WEBINAR: Collapse of Wirecard: Lessons for Supervision of Banks, Payment Systems and FinTech

Event Code :WB432020
Venue :Online Webinar
Host Name :The SEACEN Centre
Coordinator :
s
Date From :06 Jul 2020
Date To :06 Jul 2020

Descriptions


Special SEACEN Webinar:

Collapse of Wirecard: Lessons for Supervision of Banks, Payment Systems and FinTech

The dramatic collapse of global payments company Wirecard AG, based in Aschheim east of Munich, following more than 18 months of investigative journalism by the Financial Times, is a wake-up call for the supervision of banks, payment systems service providers and FinTech.

Wirecard is an international supplier of electronic payment and risk management services. It offers products and services in the areas of mobile payments, e-commerce, digitization and finance technology. It authorises and processes payments for about 250,000 merchants, issues credit and prepaid cards and provides technology for contactless smartphone payments. Its clients include German discounters Aldi and Lidl, as well as close to 100 airlines. Some of its FinTech clients include Revolut, Pockit, Soldo and Curve — who depend on the German tech-darling for card issuance, account top-ups and other e-money services.

The group was founded in 1999, initially focused on processing payments for pornography and gambling companies. It almost didn’t survive the fallout from the dotcom crash and was recapitalised in 2002 with the help of Markus Braun. Since then, Markus Braun had been the chief executive for more than 18 years up until his resignation and subsequent arrest in June 2020. During Braun’s 18 years as CEO, Wirecard grew into a USD 28 billion (24 billion euros) “FinTech” firm, at its peak share-price in 2018, that won a spot in Germany’s DAX blue-chip index.

Wirecard has been part of an ongoing saga since 30 January 2019, when the Financial Times reported, in a presentation titled “Project Tiger Summary” potential violations of Singapore law were outlined including “falsification of accounts” and “money laundering”. Wirecard dismissed the allegations, labelling them as 'misleading and defamatory' and filed a lawsuit against the Financial Times for unethical reporting and announced legal action claiming market manipulation. Criminal investigations were then launched by the public prosecutor's office in February against FT Journalist Dan McCrum on allegations of breaching Wertpapierhandelsgesetz - the German Securities Trading Act.

For its part, The Federal Financial Supervisory Authority, BaFin, prohibited short selling of Wirecard shares for two months on 19 February 2019. In a statement, BaFin outlined the move was not intended to show favourability for the company. However, questions remain about BaFin’s role in this. Two months after its short selling ban, BaFin filed a criminal complaint against the two Financial Times journalists who reported on whistleblower allegations of accounting fraud in Wirecard’s subsidiary in Singapore.  More recently, it was announced that the EU will call for a probe into whether BaFin failed in its supervision of Wirecard,. They have stated that the company’s collapse poses a threat to investor trust in the EU. The question remains as to what extent BaFin was ‘captured’ by the focus on championing Wirecard as a leading German FinTech. We would also note that BaFin is only responsible for Wirecard Bank. Wirecard the payment solutions provider falls under the supervisory responsibility of the local trade inspection office - which of course doesn’t have the resources or expertise to supervise such a complex international structure. There therefore needs to also be a change in supervisory responsibilities.

KPMG was then hired by Wirecard to investigate the alleged financial misdealings, however, the largely completed special investigation did “not produce any substantial findings” that would require any correction to the company’s annual financial statements for the 2016, 2017 and 2018 investigation periods. On 28 April 2020, an independent investigation by KPMG into Wirecard found the German payments company did not provide sufficient documentation to address all allegations of accounting irregularities made by the Financial Times.

The company then reported on 18 June 2020 that €1.9 billion was missing in cash from the company's accounts. The company admitted the €1.9 billion likely does not exist and it was told by EY, its longstanding auditor, that there were indications a trustee of Wirecard’s bank accounts had attempted "to deceive the auditor" and may have provided "spurious cash balances".

The Special SEACEN Webinar: Collapse of Wirecard: Lessons for Supervision of Banks, Payment Systems and FinTech will be delivered on 6 July 2020 at 12 noon (Kuala Lumpur time). A key objective of the session is to explore the collapse of Wirecard and identity lessons for supervision of banks, payment systems service providers, and FinTech firms. The session will cover the following:

  • Wirecard’s History and Background
  • Governance and Control
  • Role of Auditors and rating agencies
  • Whistleblowing
  • Role of Regulators and possible regulatory capture
  • FinTech

The session will be delivered by:

Mark McKenzie, Senior Financial Sector Specialist, The SEACEN Centre. Mark McKenzie is an accomplished professional in the field of financial regulation and supervision with over 25 years of experience in developing countries and emerging markets. He joined the faculty of The SEACEN Centre on June 1, 2016 as a Senior Financial Sector Specialist. In his current role, he serves as the SEACEN Centre’s subject matter expert on Crisis Management, Recovery and Resolution Planning (RRP), and Financial Technology (FinTech) and Risks. He is the host for SEACEN’s Special Webinars and Podcasts, and a contributor to SEACEN’s Financial Stability Journal and Suara SEACEN. As a member of Toastmasters International for more than 17 years, he frequently serves as mentor for young graduates and mid-level professionals. In 2014, he received the Distinguished Toastmasters Award for Outstanding Accomplishments and Leadership Excellence, and in 2018, Mark climbed Mount Kinabalu, the highest mountain in the Malay Archipelago, to its summit (known as Low's Peak) at a height of 4,095 metres (13,435 ft). His favourite quote is “Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you” by Shannon Alder.

Special guest Karyn Kenny of the U.S. Department of Justice's (DOJ) Office of Overseas Prosecutorial Development, Assistance & Training (OPDAT) Resident Legal Advisor (RLA) for the U.S. Embassy, Kuala Lumpur, Malaysia. As RLA, she designs and implements counter-terrorism (CT) and counter-terrorist financing (CTF) capacity building programs for Malaysian justice sector officials.