The EML Payments Ltd (ASX: EML) share price has come under significant pressure again on Friday.
In morning trade, the embattled payments company's shares dropped 15% to 49 cents.
This means the EML share price is now down 80% over the last 12 months, as you can see below.
Why is the EML share price crashing today?
Investors have been selling down the EML share price on Friday after the company released an update on its European operations.
These operations, which are overseen by its PFS Card Services Ireland business, have come under fire from regulators over the last 18 months amid concerns over its anti-money laundering and counter-terrorism financing (AML/CFT) compliance.
According to the latest update, PFS Card Services Ireland has received further damning correspondence from the Central Bank of Ireland.
The central bank has stated that it considers that PFS Card Services Ireland has made limited remediation progress to date with significant and ongoing deficiencies remaining in its AML/CFT control framework. The bank also advised that it is not satisfied with PCSIL's remediation plan and timetable for completion.
In light of this, EML now believes there is a risk that its remediation program and third-party assessment may not be completed as planned by the end of 2023.
Potential penalties
As a result of its lack of progress, the Central Bank of Ireland has informed PFS Card Services Ireland that it is "minded to issue a direction" that growth in total payment volumes for the period 31 March 2023 to 30 March 2024 be restricted to 0% above annualised baseline volumes in the year January to December 2022.
This would be a change from the previous 10% growth restriction imposed until 8 December 2023.
Though, it is worth noting that the central bank has not yet made this direction and has provided PFS Card Services Ireland with an opportunity to provide it with submissions by 10 March 2023 for its consideration. Management advised that work has already commenced in that regard.
The company estimates that the proposed growth restrictions would reduce its EBITDA by $2 million in FY 2023.
Strategic review
EML has revealed that it disappointed with the news and is now looking at a strategic review of the PFS Card Services Ireland business. It commented:
The Board is disappointed with this development. The reconstituted Board is taking the concerns of the CBI very seriously. It is committed to remediating the issues that are of concern to the CBI and engaging constructively with the CBI in relation to the remediation. In that context, the Board has established a new dedicated subcommittee (chaired by new non-executive director, Peter Lang) charged with oversight of the remediation program. The Board has also resolved to immediately commence a strategic review of the business with the assistance of global investment banking advisors. The Board will provide an update on the strategic review in due course.
