Yahoo Finance Germany’s financial regulator in spotlight over Wirecard scandal
Germany’s top finance industry regulator BaFin is in the hot seat over the accounting scandal at German payments company Wirecard (WDI.DE).
Once the darling of the German finance industry, the DAX-listed fintech filed for insolvency this week after a €1.9bn (£1.7bn, $2.1bn) hole in its balance sheets was revealed.
Describing the Wirecard scandal as a “wake up call that we need more oversight, more control” German finance minister Olaf Scholz said on Thursday (25 June) that he wants to overhaul financial supervision structures to make it faster and easier to spot errors.
“Here, too, the structures must be screened, possible errors quickly identified, and immediately remedied,” Scholz said. He added he was grateful that the head of BaFin, Felix Hufeld, admitted to the regulator’s errors in the scandal.
READ MORE: Embattled payments firm Wirecard collapses into insolvency
Hufeld this week called the Wirecard scandal “a complete disaster.”
The Wirecard news broke last week, after EY had refused to sign off on the company’s 2019 accounts due to the €1.9bn hole in its accounts.
Initially the Bavaria-based company, said that the money had disappeared from escrow accounts in the Philippines, and that it may have been the victim of “considerable fraud.” Then it issued a statement admitting there was “a prevailing likelihood” that the funds did not exist in the first place.
READ MORE: Customer cash frozen as Wirecard's UK business ordered to stop operating
Chief executive Markus Braun stepped down on 19 June, was subsequently arrested by Munich prosecutors over what suspected market manipulation, and has since been released on bail.
Wirecard’s former chief operating officer Jan Marsalek, who was fired last week, is believed to have flown to China from the Philippines on 24 June, CNN Philippines reported. Marsalek is also wanted for questioning by the authorities in Munich.
Wirecard auditor EY said on Thursday (25 June) there were “clear indications” that Wirecard had carried out an “elaborate and sophisticated fraud involving multiple parties around the world in different institutions with a deliberate aim of deception.”
READ MORE: Grab puts partnership with scandal-hit Wirecard on hold
The EU’s executive vice-president in charge of financial services policy, Valdis Dombrovskis, told the Financial Times on Friday that he is asking the European Securities and Markets Authority to start an investigation into BaFin, to determine whether it breached the law by failing to properly supervise Wirecard.
The Financial Times first reported on suspicious accounting practices in Wirecard’s Asian businesses back last year.
