Europe’s regulatory body, the European Securities and Markets Authority, has issued a report criticizing German financial supervisory regime, BaFin, for allowing now bankrupt payment processor, Wirecard, to defraud investors for years.
The report identifies “deficiencies, inefficiencies and legal and procedural impediments” with BaFin and the Financial Reporting Enforcement Panel, according to a report in Finextra.
Problem areas highlighted BaFin’s separation from issuers and government, including “a heightened risk of influence by the Ministry of Finance.”
Wirecard was a rising star before its collapse following the discovery of a $2.2 billion discrepancy in its balance sheet. Additionally, a lack of information about Wirecard’s employees’ shareholdings was found to raise doubts on the adequacy of BaFin’s internal control system regarding conflicts of interest of its employees and its issuers.
“The Wirecard case has once again highlighted that high-quality financial reporting is essential for maintaining investor trust in capital markets, and the need to have consistent and effective enforcement of that reporting across the European Union,” Steven Maijoor, ESMA chairman said in the report.