Receiving Wide Coverage ...
Fraud ferrets
“German prosecutors are looking into possible money laundering by executives at Wirecard, adding to ongoing probes related to potential fraud and fake accounting at the insolvent payments firm,” the Wall Street Journal reported. “A spokeswoman for the Munich public prosecutor said it was conducting several legal cases related to possible money laundering at Wirecard, the oldest dating as far back as 2010. Some investigations are ongoing.”
Separately, “Irish police carried out a search of Wirecard’s Dublin office on Thursday following a request for help from German authorities investigating a multibillion-euro fraud at the collapsed payments specialist,” the Financial Times said. The police said “its economic crime bureau executed a search under warrant at the Dublin city center premises of [an unnamed] financial services provider. Two people with knowledge of the situation said police were at the offices of Wirecard.”
“The FT reported in October that profits at Wirecard’s Irish unit appeared to have been fraudulently inflated, with sales attributed to customers which had ceased to exist or denied a relationship with the company.”
The FT also reported that Wirecard’s former number two executive Jan Marsalek “touted secret documents about the use of a Russian chemical weapon in the U.K., as he bragged of ties to intelligence services to ingratiate himself with London traders. The documents, which have been reviewed by the Financial Times, included the formula for novichok, the world’s deadliest nerve agent.”
“His use of the documents in meetings in the summer of 2018, which were described by two traders who attended, show the mysterious connections and bizarre tactics of a man who helped run the German payments group for a decade before it collapsed last month in a fraud scandal. Marsalek disappeared last month in the run-up to Wirecard’s collapse. Before then he had presented himself as an international man of action, using secret documents to forge links with traders in a years-long operation to identify speculators betting against the Wirecard share price.”
Meanwhile, Britain’s financial regulator “has issued its latest guidance to payment providers and ‘e-money’ companies on safeguarding customers’ funds, just 13 days after Wirecard’s collapse left millions locked out of their accounts. The Financial Conduct Authority said on Thursday it had brought forward stronger measures to protect the users of payment cards and digital apps, but said the timing had been driven by the impact of coronavirus on consumers, not Wirecard’s insolvency in late June.”
“Under the FCA’s new guidance, payment providers and e-money issuers must keep up-to-date records of all funds received and maintain a clearly separate ‘safeguarding account’ for customer money. Companies must also be more careful when selecting and appointing third-party service providers — such as WCS — and have been told to review these providers ‘as often as appropriate’.”
Wall Street Journal
Taking the case
The Supreme Court Thursday “said it would wade into a years long dispute involving the government’s takeover of Fannie Mae and Freddie Mac. The justices, in a brief order, said they would consider legal issues stemming from the government’s 2012 decision to channel nearly all of Fannie and Freddie’s profits to the Treasury Department. The court said it would hear dueling appeals by both the government and a group of shareholders. The court will hear the case during its next term, which begins in October. A decision is expected by June 2021.”
“A Supreme Court ruling in favor of the government could help the Trump administration return the companies to private ownership by clearing up legal uncertainties that may hamper efforts to raise fresh capital. A decision in favor of litigating shareholders could scramble those plans and allow shareholders to leverage a multibillion-dollar settlement with the government.”
The case challenges the single-director structure of the Federal Housing Finance Agency, which regulates Fannie and Freddie, American Banker’s Hannah Lang writes.
The worst is yet to come
European bank profits “have already been crushed by the economic fallout of the global pandemic. Yet the true scale of the damage will only start to be revealed over the coming months, as European economies reopen and governments unwind some of their extraordinary supports. In the second half, a deferred wave of defaults will likely take a sizable bite out of European banks’ meager profits. Hardest hit will be banks with lots of unsecured consumer debt and those lending to troubled industries such as travel, discretionary consumer products and oil and gas.”
Indian bank fraud
“One of India’s biggest state-run banks said it had fallen victim to its third multimillion-dollar fraud in as many years, a stark illustration of the bad debts and weak defenses against misconduct that plague the country’s financial system. Punjab National Bank said late Thursday that a customer, the ailing property lender Dewan Housing Finance Corp., had defrauded it of the equivalent of $491 million.”
Financial Times
Considering cuts
Wells Fargo “is considering cutting thousands of jobs as part of a broad strategic review to restore the bank’s profits from unsustainably low levels,” the FT reports. The bank, which employs 263,000 people worldwide, is expected to report second quarter net income next week of just $9 million, down from the $6.2 billion it earned a year earlier, according to a Bloomberg analyst survey. The bank has already said it will cut its third quarter dividend.
“The cuts would mark the first round of major layoffs at a U.S. bank since the beginning of the coronavirus pandemic. Banks have largely tried to avoid firing staff as they brace themselves for enormous loan losses triggered by the deep global recession.”
Gearing up
“U.S. and European banks in Hong Kong are conducting emergency audits of their clients to identify Chinese and Hong Kong officials and corporates that could face possible U.S. sanctions over a new national security law.” President Trump “is expected to sign into law as early as next week the Hong Kong autonomy act. The legislation gives the administration the power to impose sweeping sanctions on officials accused of undermining Hong Kong’s semi-autonomous status, as well as banks and state entities that do ‘significant transactions’ with them.”
“Foreign banks such as HSBC, Standard Chartered and Citibank have retail outlets in Hong Kong, while global investment banks like JPMorgan Chase, Goldman Sachs, Bank of America and UBS have offices in the Asian financial hub.”
