ESMA criticises German regulators on how they supervised Wirecard

From: RegTech Analyst

German regulators didn’t do enough when they supervised the collapsed FinTech giant Wirecard, the EU’s securities markets regulator reports.

Wirecard imploded this summer when evidence of an alleged global multi-billion dollar scam came into light. Since then, several members of the company’s top brass has been arrested or are being sought after by the authorities. The arrested executives, including former CEO Markus Braun, deny any wrongdoing.

Now, the European Securities and Markets Authority (ESMA) has published a report that looked into how Bundesanstalt für Finanzdienstleistungaufsicht (BaFin) and the Financial Reporting Enforcement Panel (FREP) supervised Wirecard.

The EU regulator said it had identified several “deficiencies” in the German authorities’ handling of Wirecard over the years, including a “heightened risk of influence by the Ministry of Finance given the frequency and detail of reporting by BaFin, sometimes before actions were taken.”

Other shortcomings included non-selection or non-timely selection of Wirecard’s financial reports to gauge risk, failure to consider reports about whistleblowing in the media, and a lack of professional scepticism in analysing the material provided by Wirecard.

“The Wirecard case has once again highlighted that high-quality financial reporting is essential for maintaining investor trust in capital markets, and the need to have consistent and effective enforcement of that reporting across the European Union,” said Steven Maijoor, chair at ESMA.

“Today’s report identifies deficiencies in the supervision and enforcement of Wirecard’s financial reporting. The report’s recommendations can contribute to the review of the German regime for supervision and enforcement.”

Since Wirecard imploded, the company that was once celebrated as a leading FinTech powerhouse in Germany has been chopped up and sold to different buyers around the world. In October, Syncapay announced that it had bought Wirecard North America.

FinTech Paynetics acquired the corporate payout card portfolio of Wirecard UK and Ireland in earlier that month. Similarly, Railsbank signed a term sheet to acquire Wirecard’s UK business in August.

In September, we reported that identity verification company IDnow planned to buy Wirecard Communication Services. At roughly the same time, the news broke that a team from Wirecard’s innovation labs would join Berlin-based FinTech finleap.

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