One year ago, Edo Kurniawan, a jovial 33-year-old Indonesian who runs the Asia-Pacific accounting and finance operations for global payments group Wirecard AG, called half a dozen colleagues into a Singapore meeting room. He picked up a whiteboard pen and began to teach them how to cook the books.
His company would soon become one of Germany’s most valuable financial institutions, but as Mr Kurniawan spoke, the immediate task at hand was to create figures that would convince regulators at the Hong Kong Monetary Authority to issue a licence so Wirecard could dole out prepaid bank cards in the Chinese territory.
The group was seeking to take over payment operations from Citigroup, covering 20,000 retailers in 11 countries stretching from India to New Zealand. Regulatory approvals in every territory were crucial, even if it meant inventing numbers to be used in the Hong Kong licence application.
Mr Kurniawan then sketched out a practice known as “round tripping”: a lump of money would leave the bank Wirecard owns in Germany, show its face on the balance sheet of a dormant subsidiary in Hong Kong, depart to sit momentarily in the books of an external “customer”, then travel back to Wirecard in India, where it would look to local auditors like legitimate business revenue.
In isolation, Mr Kurniawan’s scheme might have appeared to be the act of a rogue employee in the provincial outpost of a little known financial group. But the account of what happened, in a preliminary report on the investigation by one of Asia’s most eminent legal firms, indicated it was part of a pattern of book-padding across Wirecard’s Asian operations over several years. Documents seen by the Financial Times show two senior executives in the Munich head office had at least some awareness of the round-tripping scheme: Thorsten Holten and Stephan von Erffa, respectively the company’s head of treasury and head of accounting.
The revelations call into question the figures reported by one of Europe’s few technological success stories, a German fintech group that has grown into a €20bn global payments institution. Before the FT exposed the existence of the investigation last week, the group was more valuable than Deutsche Bank or Commerzbank, whose place it has taken in Germany’s main stock market index. Wirecard is a favourite of retail investors, who saw its rapid expansion into Asia as a sign that it can challenge the world’s biggest banks for primacy in the $1.4tn market for payments.
Markus Braun has run the company since helping to recapitalise it in 2002, an investment which made the 49-year-old Austrian a billionaire. In the field of digital money, Wirecard presents itself as best in class.
In response to the news of the preliminary investigation, Wirecard initially said no material compliance findings had resulted. This week the company told the FT that while its investigation was ongoing, it had made no conclusive findings of criminal misconduct and it would be wrong to draw conclusions from the preliminary report.
It is not the first time the group’s accounting practices have been called into question. Accusations of suspect accounting were levelled in 2008, 2015 and 2016. Each time Wirecard has alleged market manipulation, sparking investigations by the German market regulator, BaFin.
This time questions about its Asian operations began internally, prompted by a whistleblower left stunned by Mr Kurniawan’s January meeting last year. Notifying Wirecard’s senior legal counsel in the region on March 26, the whistleblower identified two senior finance executives, James Wardhana and Irene Chai, as accomplices in the book-cooking operation. A separate whistleblower also raised concerns in February, and on April 3 that person supplied the compliance team with a suspect contract they had received via Telegram, the encrypted messaging app.
Daniel Steinhoff, Wirecard’s head of compliance in Munich, flew in to Singapore for a briefing. On April 13 he ordered the email archives of these individuals “mirrored”, with copies seized.
Compliance staff, who evidently found the accounts of the whistleblowers credible, soon found enough in the documents to warrant a snap investigation, codenamed Project Tiger. They called in Singapore-based Rajah & Tann, which sent in a team of former prosecutors.
On May 4 R&T submitted a preliminary report, running to 30 pages of bombshell allegations: evidence in the documents of “forgery and/or of falsification of accounts”, as well as reasons to suspect “cheating, criminal breach of trust, corruption and/or money laundering” in multiple jurisdictions.
The trio in Singapore, led by Mr Kurniawan, appears to have been fabricating invoices and agreements to create a paper trail which could be shown to auditors at EY, as if money was moving in and out of Wirecard for legitimate purposes.
In isolation, Mr Kurniawan’s scheme might have appeared to be the act of a rogue employee in the provincial outpost of a little known financial group. But the account of what happened, in a preliminary report on the investigation by one of Asia’s most eminent legal firms, indicated it was part of a pattern of book-padding across Wirecard’s Asian operations over several years. Documents seen by the Financial Times show two senior executives in the Munich head office had at least some awareness of the round-tripping scheme: Thorsten Holten and Stephan von Erffa, respectively the company’s head of treasury and head of accounting.
The revelations call into question the figures reported by one of Europe’s few technological success stories, a German fintech group that has grown into a €20bn global payments institution. Before the FT exposed the existence of the investigation last week, the group was more valuable than Deutsche Bank or Commerzbank, whose place it has taken in Germany’s main stock market index. Wirecard is a favourite of retail investors, who saw its rapid expansion into Asia as a sign that it can challenge the world’s biggest banks for primacy in the $1.4tn market for payments.
Markus Braun has run the company since helping to recapitalise it in 2002, an investment which made the 49-year-old Austrian a billionaire. In the field of digital money, Wirecard presents itself as best in class.
In response to the news of the preliminary investigation, Wirecard initially said no material compliance findings had resulted. This week the company told the FT that while its investigation was ongoing, it had made no conclusive findings of criminal misconduct and it would be wrong to draw conclusions from the preliminary report.
It is not the first time the group’s accounting practices have been called into question. Accusations of suspect accounting were levelled in 2008, 2015 and 2016. Each time Wirecard has alleged market manipulation, sparking investigations by the German market regulator, BaFin.
This time questions about its Asian operations began internally, prompted by a whistleblower left stunned by Mr Kurniawan’s January meeting last year. Notifying Wirecard’s senior legal counsel in the region on March 26, the whistleblower identified two senior finance executives, James Wardhana and Irene Chai, as accomplices in the book-cooking operation. A separate whistleblower also raised concerns in February, and on April 3 that person supplied the compliance team with a suspect contract they had received via Telegram, the encrypted messaging app.
Daniel Steinhoff, Wirecard’s head of compliance in Munich, flew in to Singapore for a briefing. On April 13 he ordered the email archives of these individuals “mirrored”, with copies seized.
Compliance staff, who evidently found the accounts of the whistleblowers credible, soon found enough in the documents to warrant a snap investigation, codenamed Project Tiger. They called in Singapore-based Rajah & Tann, which sent in a team of former prosecutors.
On May 4 R&T submitted a preliminary report, running to 30 pages of bombshell allegations: evidence in the documents of “forgery and/or of falsification of accounts”, as well as reasons to suspect “cheating, criminal breach of trust, corruption and/or money laundering” in multiple jurisdictions.