Security & Fraud

BaFin Head Says Regulator Had Limited Ability To Regulate Wirecard

The president of Germany’s financial watchdog agency defended its actions in the Wirecard AG case where $1.2 billion in deposits went missing.

The president of Germany’s financial watchdog agency defended its actions in the Wirecard AG case where $1.2 billion in deposits went missing.

Felix Hufeld, head of the Federal Financial Supervisory Authority, known as BaFin, denied that its regulators failed to investigate Wirecard in what has become the nation’s biggest financial scandal, the Financial Times reported.

Hufeld told members of the Bundestag, the nation’s Parliament Wednesday (July 1), Wirecard was classified as a technology company, not a financial services provider. As a result, he told lawmakers, the company was not under BaFin’s jurisdiction.

In a closed-door meeting with lawmakers, Hufeld told Bundestag’s finance committee that BaFin, the European Central Bank and the Bundesbank, Germany’s central bank, agreed Wirecard should not be categorized as a financial holding, the Times reported.

“Though he expressed regret at what happened with Wirecard, he denied that BaFin could have done more than it did,” Florian Toncar, an opposition member from the liberal Free Democrats, who attended the meeting, told the newspaper.

Lisa Paus, finance policy spokeswoman for the Greens, the country’s green political party, who was also present, told the Times that BaFin needs to analyze its mistakes and have a fresh start.

“It’s still an open question as to whether that can succeed with Mr Hufeld at [its] helm,” she added.

Parliament members told the newspaper Hufeld complained about the criticism he has faced since Wirecard collapsed, and the lack of support BaFin has received from Berlin officials.

“My feeling is that he isn’t the right person to reorganize the system of financial regulation in Germany,” Fabio De Masi, a member of the left of center Die Linke party, who was present, told the Times.

Still, not everyone was convinced Hufeld had to go.

“He has to put forward proposals as to how the regulator can be improved,” said Toncar.

The European Commission, the executive branch of the European Union (EU), said it would ask the EU’s markets supervisor, the European Securities and Markets Authority (ESMA) to assess BaFin’s handling of the Wirecard affair.

But Hufeld insistsed ESMA had no right to carry out such an investigation, one participant at the meeting told the Times.

Once valued at $28 billion, Wirecard filed for insolvency last week in debt to creditors for nearly $4 billion.

The fall of the company began two weeks ago,when founder and CEO Markus Braun, 51, resigned and was later arrested on charges of misrepresenting Wirecard’s accounts and market manipulation.

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