Colombian Tax Freeze Exposes Frontier Digital Ventures’ Internal Control Risks

Emerging Concerns at Fincaraiz

Frontier Digital Ventures Limited (ASX, FDV), a prominent operator of online classifieds in emerging markets, has disclosed a troubling development within its Colombian subsidiary, Fincaraiz. Over the weekend of August 16-17, the company discovered that payments totaling roughly USD 330,000, intended for the Colombian tax authority over several months, had not been made. Instead, these funds were apparently diverted without company approval, triggering an immediate investigation.

This misappropriation led to the freezing of certain Fincaraiz bank accounts by Colombian tax authorities, a significant operational hurdle for the business. Frontier Digital Ventures has committed to settling the outstanding tax liability by August 29, 2025, aiming to restore normal banking operations within 30 to 45 days thereafter.

Broader Financial Irregularities Uncovered

Beyond the unpaid taxes, the company uncovered an additional USD 100,000 in allegedly fraudulent corporate credit card expenses incurred over the past three years by a small group of employees. These expenses were reportedly for personal use and unauthorized by the company, resulting in an overstatement of consolidated expenses in recent financial reports. Frontier has indicated that these findings will be transparently noted in its half-year 2025 financial statements.

In response, Frontier has placed the implicated employees, along with others in their department as a precaution, on compulsory paid leave with restricted system access. The company has also emphasized that all payments now require approval by the Financial Controller of 360Latam, who was not involved in the irregularities.

Strengthening Governance and Cooperation

To address these issues, Frontier Digital Ventures is appointing forensic accountants and legal counsel specializing in tax and criminal matters to conduct a thorough review. The company is cooperating fully with Colombian authorities and is actively reviewing and enhancing internal controls and governance processes across its operations to prevent recurrence.

Despite these challenges, Frontier reports that Fincaraiz’s business continues to operate, with alternative systems and funding arrangements being established to ensure continuity. The company’s proactive approach signals a commitment to transparency and accountability amid this unfolding situation.

Looking Ahead

While the total misappropriated amount currently stands at approximately USD 430,000, the investigation remains ongoing. Frontier Digital Ventures has acknowledged potential additional costs, including interest on overdue tax payments, and has pledged to provide updates on material developments as they arise.