Who's to blame for Wirecard?
Germany’s accountancy watchdog has denied blame for failing
to spot problems at collapsed payments firm Wirecard, the latest in a string of
agencies to shirk responsibility following the country’s biggest accounting
scandal.
The implosion of what was seen as a German success story
once worth $28 billion has caused major embarrassment with experts and
politicians criticising what they see as a hands-off approach on the part of
the authorities.
Wirecard filed for insolvency last week owing creditors
almost $4 billion after disclosing a 1.9 billion euro ($2.1 billion) hole in
its accounts that its auditor EY said was the result of a sophisticated global
fraud.
Allegations of fraud at Wirecard had been doing the rounds
for years though German prosecutors focused on investigating the investors and
journalists who had highlighted irregularities rather than the company.
As a financial technology firm, albeit one that owned a
bank, Wirecard was long considered as being in a grey area when it came to
traditional banking supervision - and that ambiguity is being seized on by
various authorities to shift the blame.
Germany’s financial regulator BaFin has been quick to say
that central banks also had a say in how Wirecard was supervised while the
company’s home state of Bavaria has said it was not responsible either because
Wirecard was not a financial firm.
Following allegations of fraud in a report published in
2016, the authorities twice discussed whether to tighten supervision of
Wirecard but took no action.
Early last year, BaFin also asked Germany’s accounting
watchdog - the privately-owned Financial Reporting Enforcement Panel (FREP) -
to examine Wirecard’s accounts, but the report had yet to be delivered by the
time the company collapsed.
“Tracking down accounting fraud and investigations are not
part of our tasks,” FREP said in a statement late on Wednesday, arguing that
its powers were limited and state agencies such as prosecutors had greater
clout.
‘PACK A PUNCH’
FREP, whose stated mission is to examine the accounts of
public companies to contribute to truthful and transparent accounting, said it
had investigated Wirecard as fast as possible and regularly informed BaFin of
progress.
FREP, which has 14 employees to cover 550 publicly listed
companies, assigned one staff member to examine Wirecard’s accounts, a person
familiar with the matter told Reuters.
Germany has since 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 bodies as allowing
Germany to “pack a punch” in Europe. “BaFin is the German voice of
enforcement,” she wrote.
Bavaria’s local government, which monitors financial
companies to prevent money laundering, said it wasn’t in charge of keeping tabs
on Wirecard as it did not fit the definition of a financial company, a
spokeswoman said.
Prosecutors in Munich have also rejected criticism they were
slow to look at Wirecard, saying they started to investigate recently, as soon
as they had evidence of wrongdoing.
Matthew Earl, who bet on a fall in Wirecard’s shares and
co-authored a 2016 report that alleged fraud, criticised the response of the
German authorities.
“BaFin’s approach was to go after the critics,” said Earl.
“There is a much more grown up approach in the United States or Britain. The
regulators are more open minded. On the continent in Europe, they are more
parochial.”
EY meanwhile, which has been heavily criticised after
auditing Wirecard’s accounts for a decade, said it had been duped by the
company: “Even the most robust ... audit procedures may not uncover a collusive
fraud.”
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