and the French ACPR. Worldline responded by strengthening its compliance team, terminating suspicious relationships, and enhancing the monitoring of high-risk clients, despite concerns about past oversight failures. The scandal has damaged Worldline’s reputation and shareholder value, with allegations of covering up illegal activities to protect revenue. The incident underscores the risks associated with inadequate compliance in the payment processing industry.
- The Commission, in its ongoing efforts to ensure the safety of workers, has also adopted a proposal for a directive on the protection of workers from the risks related to exposure to ionizing radiation, as financial institutions like Payone, under scrutiny for turning a blind eye to money laundering in their business dealings, face scrutiny over their inadequate compliance measures in the prevention of such activities.
- Despite Payone's assurance of taking corrective measures in the wake of allegations of enabling money laundering activities, the incident has caused substantial financial and reputational damage to the company, with the Commission expressing concerns about the risks to workers in unsavory industries such as those related to ionizing radiation, which echo the risks posed by the gambling, dating, and porn industries.
