In Germany, Investigation Looms for Wirecard and AML Supervisors Alike

By Gabriel Vedrenne

German lawmakers preparing an investigation into Wirecard unveiled a roadmap Friday that includes a probe into potentially lax regulatory supervision over the disgraced payment-services provider, which collapsed in June under the weight of a $2.1 billion accounting scandal.

Ahead of a debate on the scandal, which some have called the largest in Germany’s history, federal lawmakers released a 10-page document confirming their intent to investigate Wirecard’s lobbying, alleged market manipulation and fraud, as well as review efforts by the country’s financial regulator, BaFin, to supervise the firm for anti-money laundering purposes.

“The committee of inquiry shall in particular clarify whether, and if so, to what extent, there have been failures in the [anti-]money laundering supervision of the Wirecard Group,” lawmakers wrote in the document published Friday.

Lawmakers said their investigation must first of all determine why BaFin and other authorities did not classify Wirecard’s holding company, Wirecard AG, as a financial institution before the scandal, and why the holding company’s subsidiary, Wirecard Bank, was the only branch subject to the regulator’s AML oversight.

Authorities instead chose to cast and supervise Wirecard AG as a technology firm, and, as a result, largely declined to review AML controls throughout Wirecard’s entire operation despite knowledge that the payment processor handled around $125 billion of transactions in 2018 alone.

The roadmap published Friday also suggests that the investigation could target Germany’s financial intelligence unit to assess whether possible illegal acts “could have come to light earlier.”

Criticism of Germany’s FIU, which has long contended with manpower shortages and backlogs of thousands of SARs, ramped up again in July after the agency became the target of an unprecedented raid for allegedly not giving law enforcement critical intelligence during a money laundering case.

Officials told lawmakers in written answers after the scandal emerged that the FIU received 132 suspicious activity reports on Wirecard from June 2017 to August of this year, 36 of which flagged transactions involving the company’s managers and board members. Fifty-four Wircard-related SARs have been forwarded to law enforcement, officials wrote.

Wirecard handled payments for CenturionBet, a Maltese gaming firm that Italian courts have identified as a vehicle for the ‘Ndrangheta crime syndicate to launder money, the Financial Times reported last month.

Markus Braun, the company’s chief executive, was arrested in July for his alleged role in the scandal, which involved the use of third-party transactions to falsely inflate the payment processor’s value.

Lawmakers have since questioned several officials, including Finance Minister Olaf Scholz and BaFin President Felix Hufeld, for details of the collapse, but their purportedly unconvincing answers led four of the six political parties in Germany’s Parliament to push for a deeper inquiry.

“The problematic, complex structure of AML supervision in Germany clearly led to a situation where no one was really regulating Wirecard,” Niklas Auffermann, a partner with the FS-PP law firm in Berlin, told ACAMS “Germany’s AML laws themselves do not constitute a masterpiece, but at times the supervisory structure amplified the deficiencies.”

Hufeld in particular has rejected calls for his resignation despite his agency’s alleged supervisory failures vis-a-vis Wirecard.

A committee of inquiry, which requires approval from at least a quarter of the Parliament to begin proceedings, has the legal power to access confidential files but witnesses have the option of refusing to testify. A vote is expected at the end of the month.

The investigation proposed in Friday’s roadmap must also determine whether the German government’s AML supervision requires an overhaul beyond what the finance minister pitched to lawmakers in July.

Contact Gabriel Vedrenne at

Topics : Fraud , Anti-money laundering
Source: Germany
Document Date: September 11, 2020