Chinese Authorities Conclude Ant Group’s Regulatory Restructuring Process with $984M Penatly

China’s regulatory authorities revealed on Friday (July 7, 2023) a 7.12 billion yuan (approximately $984 million) fine for Ant Group, a decision that effectively ends a lengthy regulatory revamp of the Fintech firm while marking an important step to concluding a massive crackdown on the nation’s digital economy sector.

China’s reserve bank stated that financial regulators could fine Ant Group and its subsidiaries a total of 7.12 billion yuan, and also require the service provider to suspend business operations of its crowdfunded medical aid platform Xianghubao and compensate customers.

The hefty fine is notably one of the largest-ever penalties for an Internet firm based in mainland China.

As reported by Reuters, Ant Group and its subsidiaries had allegedly violated applicable laws and regulatory guidelines in areas like corporate governance, financial consumer protection, payment and settlement activities, and even AML requirements, the People’s Bank of China (PBOC) stated.

Ant Group also mentioned that it had finalized its rectification activities.

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance.”

It had reportedly closed down Xianghubao back in 2021.

Reuters also reported, while citing sources familiar with the matter, that China’s regulaotry authorities were planning to impose its fine on Ant Group by Friday.

In addition to the Ant Group, the Chinese regulators also revealed that they had imposed fines on Ping An Bank, insurance provider PICC Property and Casualty, Postal Savings Bank and Tencent Holdings‘ payment service Tenpay, with Tenpay issued a penalty of almost 3 billion yuan, for allegedly making violations in areas like user data management.

US-listed shares in Ant’s affiliate, digital commerce company Alibaba Group surged 9% following PBOC’s statements.

The business entity’s Hong Kong shares surged around 6.4% following media reports before giving up modest gains.

Ant’s recent fine now paves the way forward for the Fintech company to acquire a financial holding entity license, pursue further growth, and also focus on its plans for a stock market entry.

The National Financial Regulatory Administration (NFRA), a government entity under the State Council, is the main regulatory agency to issue Ant the permit. This, according to the sources familiar with the issue.

For the larger tech industry, the penalty signals a major step towards the conclusion of China’s massive crackdown on private businesses, which started with the suspension of Ant Group’s initial public offering (IPO) in 2020 and has erased billions of dollars off the market value of many firms.

Established by Jack Ma, Ant Group operates China’s mobile payment app Alipay and focuses on consumer lending/insurance services distribution.

Back in 2020, prior to its IPO being scrapped, the firm had been valued by certain investors at over $300 billion.

Since the past couple years, the Ant Group has reportedly been undergoing a major business restructuring process, which involves turning the organization into a financial holding entity that could subject it to guidelines/capital requirements similar to those for banking institutions.

The announcement of the large penalty comes right after China appointed reserve bank Deputy Governor Pan Gongsheng as the institution’s party secretary, a decision that policy sources told Reuters could lead to him ultimately serving as governor.

Pan is reportedly one of the key regulatory professionals who is tasked with overseeing Ant’s restructuring and has attended various meetings with the firm regarding the penalty as well as the revamp, according to the sources familiar with the matter (and cited by Reuters).

Notably, Ant Group’s massive fine is the largest one imposed on a China-based internet firm since Didi Global had been fined $1.2 billion by China’s cybersecurity regulatory agency in 2022.

Alibaba had also been fined a record 18 billion yuan back in 2021 for antitrust violations.

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