Wise plc’s market cap has fallen over £1.5bn this week : does an enquiry from the Brussels prosecutor signal cockroaches in the kitchen or a higher cost of doing business?

On Monday, Wise issued the following regulatory announcement:

“We are currently working with the Brussels prosecutor to respond to queries about our business, as we routinely do with regulators and law-enforcement authorities. His office's enquiries are still incomplete and no specific findings have been shared with us to date. As such, it would be speculative for us to comment on any allegations. We will continue to engage with the Brussels prosecutor's office if and when any specific findings are made available to us.”

Unsurprisingly, the shares have fallen around 15% since the announcement, wiping approximately £1.6bn from the company's market value.

Investors dislike uncertainty and companies can become tied up for years dealing with regulators and prosecutors. Stock markets are trigger-happy: shoot first, ask questions later.

Financial services companies routinely deal with enquiries from regulators. This case is somewhat different because the request for information is reportedly coming from a prosecutor rather than a financial regulator. Wise itself states that no specific findings have yet been shared with it. Nevertheless, The Bureau of Investigative Journalism (TBIJ) reported that Wise's platforms were suspected of being involved in around €500m (£432m) of suspicious transactions spanning 30 European countries.

That allegation is clearly serious, although the details available publicly remain limited.

In 2021, the National Bank of Belgium carried out a review of Wise Europe as part of a broader post-Brexit supervisory exercise. An FT article in 2024 reported that Wise lacked proof of address documentation for hundreds of thousands of customers. Wise subsequently implemented a remediation programme, including enhancements to its KYC procedures and a voluntary pause on onboarding certain new customers. As far as I can determine from the company's annual reports, no financial penalty was imposed.

The involvement of the Belgian prosecutor suggests this may be a criminal investigation rather than a purely regulatory enquiry. However, that does not imply wrongdoing has been established. Unless Wise was knowingly complicit in facilitating money laundering, a negotiated settlement and/or financial penalty would appear to be the most likely outcome. Both ING and ABN AMRO initially faced investigations led by Dutch prosecutors before ultimately resolving their cases through substantial financial settlements.

Quantifying the potential impact on Wise

The key question for investors is whether this ultimately proves to be a fine, a cost issue, or a growth impairment story.

Fines

Most AML and KYC failings are addressed through financial penalties and remediation programmes.

Under European AML frameworks, regulators can impose fines of up to 10% of annual turnover in serious cases. If such a framework were applied solely to Wise Europe, whose revenue was approximately £370m in FY2025, the theoretical maximum penalty could be around £37m. If group revenues of approximately £1.2bn were deemed relevant, the figure would be around £120m.

A more serious outcome would be a finding akin to the "culpable money laundering" cases brought against ING and ABN AMRO. Culpable money laundering occurs when AML failures are so persistent and severe that the institution bears criminal responsibility for allowing money laundering to occur through its systems, even if it did not knowingly participate.

At present, there is insufficient information in the public domain to assess whether such an outcome is plausible. However, given the remediation programme implemented following the National Bank of Belgium's earlier review, it would seem surprising to me if Wise had failed to strengthen its controls materially since then.

Importantly, Wise reported £1.6bn of own funds at its H1 26 results. Even a significant financial penalty would appear manageable from a capital perspective.

Higher compliance costs

Wise's administrative cost base is approximately £1bn per annum.

In its statement, the company noted:

"We take our responsibility incredibly seriously. Around one third of Wise's global team is dedicated to protecting our customers from financial crime and this focus is shared across all of our teams."

Given a workforce of roughly 6,600 employees, this implies around 2,200 people are already dedicated to financial crime prevention and compliance activities. That’s a pretty substantial resource.

Financial crime is becoming increasingly sophisticated, particularly with the emergence of AI. Equally, one would expect a technology-led business such as Wise to be using automation and machine learning to identify suspicious transactions more effectively than traditional financial institutions.

Nevertheless, a serious regulatory reprimand would likely require further investment in compliance infrastructure. A 20% increase in financial crime and compliance headcount would increase total workforce numbers by approximately 7%, potentially adding 6-7% to the administrative cost base before any productivity benefits from technology. Without any mitigation in other areas this could reduce earnings per share by around 10%.

Restrictions on customer onboarding

Depending on the severity of any findings, Wise could be required to strengthen onboarding procedures or, in an extreme scenario, agree to a temporary restriction on onboarding certain categories of new customers while remediation work is completed.

Wise has previous experience of voluntary onboarding restrictions. During late 2023, the company temporarily paused onboarding new business customers in the UK and Europe, citing operational capacity constraints and strong demand rather than regulatory intervention. UK customer onboarding restarted shortly afterwards, and Wise then worked through issues in Europe, dedicated to financial crime and compliance activities.

There are numerous precedents for regulators imposing customer acquisition restrictions where AML controls have not kept pace with growth.

Monzo and Starling were both prevented by the FCA from onboarding certain higher-risk customers due to deficiencies in their AML frameworks. Both institutions subsequently breached those restrictions.

N26 had customer growth capped by BaFin, initially at 50,000 new customers per month, while it improved AML controls, while Solaris, a European banking infrastructure provider, was required to obtain BaFin approval before taking on certain new customers and partners.

These cases illustrate that regulators often focus less on punishment and more on ensuring that growth does not outstrip control systems.

Broader regulatory consequences

A further risk is that scrutiny in one jurisdiction can spill over into others.

Revolut's Lithuanian banking subsidiary was fined €3.5m in 2025 after regulators identified deficiencies in transaction monitoring and customer oversight. Revolut stated that no confirmed money laundering had occurred and that the findings related to improvements to existing controls.

The financial impact of the fine itself was modest. However, the case illustrates how regulators increasingly assess governance, risk management and AML controls across multiple jurisdictions when considering major regulatory approvals.

Revolut's UK banking licence process ultimately took considerably longer than initially expected. While there is no evidence that the Lithuanian fine directly caused that delay, it demonstrates how regulatory concerns about controls can affect broader strategic objectives.

Cost of doing business

Increased sophistication of illegal activities such as authorised push payment fraud, synthetic identity fraud and money laundering means that criminals will stay one step ahead of the law. Regulators will react by increasing the regulations and thus resource required by banks and financial institutions to operate in this arena.

It may sound counterintuitive but this should, over the long term, favour the lowest cost, most efficient players such as Wise. Legacy banks with outdated technology stacks will struggle to keep up with the investment needed, exiting the transfers market to concentrate on their core actvities. Wise will need to keep investing, especially in AML and cyber crime related areas to keep ahead of the curve.

A parallel comes in Ryanair, which has kept investing in its fleet, buying bigger more efficient planes, which has to reduce non-fuel unit costs and weather oil price volatility. Higher cost competitors have not invested and have fallen by the wayside as they became less competitive.

The bottom line

Wise’s market cap has fallen £1.6bn since the announcement. That reaction appears difficult to justify on the basis of a fine alone. Even a sizeable financial penalty would likely be manageable given Wise's strong capital position and cash generation.

The more significant risk is that the investigation leads to additional remediation requirements, higher compliance costs or restrictions on customer onboarding and growth. The experiences of N26, Solaris, Monzo and Starling suggest that these indirect consequences can ultimately be more damaging than any financial penalty.

At present, there is insufficient information to determine whether this investigation is likely to result in a modest compliance outcome or something more serious. The fall in the market cap implies a severe outcome from the prosecutor’s case.

On the balance of probabilities this feels too pessimistic to me and ultimately may benefit Wise over the longer term. I have added to my shareholding.

NOT INVESTMENT ADVICE