Commerzbank Says It Was ‘Deceived’ By Wirecard Fraud

Commerzbank has told lawyers that the bank was a victim of fraud in the ongoing Wirecard case, Reuters reported Thursday (Jan. 14).

The lender was “deceived” by the executives and auditors involved, Commerzbank said.

Commerzbank Chief Risk Officer Marcus Chromik told a parliamentary committee that the bank agreed to extend credit to Wirecard in 2018, based on assurances about the company’s prospects. Top executives and auditors assured this, according to Reuters.

Despite carrying out their own analyses, “[t]here were no signs of accounting discrepancies,” said Chromik, Reuters reports. Chromik was one of several senior bankers to take questions on Thursday by parliament.

“Commerzbank, like many others, was a victim of an unimaginable fraud of a huge dimension,” he said, according to Reuters.

The Wirecard scandal has been going on since last summer, when the company filed for insolvency after questions about missing payments in its books revealed a long history of money laundering. The scandal has widened since then to include regulators and banks, in addition to the individuals running Wirecard.

Particularly of focus was Ernst & Young (EY), which had audited Wirecard for years. PYMNTS reported in December that an anti-fraud team with the auditor had warned the company that there were “red flags” with Wirecard that seemed to point to accounts manipulation. But despite that, those in charge at EY didn’t go further with any probes at that time.

According to reports, there were multiple times the anti-fraud team at EY pointed out issues with Wirecard, including discovering that the company’s one-time revenues were attached to operating profits, and that interest income had been added to a gauge of operating profit, which explicitly excluded such income.

Commerzbank began asking more questions about Wirecard and ended up severing ties with the once-popular payments company before the scandal broke, as it was concerned about the possibility that money laundering was going on.

The company warned BaFin, the German regulator, about the issues in early 2020, but the regulator reportedly didn’t take the advice.