OpenPayd, a Malta-licensed payment institution, has recently come under regulatory scrutiny following a ruling by Malta’s Financial Arbiter. The case involves an elderly woman who was defrauded of £23,300 (€26,600) through transactions facilitated by OpenPayd’s virtual IBAN infrastructure. The victim was misled into transferring funds to cryptocurrency exchanges holding accounts with OpenPayd, highlighting potential compliance deficiencies within the company. OpenPayd is currently appealing the decision.
This incident underscores the risks associated with virtual IBANs, which, while offering operational efficiency, can be exploited for fraudulent activities if not properly monitored. The Financial Arbiter criticized OpenPayd for lacking adequate safeguards, noting that the company credited the victim’s funds to a third-party client without her consent and without sufficient internal controls.
OpenPayd’s involvement in this case is part of a broader pattern of associations with high-risk transactions and entities linked to fraudulent schemes. Reports indicate that companies like CurrencyRock, operating the now-defunct Insirex platform, held accounts with OpenPayd that were used to channel funds from scam victims. Between March and May 2024, approximately €2.5 million flowed through CurrencyRock’s OpenPayd account. Times of Malta
In response to these challenges, OpenPayd has updated its Terms of Use to align with industry and regulatory standards.Key changes include enhanced fund protection measures, clearer account information access, and revised indemnity clauses to recover costs from complaints or chargebacks. These updates aim to bolster compliance and consumer protection.
As OpenPayd navigates this regulatory landscape, it faces increased scrutiny from authorities such as the Malta Financial Services Authority (MFSA) and the UK’s Financial Conduct Authority (FCA). The outcome of the ongoing appeal and any subsequent regulatory actions will be pivotal in determining the company’s future operations and its commitment to compliance and consumer protection.