Look, these sentences are probably more than just and even on the light sight. Handing in your auditing license is a pretty severe punishment, at least career changing. But will the risk and audit professionals at BaFin face the same penalties?
BaFin's role in this is indeed pretty astonishing:
"The German financial watchdog has filed a criminal complaint against two Financial Times journalists and several short sellers, accusing them of potential market manipulation over reports about suspected accounting irregularities at payments processor Wirecard."
Indeed, they failed big time. Apparently some BaFin employees were also trading the shares of Wirecard (and presumably other companies they were supposed to oversee).
There's a pretty good book on the whole sad story: Money Men: A Hot Startup, A Billion Dollar Fraud, A Fight for the Truth by the FT journalist that did most of the digging.
If journalists and short sellers hadn't kept pushing (against Wirecard, auditors, and BaFin), Wirecard might have survived a bit longer, managed to acquire Deutsche Bank, and then (with the merged balance sheet) gotten away with it. Mind boggling.
However, I must say, after reading that book and several articles about the whole thing, I am still not quite sure how they could keep up the fraud for so long, what exactly happened there, and who benefited.
(I suspect that crypto firms have taken over a lot of Wirecard's "business"...)
The head of BaFin and their deputy were forced out over it and the agency is undergoing significant restructuring[1], and a new agency was formed specifically for investigating financial crimes[2].
In terms of actual liability - no, at least not yet. A number of lawsuits by individual investors were thrown out[3] but it's possible there will be public prosecution:
> Criminal prosecutors in Frankfurt are assessing whether BaFin employees obstructed justice by not properly investigating fraud warnings.
In the end, it's a regulator, they have to rely on auditors to some point. If Wirecard lies and EY doesn't catch it, that's on the criminal and the auditor. Still, it's hard to understate just how badly the agency fucked this one up... Hopefully, it'll serve as a true wake-up call.
Certainly seems like it - they have been more aggressive recently with other problem companies like N26, Solaris Bank, Coinbase, Deutsche and others.
> The head of BaFin and their deputy were forced out over it
They tried to get innocent people put in prison. They belong in prison themselves. If all that happened to them was losing their careers, then they haven't been brought to justice.
Who is "they"? The head of the agency? Their advisors? Individual employees? Politicians? Failure of this magnitude is almost always a systemic failure.
Actually figuring out who, if anyone, committed a crime (through gross negligience, willful obstruction, or similar) will take years.
To reply to just one sentence: From my experience the relationship between auditors and financial (prudential) regulators is only lightly one of relying upon. On the one hand of course having trouble getting your financial report signed is a key risk indicator for the regulator, on the other hand the regulator in my sector (insurance) goes markedly deeper in their thematic and on-site reviews than the auditors do. Even though the auditors sign off on things like capital requirements, the regulators understand models way better. Those building proper models usually don’t work for the big-4 that do auditing, but work for more niche firms and the insurers themselves.
I’ve worked for a regulator in a sector with more lenient oversight (health) and there the accountant was one of the pillars of our understanding. We just didn’t have the mandate or capabilities to understand the finance of the thousands of providers. In that way regulating finance is easy. Banks and insurers are relatively low-N activities. In case of BaFin I find it hard to imagine that they couldn’t, so they probably wouldn’t.
Food for another thread is how to match the European perspective above to, say, the SVB case in the US. How on earth the regulator didn’t track the interest rate risk is beyond me. (I believe the legal explanation is that they fell in a D-F regime with less regulatory burden.)
Could you please stop posting unsubstantive comments and flamebait? You've unfortunately been doing it repeatedly. It's not what this site is for, and destroys what it is for.
I acknowledge that my comments in the last time where short and bold/flamebaiting, because i was on my phone. I will be explaining my views more thoroughly.
Appreciated! If you explain them more thoroughly while sticking to the site guidelines (e.g. curious, respectful conversation, without swipes or snark), all should be fine.
