Prosecutors ‘may issue arrest warrants’ against former Wirecard bosses
By Sunniva Kolostyak
Prosecutors in Germany may be looking to issue arrest warrants against Markus Braun and Jan Marsalek, the former CEOs of scandal-engulfed Wirecard, as they investigate the €1.9 billion missing from the accounts, Reuters as reported.
Two sources close to the matter, who spoke on condition of anonymity, told the news agency that prosecutors may seek to arrest the former executives. Both are Austrian citizens and there is a risk that they may attempt to flee.
Lawyers for both Braun, who resigned as Wirecard’s CEO on Friday as a response to Wirecard’s collapse, and Marsalek, who was fired on Monday, declined comment.
The German company has been under fire since last Thursday when it was revealed that Wirecard’s auditor EY could not find evidence for €1.9 billion in its balances, thereby refusing to sign off on the 2019 accounts.
German public prosecutors commented today that it is probing all possible criminal offences in connection with the payments firm, while Wirecard added that the 1.9 billion euros it counted in foreign accounts were likely never there, withdrawing earlier financial statements.
Commenting on the Wirecard scandal, Brian Fox, Founder and President of digital confirmation platform Confirmation, now part of Thomson Reuters, said it illustrates that some auditors are still using 100-year-old, outdated and easily manipulated audit procedures and techniques.
“When you see a fraud that involves inflated revenue, typically it means the auditor’s confirmation procedures have been circumvented in order to fool them to get their signature on the final audit report,” Fox said.
He told IBS Intelligence that the Wirecard fraud also exposes a common trend – that more of this type of fraud is and will continue to be exposed during an economic downturn. “As external funding becomes harder to obtain, it is more difficult for fraudsters to continue perpetrating their fraudulent behaviour. I saw this in the downturns of both 2000/2001 and in 2009/2010.”
Companies looking to inflate revenue will book it into their financial statements and offset it as either ‘accounts receivable’, or, in Wirecard’s case, as ‘cash, circumventing the auditors’ bank confirmation procedures. The auditor is directed to send the bank confirmation to a person who responds with a matching phony balance information, Fox explained.
“This is exactly the same technique used by Parmalat when they faked their $4.9 billion cash balance in order to also inflate revenue.”
“This is a 100-year-old problem that exists because some auditors still use outdated processes. Major banks and financial institutions rely on paper trails and easily manipulated technologies to confirm billions of dollars in assets and receivables, making those procedures very inefficient and more susceptible to fraud and manipulation. Confirmation’s multi-patented technology digitises the process by acting as the secure clearinghouse to help auditors quickly identify fraud,” Fox explained.
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