Russia’s Federal Financial Monitoring Service (Rosfinmonitoring) reported that clients involved in suspicious transactions migrate from QIWI Bank to other financial institutions. This shift comes in the wake of the CBR‘s decision to revoke QIWI‘s banking license earlier this year, citing severe violations of federal banking laws, including anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
The Russian Regulatory Issues
Rosfinmonitoring‘s Deputy Head, German Neglyad, addressed the issue in a recent statement. “We are closely monitoring this situation, particularly with clients who were previously with QIWI Bank and conducted suspicious financial transactions. Many of these clients have indeed moved to other lending institutions for their banking needs,” Neglyad noted.
Regulatory Crackdown and License Revocation
The revocation of QIWI Bank’s license on February 21, 2024, was a significant blow to the institution, which had already been under intense scrutiny due to its involvement in high-risk transactions. The Bank of Russia (CBR)’s decision was driven by QIWI‘s failure to comply with federal banking laws, particularly those designed to prevent money laundering and the financing of terrorism. The bank was found to have facilitated payments for illegal activities and had opened accounts using individuals’ personal data without their consent. In response, the Central Bank appointed a provisional administration to oversee QIWI’s operations until a liquidator could be appointed.
Ongoing Struggles with Western Sanctions
These recent developments are just the latest in a series of challenges for QIWI, which has been grappling with the impact of Western sanctions. Previous reports from FinTelegram highlighted the increasing pressure on the institution as sanctions tightened, cutting off access to key international markets and financial networks. QIWI‘s troubles were exacerbated by its attempts to navigate these restrictions, leading to a decline in operational stability and investor confidence.
The Strategic Trap
QIWI finds itself in a precarious strategic trap, caught between the tightening grip of Western sanctions and the stringent control exerted by Russian authorities. Although the company is headquartered in Cyprus, its operations and compliance are heavily influenced by Russian regulations. This dual allegiance has placed QIWI in a vulnerable position, particularly as it faces increasing scrutiny from international markets. On June 26, 2024, QIWI received a delisting notice from Nasdaq. In response, QIWI requested an extension from the Nasdaq Hearings Panel on July 7, 2024, to appeal this decision, reflecting the company’s desperate attempts to maintain its foothold in the West.
This delisting threat further complicates QIWI‘s already tenuous position as it struggles to navigate the conflicting demands of Russian oversight and the punitive measures imposed by Western sanctions.
Operational Impact and Market Reaction
Despite the revocation of its banking license, QIWI has maintained that its operations remain solvent. The company continues to provide services, although it has experienced significant disruptions, particularly in its payment processing capabilities across Russia. As of the end of 2022, QIWI reported having 29 million users and 13.8 million active wallets, underscoring the scale of its operations.
However, the market’s response to the license revocation was swift and severe. QIWI‘s shares plummeted by nearly 50%, reaching an all-time low. This sharp decline reflects broader concerns about the company’s financial health and the increasingly hostile regulatory environment it faces. Over the past three years, QIWI‘s stock has declined by 42.91%, a stark contrast to the MSCI World index, which saw a 16.94% increase over the same period.
Uncertain Future Amid Liquidation Process
Looking ahead, QIWI‘s future remains uncertain. The company is in the process of liquidating its Russian assets, a move that was initiated in January 2024. While QIWI is working to ensure a smooth transition during this process, the combination of regulatory scrutiny, market volatility, and ongoing challenges related to Western sanctions casts a long shadow over its prospects.
As QIWI navigates this tumultuous period, the broader implications for the Russian financial landscape remain to be seen. The migration of high-risk clients to other banks underscores the ongoing risks within the system, highlighting the need for robust regulatory oversight across the board. FinTelegram will continue to monitor these developments as they unfold.
