The European Securities and Markets Authority (ESMA), the European Union’s (EU) financial watchdog, plans to examine how German regulators handled oversight of Wirecard AG, the collapsed payments company that is facing a series of criminal allegations.
Bloomberg News reported that ESMA will probe the Federal Financial Supervisory Authority, better known as BaFin, as well as a separate private-sector supervisor, looking into whether they enforced the reporting of financial information.
ESMA said they will conclude the inquiry by the end of October.
In addition, ESMA told the news service that a previously undisclosed 2017 review of Germany’s adoption of the guidelines had identified shortcomings, including BaFin’s “legalistic approach” to accounting issues, rather than weighing their “economic substance.”
Once the darling of Germany’s financial technology sector valued at $28 billion, the high-profile Wirecard filed for insolvency last month. It reported nearly $4 billion of debt to creditors, after it revealed that $2.1 billion went missing from two Philippines banks.
Former CEO Markus Braun and Wirecard executive Oliver Bellenhaus have been arrested and released pending a trial for their alleged central role in the massive worldwide fraud case currently enveloping the company. Wirecard’s former chief operating officer Jan Marsalek is being sought by authorities in several countries.
Germany is one of few countries that separate accounting enforcement between a federal markets regulator and a private-sector watchdog, Bloomberg reported.
On Wednesday (July 15), The Wall Street Journal reported that Wirecard may have misled the financial community about its partnerships with blue-chip companies.
While Wirecard touted deals with SAP SE, Zurich Insurance Group and SoftBank Group Corp., The Wall Street Journal discovered that some of those partnership announcements were misleading or publicized without the agreement of the companies.
Last week, lawmakers urged German Chancellor Angela Merkel to release transcripts of conversations between Deputy Finance Minister Jörg Kukies and former CEO Braun, as the collapse of the payments processing company has captured headlines for weeks.
But Sarah Ryglewski, a deputy finance minister, said in a letter to Parliament’s finance committee that the content of the conversations could not be disclosed because they are classified, the Times reported after seeing the letter. She said members of Parliament can only see a summary of the conversations.