Central Bank steps in to oversee UAE Exchange operations

Parent firm Finablr said on Tuesday it has hired an adviser to help it with potential insolvency proceedings

Customers using a UAE Exchange outlet at a mall in Al Quoz, Dubai. Finablr-owned UAE Exchange's operations have been overseen by the country's central bank since March. Pawan Singh / The National

The Central Bank of the UAE is stepping in to oversee the operations of currency exchange company UAE Exchange after parent firm Finablr appointed an accountancy consultancy to undertake "rapid contingency planning" for an insolvency process.

Finablr, which listed on the London Stock Exchange less than a year ago, said on Monday there was a "material uncertainty about the group's ability to continue as a going concern".  The company has discovered cheques to the value of $100m (Dh367m) "which may have been used as security for financing arrangements for the benefit of third parties".

Finablr's chief executive Promoth Manghat stepped down and the company appointed corporate investigations specialist Kroll to conduct a review.

"The Central Bank of UAE inspection team has started an examination on the UAE Exchange today, in order to verify its compliance with the applicable laws and regulations," the regulator said late on Tuesday. "The Central Bank of UAE will take additional action, if necessary, once the examination is completed."

UAE Exchange has halted transactions through its branches and online platforms, with the exception of the operation of a Wage Protection System which it is being allowed to operate "until further notice", the central bank said.

"In order to protect consumers, the Central Bank of UAE has required the exchange house to swiftly settle outstanding remittances and all other already initiated transactions," it added.

Finablr said on Wednesday that it "is working constructively with the Central Bank and will provide an update to the market in due course".

The Central Bank announcement follows the appointment of an adviser by Finablr to help with potential insolvency proceedings. The company owns a series of currency exchanges and digital payment brands including UAE Exchange, Travelex, Xpress Money, Unimoni, Remit2India, BayanPay and digital bank Ditto.

On Monday, UAE Exchange issued a statement saying "due to certain operational challenges, we are temporarily not accepting any new transactions at UAE Exchange branches and via our online channels".

"We are currently focused on processing all existing transactions as quickly as possible", the company said.

On Wednesday, Travelex Financing issued its own statement to the LSE saying that it continues to take decisions, with input from PwC and other advisers, "in the interests of all relevant stakeholders".

"Travelex notes that it has maintained a legal and financing structure within the Finablr Group that is capable of operating separately, on a stand-alone basis," the company said.

Finablr has been facing problems for months starting after Travelex was hit by a ransomware attack on New Year's Eve. The company had to suspend both its own online currency services and those offered through UK banks including Barclays, Lloyds and Royal Bank of Scotland. Earlier this month, Travelex said its systems were now all back online and that although it faced a one-off hit to underlying earnings of about £25 million (Dh110m), it had "a cyber-insurance policy in place which we currently expect to off-set a material proportion of this".

Finablr’s owner, BR Shetty, is also the founder of the UAE's NMC Health, which has also made a series of governance disclosures following publication of a report by activist investor Muddy Waters in December accusing it of inflating cash balances, overpaying for its assets and understating its debt.

Mr Shetty recently resigned as joint non-executive chairman of the healthcare company he started in 1975 after he and other principal shareholders incorrectly reported the size of their holdings. The company recently announced the scale of its debt was "materially higher" than previously declared and that it is seeking a standstill arrangement with its lenders.

On March 12, Finablr said in a statement that “adverse perceptions in the market that the circumstances surrounding NMC Health ... have exacerbated current levels of stress on the company’s cash flow position”.

“These factors place significant constraints on the company’s access to the daily liquidity the company needs to manage its business effectively and its ability to negotiate longer term financing,” Finablr said.

Finablr had a market capitalisation of $1.3 billion when it floated last year but by close of business on Tuesday it was valued at just £77.2m (Dh369.7m).