Commerzbank flagged risks at Wirecard to German regulator in early 2020 – FT

Commerzbank AG warned German financial regulator BaFin about money-laundering risks at Wirecard AG in January 2020, the Financial Times reported, citing three people familiar with the matter.

The Germany-based lender warned the regulator based on the findings of an internal review, launched in early 2019, of its relationship with the now-collapsed payments company, according to the Jan. 12 report.

The lender informed BaFin about its role in Wirecard's acquisition of two India-based payments companies in 2015 that were cited in the allegations of fraud against Wirecard, and about suspicious transactions at unit Wirecard Bank AG, the newspaper noted.

However, BaFin reportedly said there was no immediate regulatory reason to act since it was already aware of the information that Commerzbank shared.

The lender cut its ties with Wirecard Bank in 2019 but continued to be part of a consortium of banks that provided a €1.75 billion revolving credit facility to the parent company due to a contract, according to the report.

A parliamentary inquiry is being carried out into the downfall of Wirecard, which filed for insolvency after revealing a €1.9 billion hole in its balance sheet. Former Commerzbank CEO Martin Zielke and Deutsche Bank AG CEO Christian Sewing are set to testify as part of the inquiry on Jan. 14, the FT reported.

BaFin confirmed receiving the warning from Commerzbank, saying it had put Wirecard Bank's anti-money-laundering controls under close supervision in mid-2019, the report said.

However, Member of Parliament Fabio De Masi said the review and the warning to the regulator "undermines the view" that the government and lender were "powerless with regard to Wirecard's criminal intent," the FT noted.

The European Securities and Markets Authority had flagged shortcomings in the supervision of Wirecard by German regulators, including BaFin.