FCA warned in 2019 of potential Wirecard link to high-risk scheme - report
Information about potentially illegal practices allegedly linked to disgraced German payments processor Wirecard was passed to the Financial Conduct Authority as early as 2019, it was claimed on Thursday.
According to The Times, a short-seller called Fraser Perring shared evidence with the City regulator in April 2019. He claimed that Wirecard owned the Berlin-based Deutsche Payment brand, which allegedly processed payments from bogus websites that were incorrectly coded.
The Times said that the allegedly bogus website were owned by UK companies and set up by a formations agent, which Wirecard staff were shareholders in, to allow for transaction laundering. This is where websites selling seemingly innocuous items such household goods are in fact fronts that allow risky or even illegal payments to go through that might otherwise be blocked.
In this case, The Times said the transaction laundering was linked to processing European gambling proceeds, including to the US, where online gaming is restricted.
The allegedly fake sites allowed the payments to be coded incorrectly, it was claimed, thereby allowing them to escape detection. Card companies such as Visa and Mastercard rely on coding to block any payments that may be illegal.
The existence of the allegedly bogus sites was first discovered in a 2017 investigation by Reuters, although The Times on Thursday said it was able to reveal that the sites were owned by the UK companies set up by the formations agent with links to Wirecard.
Perring told The Times he had raised concerns about it with the FCA for "four years and four months with a complete absence of public sanction or caution against the [business]. Was the FCA asleep on the wheel?"
The FCA told the newspaper: "We cannot comment on specific allegations but we treat all such information seriously and take it into consideration in the supervision of our firms." The Times also quoted the Serious Fraud Office as saying it was "aware of the allegations" but would neither confirm nor deny "any interest in the matter".
Wirecard filed for insolvency last month, owing creditors nearly $4bn, after being engulfed by an accounting scandal. The €1.9bn hole in its accounts was the result of a sophisticated global fraud, according to auditor EY, and has sparked investigations by both the police and regulators.