How do we reduce business risk

What we can learn from the Wirecard scandal

After several years of research by the Financial Times1 At the end of June, the German payment processor and financial service provider Wirecard admitted the possibility of huge balance sheet fraud in connection with allegedly bogus business activities in Southeast Asia. This latest case of alleged wrongdoing once again underscores that Need for comprehensive due diligence management in the financial services sector.

Wirecard: The deep case after the financial crimes became known

Due to the ongoing investigations into suspected fraudulent activities, Wirecard, a company that two years ago was hailed as one of the most successful fintech companies in Europe, recently filed for bankruptcy. After it was founded in Munich in 1999, the payment processing specialist quickly gained notoriety thanks to its steady growth. It won the trust of investors and supervisory authorities such as BaFin, the German Federal Financial Supervisory Authority, which in 2019 highlighted the great importance of Wirecard for the German economy.

The current Accusations relate to a balance sheet falsificationwhich was supposed to conceal the lack of 1.9 billion euros in Wirecard's books. The investigative journalists of Financial Times put the focus of their research on the bloated Wirecard balance sheets of the past few years, on various legal proceedings and on the announcement of the accounting giant EY from April that questionable accounting practices have been discovered.

The rapid rise of Wirecard since the beginning of the new millennium has now turned into an even faster decline. The (former) executives on the top floor are confronted with numerous judicial investigations in Germany and beyond.

What are the lessons? The cost of breaches of duty of care!

It is to be expected that the Wirecard scandal will have lasting effects on the financial services sector in Europe and beyond. In response, emphasize nongovernmental control organizations like Transparency International2 once again the need for a revision of legal regulations for financial supervision and for a law that comprehensive protection of whistleblowers guaranteed.

The chain of errors that led to Wirecard's implosion can refer to one systematic lack of comprehensive due diligence management to be led back. Various industry experts have since identified a number of obvious weaknesses in accounting. The expansion of Wirecard's business was too dependent on company takeovers for sustainable growth. Auditors appear to have underestimated the risks inherent in questionable business practices, which ultimately led to this rapid crash.

As an initial response, Transparency International suggests that Auditors for a violation of their duties of care legally held accountablebecomecan. Together with the reform of the financial supervisory authorities also called for by Transparency International, this could herald the beginning of a fundamental change in the financial services sector.

How to spot warning signs of corruption risks

The Wirecard case underlines the importance of comprehensive due diligence management for the financial services sector. For both investors and stakeholders, a Review of a company's financial credibility and viability one of the most urgent risk management concerns be. Given the rapid pace of development and the global scope of the financial services sector, it can be difficult to spot potential warning signs, such as bloated balance sheets, early on.

Data-driven due diligence solutions can help companies help process these warning signs and reduce potential business risks. With the help of a data-driven due diligence approach, companies can develop a 360-degree risk assessment. Whether companies opt for an off-the-peg due diligence platform or feed risk-related data into their in-house systems and analysis applications, they definitely need it quite a number of sources for general and negative news reports, for legal documents, press releases, business reports as well as for PEP and sanction lists. These sources can provide essential insights into the financial services sector and help companies with their due diligence management.

The sudden crash of Wirecard made it clear that investors and stakeholders must carry out a thorough review of a company's financial health and examine the personal and professional history of the people involved. This has obviously not been done in the current case. Access to comprehensive data from all over the world together with highly developed AI-supported tools ensures the necessary transparency so that you potential Counter financial risks and protect your company's reputation can.

It remains to be seen how the financial services sector will recover from the Wirecard shock. Forward-looking financial regulatory reform and expanded due diligence to defuse similar cases in the future should be at least two of the lessons that can be learned.

You can do that now

  1. Explore how alternative data from Nexis® Data integration financial services companies can help.
  2. Learn more about how Nexis® Diligence can help your company stay vigilant about business risks.

To person:

Chris Schneider is Associated Head of Sales at LexisNexis GmbH. He has been working in the data & analytics environment for over seven years and has a wealth of experience in supporting compliance projects in the finance and banking sector. He was involved in numerous corporate projects.


1. Wirecard: the timeline,, June 25, 2020.
2. Wirecard Scandal: Transparency Germany Calls For Reform For Reform Of Financial Supervision And Better Protection Of Whistleblowers,, 07/07/2020.

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