Regulation

German Finance Minister Calls For Regulatory Reform Amid Wirecard Scandal

German Finance Minister Calls For Regs Reform

Hours after Wirecard AG’s former CEO was arrested, German Finance Minister Olaf Scholz said lawmakers must tighten regulations because the payment services company has embarrassed the nation’s financial watchdog, Reuters reported. 

“It appears that neither auditors nor regulators were effective here,” Scholz told the news service. “(It) raises critical questions about supervision of the company, in particular with regard to accounting and balance sheet control.” 

On Monday (June 22), Scholz praised the Federal Financial Supervisory Authority (BaFin), Germany’s independent financial regulatory authority, noting that it had worked hard and done its job.

But on Tuesday (June 23), he said that any mistakes made by BaFin in the supervision of Wirecard must be identified and eliminated quickly, Reuters reported.

“And we need to quickly determine what changes are needed to regulatory rules in order to oversee complex corporate structures comprehensively, promptly and quickly,” he added.

In another aspect of Wirecard’s unfolding drama, Markus Braun was arrested Monday night (June 22). Once considered one of the most promising tech firms in Europe, Wirecard processes payments and sells data analytics services. The company has nearly 6,000 employees in 26 countries worldwide.

Braun, 50, resigned last week, when an audit revealed that 1.9 billion euros ($2.1 billion) were missing from two bank accounts that he claimed were deposited in banks in the Philippines.

Wirecard postponed the publication of its 2019 annual report after disclosing that its auditor can’t confirm the existence of $2.1 billion in trust accounts, one-quarter of the value on the company’s books.

The German electronic payments processor said in a statement on Thursday (June 18) that auditor Ernst & Young, the company’s auditor, told the firm that “no sufficient audit evidence could be obtained” to confirm that the money really exists.

A lawyer for Braun did not immediately respond to a request for comment from Reuters.

Since the case has unfolded, Wirecard share values have plummeted. On June 17, the stock closed at $104.50, but by the opening on Tuesday (June 23), it had dropped to $14.25.

Ernst & Young said it became suspicious of whether the money was ever deposited into the accounts.

“There is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euros do not exist,” Wirecard said at the time.

On Sunday (June 21), Wirecard’s claim to have directed the cash to BDO Unibank Inc. and the Bank of the Philippine Islands was challenged by the Philippines’ central bank. The Bangko Sentral ng Pilipinas said the money never entered the country.

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