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The €1.9 Billion Vanishing Act

June 26, 2020

How can you make €1.9 billion disappear from the balance sheet? German payments provider Wirecard found out the hard way that you can’t. The company just filed for insolvency and its CEO was arrested after auditors accused it of committing an “elaborate and sophisticated fraud.” Auditing firm EY stated, “There are clear indications that this was an elaborate and sophisticated fraud involving multiple parties around the world in different institutions with a deliberate aim of deception.” This led German Finance Minister Olaf Scholz to proclaim that this is “a wake-up call that we need more oversight, more controls” over financial firms. 

As the stock has dropped by 98%, lawsuits are now being filed. The fraud case started when the Financial Times reported on accounting irregularities in its Asian operations. EY also raised concerns while auditing its 2019 financial statement because they couldn’t account for €1.9 billion. Now the CEO has been arrested on charges that he may have inflated the company’s balance sheet.

While all the details haven’t been released about how this alleged fraud was committed, it does bring up memories of another case of fraudulent transactions involving Steinhoff International, a global retailer. According to a report by PwC, the company recorded irregular or fraudulent transactions of $7.4 billion by former executives and external parties. These transactions were used to inflate profits and asset values of the company. And in order to cover up this illegal activity, the executives allegedly backdated documents.

So what can we learn from these two reports?

  • The inside threat can be any position at a company.
  • There is no limit to the damage the inside threat can do to a company.
  • Manual controls and time-consuming audit processes may make it easier for the insider threat to cover their tracks.

Now the question is after seeing the damage that the inside threat can do, are you confident that you can prevent this from happening at your organization? If you’re randomly sampling 5% to 10% of transactions across the enterprise, it is very easy to miss the risky or fraudulent ones that need to be reviewed.

But what if you had automated controls in place that alert you to risky or fraudulent transactions across all applications and all users? For example, what if a team at Steinhoff was alerted when someone tried to backdate a transaction and flagged it as suspicious? And what if it could correlate the transactions across all of your applications, not just your ERP, to find this activity? In one of these news stories, that could save you… $12 billion!

Click here to learn more about how you can accomplish this.