GALSIN, AYA S.

BSAIS 2- Y2-1 ACIS211

● Research the biggest accounting scam/fraud in history.

● Accounting Fraud in History: The Case of Wirecard

This paper will discuss the accounting controversy at Wirecard, a German

payment processor that grew to rank among the most valuable companies on the
German stock exchange in the 2010s. In late 2019, the Financial Times
conducted an investigation that exposed the Wirecard issue and raised questions
regarding the company's accounting practices. When it was found, two of the
largest banks in the Philippines were clients of the company, and that €1.9 billion
($2.1 billion) was missing from the balance sheet.

Wirecard is a German payment processor that provides businesses with services

that enable them to take credit cards and online payments. It guarantees that the
merchants receive their due payment and gathers the money. It generates
income for the corporation through commission. According to Wirecard, it serves
about 300,000 businesses globally through partnerships with major players in the
industry like Apple, Google, China's AliPay and WeChat, Bank of the Philippine
Island (BPI), Unionbank, and Banco De Oro (BDO). Wirecard was first
established in 1999, it catered primarily to gambling and pornographic websites.
Its consistent revenue streams allowed it to weather the dotcom crisis of the early
2000s, and as more sophisticated types of online commerce gained traction in
the 2000s and 2010s, the group's profile grew along with it. Wirecard now
showcases clients on its website, including FedEx, Deutsche Telekom, and KLM.
First launched on the Frankfurt Stock Exchange in 2005, it had driven out more
established lender Commerzbank from the blue-chip DAX share index by 2018.
With fifteen times fewer people, Wirecard's market value at the beginning of 2019
was over 17 billion euros, matching the revenues and manpower of the
financially troubled Deutsche Bank.

In early 2019, The Financial Times had an interview with a whistleblower who
claimed that Wirecard had been manipulating sales transactions to increase
profits and that there had been an anomaly in accounting procedures. The
fabricated financial figures caused the company's stock price to rise, increasing
its valuation to $28 billion. In a statement released on Monday, the IT company's
board said that after "further examination," it is "preponderantly likely" that the
€1.9 billion ($2.1 billion) in cash that was supposed to be in its accounts does not
exist. But according to Wirecard the two major Philippine banks, BPI and BDO,
have received the funds. The banks and the Bangko Sentral ng Pilipinas denied
this, claiming that the cash never entered the country's financial system, as
stated by BSP Governor Benjamin Diokno. On Thursday, June 18, 2020, Ernst &
Young, the auditors, verified this, saying they were unable to find 1.9 billion euros
in cash that was supposed to be in trustee accounts at two Philippine banks.

Der Spiegel, a German news organization, claims that Mark Tolentino, a Filipino
lawyer, is the trustee accountable for the lost money. Tolentino, however, refuted
this, claiming he was unaware of the Wirecard scam and was the victim of
identity theft. One of the BPI's workers was suspended while an inquiry into the
bank was conducted. A fake document about the claimed deposits to the bank is
said to have been signed by the employee. The Philippines National Bureau of
Investigation filed a complaint on May 31, 2021, alleging that Filipino trustee
Mark Tolentino and Wirecard COO Jan Marsalek committed accounting fraud
worth $2.5 billion and broke both the New Central Bank Act and the Cybercrime
Prevention Act. They were also accused of forging paperwork related to the
Cybercrime Prevention Act.

Wirecard faces now multiple investigations into its accounting practices and at
the end of September the company faced an outstanding debt of 1.8 billion euros
and filed for insolvency. Munich prosecutors had already opened an inquiry into
Braun and other senior board members for "market manipulation" after they
published revisions of the KPMG audit results of their previous accounts. This
event was considered the biggest accounting scandal in European history.
 References

France-Presse, A. (2020, June 25). 5 things to know about the Wirecard scandal.

https://www.rappler.com/business/264874-explainer-things-to-know-wirecard-sca

ndal/

Riley, C. (2020, June 22). Wirecard says missing $2 billion never existed. Its stock is

down 85% in 3 days. CNN.

https://edition.cnn.com/2020/06/22/tech/wirecard-missing-money/index.html

Rivas, R. (2021, June 4). NBI files complaint vs Wirecard execs for $2.1-billion

accounting fraud. Rappler.

https://www.rappler.com/business/nbi-files-complaint-vs-wirecard-accounting-frau

d-june-2021/

Taub, B. (2023, February 27). How the Biggest Fraud in German History Unravelled.

The New Yorker.

https://www.newyorker.com/magazine/2023/03/06/how-the-biggest-fraud-in-germ

an-history-unravelled

Wirecard says €1.9bn of cash is missing. (2020, June 18). Financial Times.

https://www.ft.com/content/1e753e2b-f576-4f32-aa19-d240be26e773