BaFin Ignored Commerzbank's Warning Over Wirecard Fraud

January 14, 2021 | AtoZ Markets – Commerzbank, one of the largest and oldest banks in Germany, warned the Federal Financial Supervision Authority (BaFin) at the beginning of 2020 about the fraud of the now bankrupt fintech company Wirecard, but the regulator did not take any action. The Financial Times writes about this with reference to those familiar with the matter.

Commerzbank warned BaFin about Wirecard months before scandal

Commerzbank financed Wirecard's acquisitions of two Indian fintech companies. Following the publication of a series of FT articles on reporting fraud by their partner, Commerzbank, Deutsche Bank, and other banks initiated an internal audit in March 2019.

Its result forced Commerzbank to distance itself from the partner by the end of 2019. In a detailed report from January 2020, the lending institution notified BaFin of its role in the aforementioned transactions, as well as suspicious transactions by Wirecard Bank customers. However, the regulator ruled that "there is no immediate justification for enforcement action," as it knows most of this information.

Read also: ESMA Criticizes BaFin for Failures in Wirecard Scandal

BaFin's skepticism is also associated with the fact that at that time Commerzbank did not withdraw from the consortium of banks providing Wirecard with a revolving credit line for €1.75 billion. Representatives of the credit institution explained this by the fact that they could not stop financing under the terms of the contract.

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Now former Commerzbank CEO Martin Circke and Deutsche Bank CEO Christian Scheeting will testify in the fintech case.

The scandal

Recall that in June 2020, a hole in the balance sheet of almost 2 billion euros was found on Wirecard accounts. The company later went into bankruptcy proceedings.

Police have arrested former Wirecard chief executive Marcus Brown. Former Wirecard top manager Jan Marsalek, according to some sources, fled to Russia. The Prosecutor General's Office of Germany announced Marsalek 's cooperation with the Austrian state security service.

In late July, Wirecard investors filed a lawsuit against BaFin, accusing the regulator of overdue measures taken against the company.

Read: Bafin Threatens to Impose €330,000 Fines on Wirecard AG

In December, Wirecard insolvency administrator Michael Yaffe went to court to invalidate the company's 2017 and 2018 financial statements.

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