Tencent’s stock dropped sharply in Hong Kong on Monday after the Wall Street Journal reported that the Chinese internet giant might face a record punishment for breaking anti-money laundering regulations.

According to the Wall Street Journal, WeChat Pay, Tencent’s mobile payment service, allows the transfer of cash for illegal activities such as gambling, according to people familiar with the situation. According to the publication, Tencent also failed to completely comply with standards governing the identification of merchants and people, as well as the source of their finances.

There were no comments on the report by Tencent on Monday. 

The IT firm’s stock dropped over 10 per cent to settle at 331.80 Hong Kong dollars ($42.38), the lowest level since December 5, 2019.

Tencent shares have lost about 56 percent of their value since reaching a record high closing of 766.50 Hong Kong dollars in January 2021, wiping out more than $500 billion of the company’s assets.

The WSJ revelation comes after Beijing’s intensive regulatory tightening on the country’s technology industry for more than a year, in an effort to reign in power and stamp out some of the top internet giants’ suspected bad behaviour. China has attempted to impose regulations in a variety of sectors, including antitrust and data protection.

Non-bank financial players such as Tencent and Alibaba-affiliated Ant Group have been a special target of authorities. These businesses provide financial services but are not subject to the same stringent regulations as banks are. China intends to alter this.

Tencent has escaped a big regulatory setback thus far, unlike Alibaba and Meituan, which have both been fined for antitrust violations.

According to the Wall Street Journal, Tencent’s possible penalties might be in the hundreds of millions of yuan range, but this is still up for debate.

Other Chinese Internet companies’ Hong Kong-listed shares also took a beating on Monday, as already shaky sentiment about the country’s internet industry was put to the test.

China is dealing with a fresh wave of Covid infections, which has resulted in city lockdowns and factory closures. Meanwhile, investors are concerned about whether Chinese businesses listed in the United States would be delisted and whether Beijing’s regulatory crackdown will continue.

(Adapted from CNBC.com)

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