Shares of Chinese technology giant Tencent Holdings (TCTZF) are down more than 10% on media reports that the company faces a record fine for violating Chinese anti-money laundering regulations.
The People’s Bank of China has found that Tencent’s WeChat Pay allowed the transfer of funds for illicit purposes such as gambling, according to media reports. WeChat Pay was also judged non-compliant with other rules that required Tencent to identify users and merchants transacting on the platform.
A probe into potential money-laundering would open a new front in Beijing’s sweeping crackdown on the technology sector, an effort that’s already wiped-out hundreds of billions of dollars in areas from ride-hailing and e-commerce to online education.
Tencent itself has, until now, escaped formal regulatory action. Unlike rival Alibaba (BABA), the WeChat operator hasn’t yet been the direct target of any government probe or action.
Central bank officials say they discovered irregularities on WeChat Pay after conducting a routine inspection of the payment platform in late 2021. Regulators are discussing the size of the impending fine, but it could run to hundreds of millions of yuan, larger than typically levied.
Tencent’s shares are at their lowest level in almost two years. The spread for Tencent’s dollar bond due 2030 widened 22 basis points to 228 basis points, according to Bloomberg Markets data.