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Commerzbank warned the German financial watchdog of money laundering risks at Wirecard in early 2020, noting how fears about the payments group were growing months before its collapse.
The harsh assessment that Commerzbank offered BaFin in January last year was based on the findings of an internal review the bank began in its relationship with Wirecard in early 2019, according to three people familiar with the matter.
The findings of the review, launched by Germany’s second-largest publicly traded bank after the Financial Times reported alleged accounting manipulations to Asian division of Wirecard, prompted Commerzbank to start severing its business ties with the payments group in the second half of 2019, the sources said.
Part of a consortium of Wirecard lenders, Commerzbank lost € 175 million when the company failed in one of Europe’s biggest accounting frauds in June.
The revelation that Commerzbank conducted its own review and reported the results to BaFin, comes as a German parliamentary inquiry Wirecard’s demise this week highlights the support the once high-profile company has received from some of the country’s biggest banks.
Martin Zielke, former managing director of Commerzbank, and Christian Sewing, managing director of Deutsche Bank, are among the witnesses called to testify before the investigation Thursday. The banks helped finance Wirecard’s acquisition in 2015 of two Indian payment companies mentioned in the fraud allegations against the group.
His role in the transaction was one of the disclosures Commerzbank made to BaFin in a detailed presentation at a meeting on January 14 last year, according to people familiar with the matter.
The bank also informed the regulator of suspicious transactions from Wirecard Bank customers, for which it was processing cross-border payments. In response, BaFin concluded that there was “no immediate regulatory reason to act” as it was already aware of most of the issues raised by Commerzbank, the people added.
Commerzbank abandoned its business relationship with Wirecard Bank, where it was so-called correspondent bank, in 2019. However, the lender remained a member of a consortium of 15 banks which provided Wirecard with a revolving credit facility of 1.75 billion euros.
The bank’s internal review and warning to BaFin “undermines the view” that the German government and Wirecard’s business partners, such as Commerzbank, were “powerless in the face of Wirecard’s criminal intent,” said said Fabio De Masi, a deputy from the far left party. Die Linke.
“If Commerzbank withdrew from its correspondent banking relationship with Wirecard Bank in September 2019, why didn’t the lender also sever its credit relationship?” asked Mr. De Masi.
Commerzbank wanted to end its lending relationship with Wirecard after its review, but the contract prevented an early exit of the consortium, which had committed the line of credit until 2024, according to people familiar with the matter.
The findings of the Commerzbank review were also at odds with the views of Heike Pauls, the bank analyst who covered Wirecard and recommended investors buy the shares until the group collapsed.
In a statement, Commerzbank said there was a separation between the work of its analysts and other parts of the bank. He declined to comment further on his relationship with Wirecard.
BaFin confirmed in a statement to FT that it had been informed by Commerzbank of the risks of money laundering at Wirecard. The regulator added that it had already put Wirecard Bank’s anti-money laundering controls under close surveillance in mid-2019.
“The findings from Commerzbank confirmed BaFin’s decision to do this and have been factored into our work,” the watchdog said.
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