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ROUNDUP 3 / Wirecard scandal: Court of Auditors examines role of Bafin and Ministry | message


(new: Assessment report on Finance Minister Scholz (3rd paragraph))

BERLIN (dpa-AFX) – In the balance sheet scandal about the alleged billions of fraud at the Dax (DAX 30) group Wirecard, the Federal Audit Office is now targeting the financial supervision Bafin and the Federal Ministry of Finance. “We will investigate the system of supervision – structure and risk management using the Wirecard as an example – and why the Bafin apparently did not take up the evidence,” said Federal Court of Auditors President Kay Scheller to “Spiegel” (Thursday). “We will also examine how the Federal Ministry of Finance and Bafin dealt with the allegations of incorrect balance sheets and with the reports from the auditors.”

For Bafin, this is the second announced review of possible defects and errors in the Wirecard case – the EU Commission had previously set the European financial supervisory authority Esma on the case. “For years, information has been given, including through journalistic research, and the question is whether the Bafin has looked at it sufficiently,” Scheller told Der Spiegel. “There are important questions unanswered here – and that is why the Federal Audit Office is required. There are obviously gaps in the supervisory system.”

Federal Finance Minister Olaf Scholz (SPD) had already announced that he wanted to improve supervision, and now he and his ministry also have to ask questions. On Thursday evening, it was also announced that Scholz had known for a year and a half that the Bafin had suspected Wirecard. This emerges from a report by the Ministry of Finance to the chair of the finance committee, which is available to the German press agency. The “Frankfurter Allgemeine Zeitung” had previously reported about it. The report said that on February 19, 2019, Scholz was informed that the Bafin was investigating the Wirecard case “on suspicion of violating the ban on market manipulation”. “It was pointed out that the Bafin is investigating in all directions,” it continues.

Wirecard granted alleged air bookings of 1.9 billion euros in June, the Munich public prosecutor’s office is investigating several former and active managers, including the ex-CEO Markus Braun, who was subsequently fired by the supervisory board. A second key figure has presumably fled overseas with an unknown stay: the former sales director Jan Marsalek. The UK’s Financial Times had reported inconsistencies in the payment provider’s balance sheets since 2015.

The Bafin herself has repeatedly pointed out that she did not have full supervision of Wirecard because only the subsidiary bank of the scandal company from the Munich suburb of Aschheim was classified as a financial service provider, but not the entire group. And according to the current legal situation, the Bafin was not primarily responsible for the control of company balance sheets, but rather the German Audit Office (DPR).

According to Scheller, the basic problem that Wirecard was both a fintech company and a bank was “known to everyone”. “The supervisory system should have been aligned with this and from today’s perspective it should have been.”

Another criticism is the auditing company EY, which had checked and certified Wirecard’s annual balance sheets since 2009. The Munich prosecutor’s office assumes that bogus sales have been included in the balance sheets for years.

Ex-Wirecard CEO Markus Braun used the company’s own bank at the beginning of the year to obtain a loan of 35 million euros, as reported by the London “Financial Times”. In doing so, Braun wanted to prevent the forced sale of Wirecard shares, which he had deposited with Deutsche Bank as security for a 150 million euro loan. The loan was taken out “to avoid shares being sold by a (third) bank,” a Braun lawyer said on request.

The in-house loan was then repaid in March. According to the lawyer, the loan had an interest rate of 12.55 percent – Braun therefore paid interest of EUR 963 909.72 for the period of two and a half months. According to “FT”, the Bafin checks whether the loan in its own company violates regulations. The legal background: Board members are not allowed to use their own companies to gain private advantages.

The Institute of Auditors in Germany also sees room for improvement in supervision and balance sheet auditing. A suggestion from the IDW: Company directors should be legally obliged to set up an appropriate internal control system for the legal compliance of their companies. Another suggestion: the auditors should use “forensic methods” increasingly after indications of manipulations in companies of public interest – in other words, specifically investigate suspicions./cho/men/DP/he

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