Who is to blame for Wirecard? Germany spends money

FRANKFURT (Reuters) – Germany’s accounting watchdog has denied blame for failing to spot problems at collapsed payments company Wirecard, the latest in a series of agencies to shirk responsibility after the country’s biggest accounting scandal. .

FILE PHOTO: The logo of Wirecard AG, an independent provider of outsourcing and private label solutions for electronic payment transactions, is displayed at its headquarters in Aschheim, near Munich, Germany, on July 1, 2020. REUTERS / Andreas Gebert / File Photo

The implosion of what was seen as a German success story that was once worth $ 28 billion has caused a great shame with experts and politicians who criticize what they see as a non-intervention approach by the authorities.

Wirecard filed for insolvency last week due to creditors of nearly $ 4 billion after revealing a € 1.9 billion ($ 2.1 billion) hole in its accounts that its EY auditor said was the result of sophisticated fraud global.

Allegations of fraud on Wirecard had been circulating for years, although German prosecutors focused on investigating investors and journalists who had highlighted the irregularities instead of the company.

As a financial technology company, even though it owned a bank, Wirecard was considered to be in a gray zone when it came to traditional banking supervision, and various authorities are taking advantage of ambiguity to put the blame.

Germany’s financial regulator BaFin was quick to say that central banks also had a voice in the way Wirecard was supervised, while the company’s home state Bavaria said it was also not responsible because Wirecard was not a financial company.

Following allegations of fraud in a report released in 2016, authorities twice discussed whether to strengthen Wirecard’s oversight, but took no action.

Earlier last year, BaFin also asked Germany’s accounting regulator, the privately owned Financial Reporting Control Panel (FREP), to examine Wirecard’s accounts, but the report had not yet been released by the time the company collapse.

“Tracking accounting fraud and investigations are not part of our tasks,” FREP said in a statement Wednesday night, arguing that its powers were limited and that state agencies, such as prosecutors, had greater influence.


FREP, whose stated mission is to examine public company accounts to contribute to truthful and transparent accounting, said it had investigated Wirecard as quickly as possible and regularly reported to BaFin on the progress.

FREP, which has 14 employees to cover 550 publicly traded companies, has assigned a staff member to examine Wirecard’s accounts, a person familiar with the matter told Reuters.

Since then, Germany has said it will cancel its contract with the watchdog.

In a FREP brochure published in 2015, a BaFin official, Elisabeth Roegele, applauded the cooperation between the agencies by allowing Germany to “hit” on Europe. “BaFin is the German voice of compliance,” he wrote.

Bavaria’s local government, which monitors financial companies to prevent money laundering, said it was not in charge of controlling Wirecard as it did not meet the definition of a financial company, a spokeswoman said.

Prosecutors in Munich also rejected criticism that they were slow to look at Wirecard, saying they began investigating recently, as soon as they had evidence of wrongdoing.

FILE PHOTO: People enter the headquarters of Wirecard AG, an independent provider of outsourcing and private label solutions for electronic payment transactions, in Aschheim, near Munich, Germany, on July 1, 2020. REUTERS / Andreas Gebert / File Photo

Matthew Earl, who bet on a drop in Wirecard stock and co-authored a 2016 report alleging fraud, criticized the response from German authorities.

“BaFin’s focus was to go after the critics,” Earl said. “There is a much more adult approach in the United States or Great Britain. Regulators are more open. On the European continent, they are more parochial ”.

Meanwhile, EY, which has come under fire after auditing Wirecard’s accounts for a decade, said it had been duped by the company: “Even the strongest audit procedures … can’t uncover collusive fraud.”

Additional reports by Joern Poltz in Munich, Hans Seidenstuecker in Frankfurt and Douglas Busvine in Berlin; Written by John O’Donnell; Editing by David Clarke

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