B2B Payments

Wirecard Again Facing Accounting Fraud Allegations

Germany-based Wirecard is once again facing allegations of accounting fraud by the Financial Times (FT).

The FT reported this week that its review of internal company spreadsheets and correspondence within Wirecard’s financial team casts “further doubt” on Wirecard accounting practices, alleging that the documents “appear to indicate a concerted effort to fraudulently inflate sales and profits at Wirecard businesses in Dubai and Ireland, as well as to potentially mislead EY, Wirecard’s Tier 1 auditor.”

The digital payments company, in turn, accused the Financial Times of market manipulation, allegations that the FT rejects. These claims have led to an investigation by German financial watchdog BaFin.

The internal documents were reportedly provided by whistle-blowers, the Financial Times said.

Subsidiary Questioned

According to the publication, Al Alam Solutions, one of Wirecard’s third-party acquirer partners, has been referred payment processing business for 34 of Wirecard’s largest clients around the world. The FT called this into question, claiming that Al Alam only has a handful of employees, and that Wirecard has its own payment processing unit, Wirecard Processing. The FT said Wirecard documents show that Al Alam processed about $386 million worth of payments for top Wirecard clients every month.

However, the FT added, there are “strong indications” that the payment processing never occurred. Visa and Mastercard told the publication that they do not have a record of any relationship with Al Alam, which would be required for Al Alam to process payments.

The publication also called into question Wirecard documents that allegedly show Al Alam processing millions of dollars’ worth of payments for Wirecard clients that are no longer in business.

“Together, these findings raise doubts over whether substantial sales and profits were actually traveling through Al Alam to Wirecard — or were simply invented,” the FT claimed.

Auditor Oversight Doubted

The Financial Times report also pointed to internal Wirecard documents that call into question EY’s oversight over the company, which allegedly show that about €4.2 billion ($4.63 billion USD) in payments processed via Al Alam in 2016 generated more revenue than the €62 billion Wirecard processed that year.

“The documents raise important questions about EY’s oversight of Wirecard’s relationship with Al Alam,” the publication wrote.

EY reportedly declined to comment on the matter, citing client confidentiality.

In another statement, Al Alam said it “was not involved in any alleged process to fake revenues or profits at Wirecard.” Furthermore, Wirecard similarly rejected allegations that any financial data was fabricated.

Previous Allegations

Earlier this year, the Financial Times published separate reports accusing Wirecard of accounting fraud, which the payments company also vehemently denied. At the time, the FT accused Edo Kurniawan, Wirecard’s head of Asia-Pacific accounting and finance, of orchestrating a scheme with employees to obtain an operating license from the Hong Kong Monetary Authority — in which Wirecard would transfer funds from its Germany bank to a non-operational unit in Hong Kong.

“Wirecard fimly rejects the media coverage of FT,” a spokesperson said at the time. “Nothing about the article published today is true.”

Wirecard subsequently announced plans to file a lawsuit against the Financial Times, which was filed in Munich in March. The company also said in February that an external law firm, which conducted an investigation into the FT’s previous allegations, found no criminal wrongdoing by any of its employees.

The FT’s previous report led to regulators in Singapore raiding Wirecard operations, and opening their own investigation into the matter. A FinTech Futures report in March said Wirecard CEO Markus Braun noted that a single accounting employee was under investigation by Singapore police, and that the employee had been put on leave.

Reuters reported in July that the Financial Times had hired a law firm to review the publication’s own investigations into Wirecard, with London-based RPC tapped to review its findings that led to accusations against Wirecard.

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