By: Editorial Staff, Date: April 5th, 2022
Tencent is not a new name in Asian technology markets. However, finding their moniker in the list of confirmed criminal operations isn’t something one sees every day. Unfortunately, for the tech giant’s management, Beijing has other opinions working in full force. The Chinese government has identified Tencent as directly responsible for serious money management violations spelled out in financial regulations. The punishment will set records for how much Tencent will have to pay out in retribution.
China has made 2021 the year that it got rid of massive crypto mining, but what was not overtly visible on the digital radar was that the country’s regulators were also going after players managing exchanges and payment tools as well. Tencent has been a long-standing big player in the world of digital financial transfers, and that particular presence put the company on China’s target list for regulatory control. Tencent has now being specifically charged with systemic money laundering through its WeChat Pay product.
Key violations include failure to maintain “know your customer” controls, as well as moving gambling funds for parties. Both areas of financial activity have put the WeChat Pay element of Tencent’s operations in jeopardy. Market response was immediate on the news; investment in the company dropped at least ten percent and continues to be shaky. It’s the hardest market cap hit Tencent has seen since the end of 2019.
Tencent’s response in the matter has been muted. After watching the regulatory emasculation of Alibaba as well as Meituan, management is likely thinking silence is the better course of action. Take your beating like a professional and move on if you stay in operation. The Tencent punishment, and potential massive fines are part of a bigger movement, however, as the Chinese government reminds everyone who’s still in control of the country at any given time. It’s also a reminder to markets what happens when players get too far off the acceptable field. The entire Chinese Internet sector is on edge, and the big question going into the Spring is who is going to be made the next example. For more Financial Industry CLE & CPE webcasts, click here.