By Dan Byrne for AMLi
THE LAST CEO of German online payments company Wirecard has said that his first day on the job was when he truly realised the extent of the problems facing the company.
He also laid criticism on senior staff in the company who served before his arrival, saying in a Wall Street Journal interview that many of them were more than capable of recognising the problem and flagging it before it was eventually made publicly known under his leadership.
James Freis – who served as the 6th head of US financial crimes watchdog FinCEN – stepped in as interim CEO in June 2020, following the resignation of Markus Braun (now in custody).
Later responding to an article AML Intelligence, Mr Freis said: “I emphasized in the interview—see also quote in recent Handelsblatt article—that the vast majority of the staff were involved in the global legitimate business of the Wirecard Group, unrelated to the allegations.
“Yet, in my town hall introduction to the global team, I emphasized the importance of speaking up when something does not make sense. AML professionals will understand the distinction: an analogous principle is the well-established obligation to report ‘suspicion’ when a transaction does not make sense from a business perspective.
“Multiple known fraud typologies were exhibited at Wirecard—the public prosecutors are working on whom to hold accountable,” he said in the response to AML Intelligence.
He said his view remains “that a range of persons—external and internal—could have spoken up earlier about the red flags; had more done so under any of various possible avenues, it likely would have limited the frauds before I stopped them on my first day.”
In the Wall Street Journal interview meanwhile, Mr Freis said that he expected his tenure to involve fixing the company’s fractured financial foundations. Instead, he found himself overseeing its rapid descent towards insolvency.
He has now said that he didn’t realise how dire the company’s situation was until he took over as CEO and was given full access to internal documents. The Financial Times had been reporting for some time suspicious goings-on at the payments giant – and was in receipt of legal threats from the German company.
Before taking the position, Mr Freis noted that certain investors were already giving bleak reports on the company’s future, but he didn’t see the full depth of these reports till taking the reigns himself.
“So many people could have and should have stepped up and said something,” he said in an interview with the Wall Street Journal Monday. “I rapidly came to the conclusion that there was fraud here, but that it involved internal fraud.”
The internal fraud he referenced was the much-discussed $2 billion in monetary assets that Wirecard’s books previously claimed the company held in offshore accounts, but which it was later forced to admit was ‘missing’.
This admission was made very soon after Freis took over and discovered the discrepancy – a discovery which he noted to WSJ, “didn’t take special expertise to reach.”
Following the revelation that such a large hole existed in Wirecard’s books, things began to unravel fast. The company filed for insolvency later in June 2020. Markus Braun was arrested, and former CCO Jan Marselek fled from authorities. He is still at large.
In the fallout from the scandal, the reaction from the German financial crimes watchdog BaFin has been so heavily criticised that its head Felix Hufeld was made to step down in late January on the say-so of Finance Minister Olaf Scholz.
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