Via Financial Times

Wirecard’s explanation for a €1.9bn hole in its balance sheet was further undercut on Sunday when the head of the Philippine central bank said the money never entered the country.

The German fintech group revealed on Thursday that the funds were missing and that its auditor, EY, had not been able to trace the money, supposedly held in escrow accounts at two Asian banks.

On Friday Wirecard’s chief executive Markus Braun resigned after Süddeutsche Zeitung identified the banks involved, and the two Philippines-based institutions said they knew nothing about it.

BDO and BPI both told the Financial Times that Wirecard was not a client, that there was no evidence such accounts ever existed and that documents provided to EY supposedly detailing the balances were forgeries.

The fake documents came to light this month during an extended audit of the German group. Sunday’s statement by the governor of the central bank raises fresh questions over whether the sums Wirecard has described as “missing” ever existed.

“None of the missing [€1.9bn] of German firm Wirecard entered the Philippine financial system,” said Benjamin Diokno, governor of the Bangko Sentral ng Pilipinas, referring to an “initial report”. He added that the banks’ names had been used “in an attempt to cover the perpetrators’ track”.

The Dax-30 company has appointed restructuring specialist Houlihan Lokey to advise it. It was in negotiations with a banking consortium at the weekend over €2bn in credit lines that could be terminated after it missed a Friday deadline for reporting annual results.

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The fintech group has spent 18 months battling whistleblower allegations of accounting fraud. The resignation of Mr Braun, the longest-serving chief executive of a Dax-30 company and Wirecard’s largest shareholder, followed a 75 per cent two-day collapse in its share price. He has always denied wrongdoing.

The FT reported in October that profits at units in Dubai and Dublin appeared to have been fraudulently invented.

Wirecard appointed KPMG to conduct a special audit. It told the forensic investigators, as well as its longstanding auditor EY, that cash balances related to the suspect business were held in bank accounts controlled by a trustee.

An April 28 report on KPMG’s work said it did not receive independent bank confirmations to validate €1bn of cash balances, and that the trustee responsible for the accounts had abruptly cut ties to Wirecard late last year.

The report said the accounts were moved to a new trustee and new banks in Asia.

Sunday’s statement by Mr Diokno is the latest setback for Wirecard, whose executives on Friday still hoped it might be possible to recover the money. “Everyone in the company is adamant that the money exists,” a person briefed on the matter told the Financial Times.

Wirecard declined to comment on Sunday.

BPI said it believed the fake certification it was shown by EY was created with the help of a junior employee at one of its branches who had been suspended pending an investigation. 

“It’s really something that caught us by surprise,” said Cezar Consing, BPI president and chief executive. “When EY gave us a copy of that document to verify, we immediately realised it was bogus — it was falsified.” 

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He said the document “looks like something somebody just dreamt up”, adding: “It’s basically a piece of paper made to look as if there was money in this account.” 

Nestor Tan, president and chief executive of BDO, said the bank had found no evidence such accounts existed. “We would have known an account of that size regardless of who the owner is,” he said, adding that an amount that large — which he said was a substantial sum for a Filipino bank — “would not be easily hidden or forgotten”.

Wirecard has previously said the Philippine accounts were used to settle payments with crucial third-party partners to which it outsourced payments processing in countries where it lacked its own licence.

Between 2016 and 2018, roughly half of Wirecard’s sales and “the lion’s share of its profits” were attributed to three such business partners, according to KPMG’s report and documents seen by the FT.

The FT reported in March last year that one of those partners was PayEasy Solutions, a Philippine payment processor that did not appear to have filed financial statements in the country for years, and which shared an office with a tour bus company run by a former Wirecard employee.

A six-month KPMG special audit was unable to demonstrate this business was genuine, citing a lack of co-operation from Wirecard’s partners.