Why Germany’s finance minister has come under fire over Wirecard scandal

German Finance Minister Olaf Scholz came under fire Friday after documents showed he knew about suspicions of misconduct at disgraced payments company Wirecard as early as 2019.

Why Germany's finance minister has come under fire over Wirecard scandal
Scholz speaking in Berlin in June. Photo: DPA

Wirecard collapsed spectacularly last month after admitting that €1.9 billion missing from its accounts likely did not exist, in what auditors said appeared to be an “elaborate and sophisticated fraud”.

Scholz has described the Wirecard scandal as “unparalleled in the financial world” and called for reforms of the country's finance watchdog Bafin.

READ ALSO: Five things to know about Germany's Wirecard scandal

But a finance ministry report sent to the parliamentary finance committee on Thursday showed that Scholz was told in February 2019 that Bafin was investigating Wirecard executives “on suspicion of a violation against the prohibition of market manipulation”.

Bernd Riexinger, leader of the far-left Die Linke party, said Scholz should urgently explain “why his ministry ignored” the warnings about Wirecard for so long.

“The sloppy oversight of multi-billion-euro companies is simply astounding,” he said.

The Green party also demanded further clarifications.

A finance ministry spokesman confirmed that the relevant departments were made aware of the Wirecard probe.

“We kept parliament informed about this,” he added.

German authorities have faced mounting criticism for not scrutinising Wirecard more closely despite the persistent media speculation of accounting irregularities, particularly by the Financial Times.

Wirecard's ex-CEO Markus Braun was last month arrested on suspicion of market manipulation and falsifying accounts. He has been released on bail.

The company's former chief operating officer Jan Marsalek, who is also wanted by German prosecutors, is on the run.

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German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.