Wirecard: the unanswered questions
German fintech company’s rebuttal of the FT’s reporting leaves unanswered questions
After the Financial Times published an in-depth examination of suspect accounting at Wirecard this week, the high-flying German fintech published a rebuttal that left many observers with further questions.
The FT had published internal correspondence which appeared to show a concerted effort to inflate sales and profits for subsidiaries in Dubai and Dublin, and shares in the Dax 30 group tumbled.
With calls growing for an independent review of the audit work conducted by EY, the FT sought clarification of points made in Wirecard’s Wednesday statement, which seemed to reverse its previous position that documents cited by the FT were fake.
Wirecard said it would not provide answers before the end of this week. In the absence of any available clarificatory responses, the questions are reproduced here.
Clients versus client clusters
At the heart of the matter are the names of 34 companies. Internal financial reports appeared to attribute substantial profits to payments processed for these companies on behalf of Wirecard by a third-party: a Dubai business called Al Alam Solutions.
I’ve never used that process, I’ve never heard them talk to me about it, I’ve never heard of it during my career
Whistleblower
The FT found that eight of the 34 companies had shut down by the time their names appeared next to monthly financial data for transactions and sales in 2017. A further 15 of the 34 told the FT they had never heard of Al Alam, of which four said they did do business with Wirecard in the period concerned. Six did not respond or declined to comment, and five could not be traced.
Wirecard’s statement said “the 34 company names mentioned by the Financial Times refer to labels of customer clusters created for reporting and reconciliation purposes, each containing hundreds of individual genuine merchants. The conclusions drawn by the Financial Times are therefore not correct”.
Whistleblowers with experience of Wirecard operations in multiple countries said they were unaware of any practice of using aliases to mask client identities in financial reports.
One whistleblower said “why would ‘cluster’ names have the same name as an actual company? Yes, there were code words for projects but I never heard of code words for company clusters”.
Another whistleblower said that they had never heard Edo Kurniawan — Wirecard’s former head of international reporting, who was a party to the correspondence published by the FT this week — refer to the practice. “I’ve never used that process, I’ve never heard them talk to me about it, I’ve never heard of it during my career,” the whistleblower said.
The FT sought on Wednesday to understand why such aliases would be used to refer to clusters of clients in the documents it had published. The FT asked the company:
“If Wirecard maintains that its statement (which some may find implausible) to the market today is correct, please explain the company’s use of names both of defunct companies — such as Cymix, Piku, and Molotok — and existing Wirecard customers — such as CCBill, 1XBet, and Allied Wallet — to disguise the identity of clients or clusters of clients.”
The FT also asked why large numbers of clients names were not disguised by aliases in other parts of a document, which had been partially redacted by the FT prior to publication.
Dubai clarity
Wirecard’s statement said its Dubai operations employ nearly 200 staff, constitute a global product and service delivery hub, and hold contractual agreements with customers and various partners. “Revenues generated from customers contracted via Dubai contributed nearly 32 per cent of global revenues in FY2018,” it said.
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This week’s FT story built on one published in April, which reported that half of Wirecard’s revenues in 2016, and almost all of its profits, appeared to come from a relationship with three partner companies. Al Alam was the largest of those, followed by PayEasy Solutions, a Philippine payment processor whose registered office in Manilla was shared with a bus company, and the Senjo group in Singapore.
At the time Markus Braun, Wirecard’s chief executive, said the figures cited by the FT were not accurate. The FT has asked Wirecard what share of its overall transaction volumes and revenues were attributed to Al Alam, Senjo and PayEasy in 2016.
Following Wirecard’s statement on Wednesday, the FT also asked who it has appointed to audit its Dubai businesses.
What can Al Alam do, which Wirecard can’t?
Wirecard’s statement said Al Alam is “one of multiple such independent partners” it works with in the UAE, “providing access to a multitude of payment methods”. The company said it “relies on such partners for the processing of transactions requiring particular payment methods or the involvement of locally licensed financial institutions”.
Al Alam has said it operates lawfully and was not involved in any alleged process to fake revenues or profits at Wirecard.
The FT has asked Wirecard to name other independent partners it works with in the UAE, and to specify which payment methods Wirecard does not support which require a third-party processor.
As Visa and Mastercard do not license Al Alam, Wirecard was also asked to specify the payment methods Al Alam was able to process, and the licences it held. |
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