The WSJ, citing people familiar with the matter, said that WeChat Pay, the mobile payments service run by Tencent, allowed the transfer of funds for illicit purposes like gambling. Tencent also failed to fully comply with rules around checking the identity of merchants and individuals as well as the source of their funds, the newspaper said.
Tencent was not immediately available to comment when contacted by CNBC Monday.
Shares in the tech firm fell nearly 10% to close at 331.80 Hong Kong dollars ($42.38), their lowest closing level since Dec. 5, 2019.
Since a record high close of 766.50 Hong Kong dollars in January 2021, Tencent shares have shed around 56%, wiping off more than $500 billion of value off the company.
The WSJ report comes after more than a year of intense regulatory tightening by Beijing on the country’s technology sector that has sought to rein in the power and stamp out some of the alleged bad behaviors of the biggest technology companies. China has sought to introduce regulation in areas ranging from anti-trust to data protection.
A particular focus of regulators has been non-bank financial players such as Tencent and Alibaba-affiliate Ant Group. These companies offer financial services but traditionally without the strict regulation that banks face. China is looking to change that.
The Wall Street Journal said that Tencent’s potential fine could be at least hundreds of millions of yuan, but it is still under deliberation.
The Hong Kong-listed shares of other Chinese tech names also took a battering on Monday as already-fragile sentiment towards the country’s internet sector continues to get tested.
China is facing a new wave of Covid infections across the country leading to lockdowns in cities and factories closing. Meanwhile, investors are still on edge about whether U.S.-listed Chinese companies could face delistings and if Beijing’s regulatory onslaught will continue.