Jeffrey Levine
CFO | Seeking a just world I Author

The Wirecard Scandal – A wake-up call

Wirecard AG is an insolvent German payment processor and financial services provider at the centre of a financial scandal in Germany. One of Wirecard backers was Softbank.

How could €1.9bn go missing?  Cash is either there or not. So, who takes responsibility here?

Obviously, there is a problem of basic Honesty and Business Ethics, but we need to look further at look at the role of :

  1. Regulations
  2. Regulator Role
  3. Corporate Governance – Investor oversight
  4. Role of the Auditors

So, let’s analyse each of these points.

Quoting the FT –  “The collapse of Wirecard, until recently the flagship of Germany’s burgeoning fintech sector, has stunned the country’s political elite and raised far-reaching questions about the state of financial regulation in the eurozone’s largest economy. The Head of the German financial watchdog defends agency’s Wirecard role Felix Hufeld tells Berlin MPs that payments firm was classified as a tech company and not fully under BaFin’s oversight”.


Let’s look at some other Examples of accidents waiting to happen:

  1. Digital Banks operating with Electronic Payment Licence (EMI) Licence – Revolute the leading UK based Digital Bank has an EMI Licence. They are now looking to upgrade this a Banking Licience , and now have a Banking Licence in Lithuania.
  2. B2B Lenders in the UK and the US operating without the need of Regulatory supervision. By way of Example – Marketfinance a  leading Business lending platform is not regulated
  3. Inadequate Consumer Credit Protection and Laws

In our Example, The Regulator did not appear to fully understand the changing nature of the integrated Business Lifecycle, nor does it appear to have the tools and process to monitor this. There are several Tech Platforms that facilitate Lending that are not regulated. They look and act like Lenders, and the situation is often ambiguous.

In Feb 2020. The Financial Conduct Authority (FCA) said it was concerned about the rapid growth of online and app-based banks and payment firms which have entered the market but without protection in place for customers. In a report published yesterday, it said that “innovation” in the industry, combined with the complexity of the regulations, could put consumers at risk.

Open Banking, Data and Ai the Way Forward

With the adoption of Open Banking, and with other Tech Providers of Data / BI using AI, we are most likely to see supervision and oversight move into real-time and digital where the Regulator taps directly into Banks and other Accounting Systems.

Private Equity or VC Investors should also be able to access Data directly to get them direct oversight and highlight them to problems that might arise in realtime.

Another suggestion that could be used is an overhaul of the Independent Director Regime. Regulators should impose a real independent director of qualified, industry knowledge directors who are chosen by the Regulator. Payment of these services is made by the Regulator, and this person should be given the necessary Authority to effect strong oversight.

“As Regards Auditing, there have been moves to more tech-based Auditing. New technology makes it possible for auditors to analyse large amounts of a company’s financial data and test 100% of a company’s transactions instead of testing only a sample. Sophisticated tools enable auditors to perform advanced analytics to gain deeper insight into the company’s operations. Despite this, False Accounting is still slipping through the net.

“Ernst & Young bear responsibility for this,” said Neil Campling, an analyst with Mirabaud who has had a price target of zero on Wirecard since March 2019. “They were defrauded like everyone else but, as auditors, they should have looked through it. It is amazing that they signed off on the 2018 account.” EY, as the accounting firm is officially known, finally sounded the alarm last week, when they refused to sign off Wirecard’s 2019 financial report. (The firm remains the auditor of record). That set off a cascade of events that started with Wirecard admitting it couldn’t locate billions of euros in cash, followed by the ousting and arrest of former Chief Executive Officer Markus Braun before Thursday’s insolvency filing” From / Read more at

Auditing today, in theory, is not a quarterly or annual exercise, but in the case of regulated Companies a more real-time, direct oversight is required.  The current practice is to write to Financial Intermediaries – Banks, PSP’s etc. and get confirmation of Balances. This has not changed in over 50 years.

Again, as commented previously as regards Open Banking, the auditors need to have direct access to all banks, PSP’s to monitor this in real-time. In essence, CAAS oversight is made Digital daily.  Regulatory Capital Monitoring will be monitored digitally and as well as a host of Financial Ratios. With the adoption of Open Banking, advances in Data. BI / Ai, Data Visualisations this is now achievable.

The same Tech Solution can be used by the Regulator who can monitor this in easy to read visual Reports showing which Companies are compliant, and take ready steps to follow out ap any action required.

In Conclusion, the Wirecard scandal is another wake-up call. Now with new Tech, it will be possible to put in bells and whistles to minimize the risks of this happening again.

I have been for a number of years following developments in Fintech with a specific focus on Accounting efficiency, Banking, and BI. With the advance of Open Banking and Ai, the landscape is changing fast. Consultancy firm Accenture’s ‘Big Success with Big Data” study found that 79 percent of enterprise execs say that companies who don’t embrace Big Data will lose market strength and may face extinction. I am currently able to offer relevant Tech that provides solutions to the problems described in this blog. Feel free to reach out to me at

I have also recently set up an initiative  CFO-Israel came about from my experiences as CFO in International Groups and the and the challenges of the Modern CFO and share ideas in new technology, efficiencies to increase productivity and help grow the company. This resource is for CEOs, CFOs, FDs, Controllers, and Finance Managers, BI Professionals to share ideas, technology, and business efficiency that are unique to Israel, Start-ups and SME’s doing business internationally, SAAS, online, B2B, B2C. Please feel free to share or contribute interesting ideas or tech.

About the Author
Jeffrey is a CFO | Seeking a just world I Author -living in Jerusalem. He is a young grandfather who has five kids and seven grandchildren. Jeffrey is promoting a vision for a better and fairer world through and is the author of Upgrading ESG - How Business can thrive in the age of Sustainability
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