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BDO, BPI turn up in Wirecard Story

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Arcane Wall Street item has been developing a few days. I was surprised to see the Philippines of all places pulled into it... 2.1 billion dollars has gone missing. Makes for some interesting reading if you follow markets and finance. Most likely nothing, but this place is so opaque, I could see it as a convenient pit stop - at the upper or very lower levels. 



BPI, BDO decry fabricated docs on Wirecard claims

A few days ago, auditing firm Ernst & Young (EY) called on Bank of the Philippine Islands to investigate documents claiming that German fintech Wirecard had over 800 million euros worth of funds in the local bank.

EY, Wirecard’s auditor, has refused to sign off Wirecard’s 2019 accounts over some 1.9 billion euros ($2.1 billion) worth of missing funds. EY’s search for the money turned to the Philippines because of documents alleging that Wirecard had assets in two local banks – BPI and BDO Unibank.

BPI had informed EY that such certification was “bogus,” BPI president Cezar Consing said in an interview with Inquirer on Friday.

Wirecard is not a client and has never placed any money with the bank, Consing stressed.

BDO Unibank also vehemently denied that Wirecard was a client or that it had any banking relationship with the once high-flying German fintech.

In both cases, rogue employees appeared to have been responsible for fabricating documents to “certify” that Wirecard had assets stashed in BPI and BDO.

Upon further investigation, Consing said a “very junior officer appeared to have had a hand in creating this document.” This officer, one with the rank of assistant manager, had been put on preventive suspension as BPI continued to investigate the matter.

“What is clear is no funds were received and no funds were lost,” Consing said.

Both BPI and BDO have reported the case to the Bangko Sentral ng Pilipinas (BSP).

“We are not involved in the Wirecard affairs. Wirecard is not a client. We have no relationship with them. The falsified docs (documents) used our name and forged our officers’s signatures,” BDO president Nestor Tan said on Friday.

“BDO was used and not a party to the issue,” Tan added.

In the case of BDO, BSP Governor Ben Diokno said, citing the bank’s report, that one marketing officer had “fabricated a bank certificate in favor of EY Germany.” This officer has since then been terminated.

Wirecard’s embattled chief executive Markus Braun said it “cannot be ruled out that Wirecard AG has become the aggrieved party in a case of fraud of considerable proportions.”

Meanwhile, Aboitiz-led Union Bank of the Philippines – which signed a partnership with Wirecard to improve corporate banking services only last February – assured that it had no exposure to the fintech firm.

“We signed a cash management service where we pay their merchants in the Philippines. This was on testing (mode) but (was) delayed due to lockdown,” Union Bank president Edwin Bautista said in a text message.




Wirecard Carnage Continues: CEO Quits As Search For Missing Billions Continues

by Tyler Durden Fri, 06/19/2020 - 08:11

Update (8:15ET): Wirecard confirms it's in "constructive discussions" with its lending banks with regard to credit lines and business relationships, according to Bloomberg. 

Bloomberg data shows at least 18 commercial banks are involved in Wirecard's existing revolving credit facilities worth about $2.8 billion. 

Wirecard has warned if Ernst & Young (EY) doesn't sign off on its 2019 accounts by Friday - loans up to $2.24 billion could be terminated. 

The payments company is skating on thin ice into the weekend as liquidity issues emerge.   

Wirecard shares continued to plunge on Friday morning, falling at least 43% as the saga over the missing $2.1 billion from its accounts worried investors over the company's future, reported Reuters. 

Germany's once high-flying payments firm could be forced to repay $2.24 billion in bank loans, if its auditor, Ernst & Young (EY), does not sign off Friday on its 2019 accounts due to the billions of dollars missing. Heading into the weekend - it's likely EY will not sign off - thus triggering liquidity issues for the company. 

EY had approved Wirecard's accounts in recent years but refused to sign off for 2019 due to the missing money, which sent Wirecard shares plunging by more than 50% Thursday in Frankfurt trading. 

In the last two days, Wirecard shares have plunged by more than 80%.


Now Wirecard's chief executive Markus Braun has resigned, according to the payments firm on Friday morning, adding that James Freis had been appointed as interim CEO. 

Before Braun's exit, he said in an online video, "It cannot be ruled out that Wirecard AG has become the aggrieved party in a case of fraud of considerable proportions." 

Braun did not say those he suspected of fraud - it was also determined that documents were falsified about the company's relationship with BPI and BDO, the two Philippine banks that were supposedly holding the billions of dollars in escrow accounts.   

BDO issued this statement: "Wirecard is not a client of the bank. The document claiming the existence of a Wirecard account with BDO is a falsified document and carries forged signatures of bank officers. "

The epic unraveling in Wirecard's shares and bonds puts an end to this homegrown Germany technology story after the Financial Times reported last year about accounting fraud. 

At least 18 commercial banks have lending risks with Wirecard and have likely not isolated themselves. 

"round-tripping" is an interesting practice...



Wirecard Shares Sink As Theranos-Style Whistleblower Exposes Accounting Fraud

by Tyler Durden Thu, 02/07/2019 - 10:45

Update: As Wirecard shares tumble, dragging down the DAX (where the company's shares recently replaced those of struggling German lender Commerzbank), both the CEO and COO are swooping to the rescue by buying 1,000 shares apiece, according to BBG.

Last month, the Financial Times sent shares of German global payments company Wirecard - a market darling which had seen its shares nearly quintuple in a span of less than four years - reeling when it published a story purportedly sourced from company insiders revealing the existence of an internal investigation into widespread accounting fraud. Before the rout was over, Wirecard shares had fallen more than 20%. But analysts backed up the company's insistence that no wrongdoing had actually taken place, with one calling the report "fake news".

But refusing to back down, the FT returned on Thursday with another even more extensive story, sourced Theranos-style "whistleblower" company insider who claimed to have been complicit in the alleged fraud. The whistleblower managed to leak a copy of a report compiled by a law firm that examines the alleged malfeasance in great and sometimes stunning detail. And as a result, Wirecard's shares are moving lower once again.


This time around, investors might find it difficult to ignore the FT's findings, or find them anything short of compelling. because not only does it cite information from company insiders, but it also includes details from a preliminary report from one of Asia's top law firms that appear to back up the allegations of wrongdoing. The company, according to the report, committed widespread book-padding as it sought to take over a regional payments business from Citigroup that ultimately granted Wirecard a stretch of territory spanning from New Zealand to India.

The gist is simple: As Wirecard embarked on its quest for globe-spanning domination in the payments space, heads of regional businesses were encouraged to inflate the company's transaction volume numbers, mainly through the use of a technique referred to by the FT as "round tripping."

One year ago, Edo Kurniawan, a jovial 33-year-old Indonesian who runs the Asia-Pacific accounting and finance operations for global payments group Wirecard AG, called half a dozen colleagues into a Singapore meeting room. He picked up a whiteboard pen and began to teach them how to cook the books.

His company would soon become one of Germany’s most valuable financial institutions, but as Mr Kurniawan spoke, the immediate task at hand was to create figures that would convince regulators at the Hong Kong Monetary Authority to issue a licence so Wirecard could dole out prepaid bank cards in the Chinese territory. 

The group was seeking to take over payment operations from Citigroup, covering 20,000 retailers in 11 countries stretching from India to New Zealand. Regulatory approvals in every territory were crucial, even if it meant inventing numbers to be used in the Hong Kong licence application. 

Mr Kurniawan then sketched out a practice known as “round tripping”: a lump of money would leave the bank Wirecard owns in Germany, show its face on the balance sheet of a dormant subsidiary in Hong Kong, depart to sit momentarily in the books of an external “customer”, then travel back to Wirecard in India, where it would look to local auditors like legitimate business revenue.

The practice, according to the report cited by the FT, was used to appease regulators throughout Asia, which suggests that the fraud wasn't merely the work of one rogue employee.

In isolation, Mr Kurniawan’s scheme might have appeared to be the act of a rogue employee in the provincial outpost of a little known financial group. But the account of what happened, in a preliminary report on the investigation by one of Asia’s most eminent legal firms, indicated it was part of a pattern of book-padding across Wirecard’s Asian operations over several years. Documents seen by the Financial Times show two senior executives in the Munich head office had at least some awareness of the round-tripping scheme: Thorsten Holten and Stephan von Erffa, respectively the company’s head of treasury and head of accounting.

The revelations call into question the figures reported by one of Europe’s few technological success stories, a German fintech group that has grown into a €20bn global payments institution. Before the FT exposed the existence of the investigation last week, the group was more valuable than Deutsche Bank or Commerzbank, whose place it has taken in Germany’s main stock market index. Wirecard is a favourite of retail investors, who saw its rapid expansion into Asia as a sign that it can challenge the world’s biggest banks for primacy in the $1.4tn market for payments. 

The "whistleblower" who spoke with the FT helped initiate the internal probe after finding the brazenness of one of the company's regional managers, who had called a meeting to explain to employees how the fraud would be carried out, almost too shocking to be believed.

This time questions about its Asian operations began internally, prompted by a whistleblower left stunned by Mr Kurniawan’s January meeting last year. Notifying Wirecard’s senior legal counsel in the region on March 26, the whistleblower identified two senior finance executives, James Wardhana and Irene Chai, as accomplices in the book-cooking operation. A separate whistleblower also raised concerns in February, and on April 3 that person supplied the compliance team with a suspect contract they had received via Telegram, the encrypted messaging app. Daniel Steinhoff, Wirecard’s head of compliance in Munich, flew in to Singapore for a briefing. On April 13 he ordered the email archives of these individuals “mirrored”, with copies seized.  Compliance staff, who evidently found the accounts of the whistleblowers credible, soon found enough in the documents to warrant a snap investigation, codenamed Project Tiger. They called in Singapore-based Rajah & Tann, which sent in a team of former prosecutors.

Eventually, much of the behavior that the whistleblower had complained about was borne out by the report, including "forgery and/or falsification" as well as "cheating, criminal breach of trust, corruption and/or money laundering."

On May 4 R&T submitted a preliminary report, running to 30 pages of bombshell allegations: evidence in the documents of “forgery and/or of falsification of accounts”, as well as reasons to suspect “cheating, criminal breach of trust, corruption and/or money laundering” in multiple jurisdictions.  The trio in Singapore, led by Mr Kurniawan, appears to have been fabricating invoices and agreements to create a paper trail which could be shown to auditors at EY, as if money was moving in and out of Wirecard for legitimate purposes.

And in what was undoubtedly a bad look for the company's top brass, once the investigation got rolling, the company's top brass installed a senior employee who had allegedly been involved in some of the fraudulent activities to help oversee the probe, inviting comparisons to the "fox guarding the hen house."

A briefing document dated May 7 2018 was prepared for a meeting of Wirecard’s four most senior executives. Alexander von Knoop, chief financial officer, thanked the author in an email following the meeting “for the great job you are doing to clarify the circumstances and to prevent Wirecard Group from any financial and reputational damage”.  The email also announced that Jan Marsalek, Wirecard’s chief operating officer, had been appointed to co-ordinate the inquiry, “to get the necessary pressure on the investigation”, Mr von Knoop said.

Wirecard’s lawyers in Singapore warned Mr Marsalek’s proposed role presented "a perceived and potential conflict of interest." He was a material witness of fact who had worked closely with Mr Kurniawan on certain projects, they said. 

To sum up, to call Thursday's FT report "damning" would be an understatement. It suggests that managers throughout the company's vast global network brazenly and blithely invented money flows and even in some cases fake customers to back them up. The company also reportedly violated AML reporting guidelines. Taken together, the fraud calls into questions not just Wirecard's recent earnings results, but the very perception of WireCard as one of the Continent's most successful fintech startups.

Which begs the question: When this is all said and done, will Wirecard be remembered as Germany's "Theranos?" As the whistleblower put it: "If a payments company can do this, how can we trust the system?"


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story may have some legs, of the "rogue employee" type.  A marketing officer of a Philippine bank has been terminated upon discovery of a fake bank certificate issued to Wirecard's auditor for a supposed trust account holding the German firm's money, a highly-placed source says.  



Local bank officer sacked for fake document on Wirecard deposits

By Melissa Luz Lopez, CNN Philippines Published Jun 19, 2020 6:48:01 PM Updated Jun 19, 2020 7:12:00 PM

Metro Manila (CNN Philippines, June 19) – A marketing officer of a Philippine bank has been terminated upon discovery of a fake bank certificate issued to Wirecard's auditor involving a supposed trust account holding the German company's money.

A highly-placed source with knowledge on the issue said Friday one marketing officer at BDO Unibank, Inc. has been sacked after the employee "fabricated a bank certificate in favor of EY Germany," Wirecard's auditor. The bank confirmed the development and said they have already started termination proceedings for the employee.

In a statement, BDO has denied that it is holding any of the $2.1 billion (about ₱107 billion) missing cash of the German payments firm, which was supposed to be held by the bank and by the Bank of the Philippine Islands.

The Bangko Sentral ng Pilipinas said BDO has reported the incident as early as June 9, which prompted the regulator to conduct its own probe into the matter. Both denied that Wirecard is a client, noting that the documents pertaining to the trust accounts were falsified.

"Wirecard AG has been informed by the auditor EY that an audit certificate for the annual financial statements for the past fiscal year 2019 requires additional audits," the company said Thursday, with the discovery prompting the firm to postpone the release of its 2019 financial statements. 

Wirecard added that the account numbers supposed to be given by the banks could not be found, contrary to the company's claims that it has funds held in escrow by the Philippine lenders.

Wirecard AG's subsidiaries have supposedly paid "substantial security deposits" worth 1.9 billion euros to these offshore accounts, citing that the Asian banks chosen to hold the funds have investment-grade ratings.

Wirecard's long-time CEO Markus Braun resigned Friday amid the controversy, with Dr. James Freis, Jr. stepping in as interim CEO.

The amount is said to be worth one-fourth of the company's consolidated balance sheet. Failure to trace where the amounts are will allow about 2 billion euros worth of loans to Wirecard AG to be terminated.


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