SBP orders TAG to make full refunds to depositors. What does this mean for the troubled fintech startup?

State Bank has ordered more corrective actions than just refunding money to wallet customers

The State Bank of Pakistan (SBP) has ordered Pakistan’s fintech TAG Innovation to initiate refunds to customers. Despite that it may seem that TAG Innovation might be going towards a complete cessation of operations, it might not be entirely accurate because the State Bank has ordered more corrective actions than just refunding money to wallet customers. 

On August 4, the central bank said in a press release that TAG Innovation had been ordered to initiate refunds to customers, with a hard deadline to complete the refunds by August 19. However, the original letter sent to TAG Innovation requesting this action also asked TAG Innovation to completely disassociate from co-founders Talal Ahmed Gondal and Ahsan Kaleem Khan, multiple sources privy to the contents of the letter, told Profit.

Even though the State Bank also said that it would review the fit-and-proper test of both the co-founders, sources claimed that to satisfy the SBP, divestment of the shareholding of the two co-founders would also be necessary. Both co-founders currently have no direct shareholding in TAG Innovation, which is owned 100% by TAG Fintech in the US.

In TAG Fintech, Talal Gondal owns the majority shareholding and recently stripped the other co-founder, Ahsan Khan, of shareholding on grounds of alleged misconduct.

The move by the central bank, coming after months of a probe into the startup, appears to be a measured one to keep the startup afloat while taking punitive action against persons allegedly responsible for the misconduct that led to the SBP action of first suspending TAG’s pilot operations and then ordering refunds to customers. 

According to a source, the actions that led to TAG Innovation in Pakistan’s troubles were initiated when a doctored document was submitted to the central bank by TAG Fintech when it initiated a bid to acquire a majority stake in SAMBA Bank. According to the source, since these actions were carried out by TAG Fintech, with which the rest of TAG Innovation’s management and wallet operations had no connection since TAG Fintech is only the holding company of TAG Innovation, and that TAG’s wallet operations in Pakistan had no irregularities, as an entity, TAG Innovation is not directly implicated of any wrongdoing. 

The source further says that the arrangement, therefore, most likely is going to be that TAG Innovation’s operations will continue with changes in shareholding in the holding company, changes in the management, and without any involvement of both the original co-founders. According to one of the sources, the scenario for TAG Innovation now will be something like “touching the bottom and then coming back up.”

The central bank has further asked TAG Innovation to submit an audit report of refunds to customers in September but gave no timeline by which the co-founders are required to be removed from the company. 

According to SBP’s letter, following the satisfactory completion by TAG Innovation of the removal of both co-founders and refunds to customers, the SBP will convey the future of TAG’s EMI license approval, which affirms the State Bank’s willingness to keep the startup alive, though prompting them to start all over again.

It is pertinent to note that the State Bank has not asked for any action against the CTO of TAG Innovation, Alex Lukianchuk, who is the third co-founder and a shareholder in the holding company. Alex was not named in the document submission fiasco.

The Germany-based CTO of TAG Innovation was made the CEO of TAG Fintech, the holding company in the US after Talal’s resignation in March.

Both Talal and Alex are said to be close and one option left for Talal would be to transfer his shareholding to Alex, in an attempt to retain a say in the company’s decision-making. Profit reached out to Talal for comments on his future course of action but no comments were received. Profit asked Alex about his association with Talal as well as his future plans but no response was received till the filing of this report. 

Founded in 2020, TAG was at the pilot stage of the Electronic Money Institution (EMI) licensing process when the State Bank suspended its operations because of a forged document submitted by TAG Fintech while aiming to buy Samba Bank Limited.

TAG Innovation, the operating company has among its present management Talib Rizvi, a senior banker, who has now been given charge to run the affairs under the supervision of new CEO Muhammad Afzal.

In its press release, the SBP says that the recent action requiring refunds to customers has been taken after the identification of violations of SBP’s regulatory requirements and other concerns during the pilot operations of TAG. The central bank did not specify what these violations were.

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Taimoor Hassan
The author is a staff member and can be reached at [email protected]

7 COMMENTS

  1. As a reader I wonder the ethics of your journalism and the sources; probably these are employees of the company? Having access to confidential information and leaking it for your scoop.

    Or its all made up.

  2. Good read; except that the management including Talib Rizvi and Gen. NDMA will be minting millions now.

    Both controversial personalities at the helm. The two kids were better than these.

    • True, Talib and Gen were the reason of the split between Talal and Ahsan as well. not to mention the forgery was ‘recommended’ by Talib. Odd is Gen brought Talib and Talib was never a fit candidate for CEO at BoP — he was kicked out of there… When I found of the state the org didn’t join TAG.. Saved by the whim..

      Approx. packages of Talib (he had to get TAG licensed hahaha) and Gen were PKR 2mln..

  3. One question arises, where were these Senior Bankers when all of this was done?

    Some say Talib Rizvi was in the communication chain sent to State Bank and he facilitated the doctoring of the document with Talal. As he also facilitated his marriage to a General’s daughter.

    Rishta aunty, Corruption Babu-Banker

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