WIRECARD (OTCMKTS:WCAGY) faces the wrath of Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) for dubious transactions. It engages in processing payments for online merchants and shops.
Visa and MasterCard impose fine of $10 million
MasterCard and Visa each imposed a fine of over $10 million on Wirecard over a decade ago for dubious transactions. Wirecard supported transactions from gambling and adult content sites in the past. It also accounted for huge stolen card purchases, causing a loss to MasterCard and Visa.
Remove high-risk clients
Visa told Wirecard to stop processing payments on behalf of high-risk clients like businesses that engage in nutraceuticals, adult content websites, and gambling. According to the available information, some clients of Wirecard changed their names to prevent detection.
Wirecard netted a 10% fee in 2017 for handling transactions related to Pornjapan. The credit purchases from mainstream merchants usually attract a fee of 2% to 3% in the US. A spokesperson at MasterCard said it actively tracks its networks for any noncompliance and flaws.
Corrective steps by Mastercard
MasterCard thoroughly investigates areas where it finds a fault and works with the customers for speedy remedial action. The actions are in the form of suspending or terminating the license, imposing fines, or taking other corrective steps.
Wirecard admitted losing over $2 billion when it crumbles into bankruptcy in June 2020. The company acted as providing information to the networks of MasterCard and Visa that handles several million transactions daily by connecting customers and banks.
The prosecutors in Germany are investigating whether executives at Wirecard gained access to the financial system way back in 2010 for money laundering. Wirecard charged some executive responsible for multiyear fraud in 2015. The investigators in the US are also conducting an inquiry into an alleged fraud involving an offshore bank.
MasterCard and Visa receive large chunks of their revenues into their networks from companies like Wirecard. FTC (Federal Trade Commission) is playing an active role in detecting card fraud. It filed several cases accusing several companies that process unsavory purchases and individuals.
The payment networks such as Visa usually have powers to impose fine on merchants like Wirecard. They do not reveal fines imposed on such merchants to the general public.