November 8, 2019
We continue to track Wirecard’s delayed filings around the world.
Wirecard has two subsidiaries in Singapore, Wirecard Asia Holdings Pte Ltd (WDAH) and Wirecard Singapore Pte Ltd (WDSG). Both have been consistently late in filing audited financials. The 2018 accounts remain outstanding for both subsidiaries. This report focuses on WDSG:
The 2017 financials for WDSG were filed on the 18th of October 2019, over a year late. Ernst & Young (EY) chose to disclaim their opinion on the accounts, a rare situation where the auditors judge that they have the inability to obtain sufficient appropriate audit evidence, and they also judge that the effects on the financial statements are material and pervasive.
The directors’ report claims that the financial statements are drawn up to give a true and fair view of the financial position of the company. However, EY does not confirm that statement.
This raises grave questions for Wirecard’s ability to gain a license in Singapore under the new Payment Services Act (PSA) which they will need to operate their local business from the 1st of January 2020. Section 37 of the PSA states that licensees must appoint an auditor and submit a report of the audit to the Monetary Authority of Singapore (MAS). The MAS can then request additional information from auditors or demand an enlarged scope audit. Until 2018 accounts are filed, with all prior accounts thrown into doubt by EY’s disclaimer of opinion, it seems unlikely that Wirecard will receive a license.
It is also worth addressing some deeply misleading comments from the Wirecard CEO on the 3Q19 earnings call which took place on 5th November 2019.
“The other direction was there is a new license or new regulation came out concerning financial services licenses, so you need now financial services license to do acquiring and issuing. We have in Singapore our own acquiring and issuing license.”
He is correct that Wirecard need a financial services license. He then states that in Singapore they have an acquiring and issuing license. And while this is technically correct, because Wirecard has a Visa/Mastercard license, it is deeply and deliberately misleading. This is not the financial services license which they will need from 2020.
We urge interested parties to check the register at the Monetary Authority of Singapore website. Wirecard does not have any licenses
Wirecard has been late in filing accounts in Singapore for years.
WDSG filed 2016 financials on the 18th of June 2018, 326 days late, which received a clean, unqualified audit opinion from EY. This is surprising as Rajah & Tann (R&T) had finished on the 4th of May 2018 a report that showed preliminary findings of fraud at WDSG. The evidence they had investigated included the email inboxes of Irene Chai, Head of Finance at WDSG, and James Wardhana, International Finance Project Manager, Finance and Controlling Asia Pacific at WDSG.
It seems extremely unlikely that Wirecard shared the news of the R&T investigation with EY prior to the June 18, 2018 completion of the 2016 audit. If they had, it would have been at least a material “post-balance sheet event”, if not a reason to disclaim the 2016 audit entirely. Did Wirecard hide this investigation from their own auditors?
We cannot put much faith in the financials given the disclaimed opinion. However, we note that the revenues shrank in both 2016 and 2017, and the business had a €7.3M loan from Wirecard Sales International as of 31st December 2017, that was extended to €30M as of 27th August 2019.
|Wirecard Brazil (€M)||Our|
|Company Reported MCA||400||400|
|Brazil % Estimate||40%|
|Brazil MCA Estimate||160||160|
|Monthly Credit Volume||37.2||37.2|
|Calculated MCA Balance||18.6||18.6|