A few days ago, Netflix released their highly anticipated film Skandal! Bringing Down Wirecard, a thrilling look into how Financial Times journalist Dan McCrum took down one of the largest fraudulent operations in recent memory. For those unfamiliar with the situation, Wirecard was a German payment processor that was declared insolvent in 2020 after posting nearly €2 billion in cash missing and owing €3.2 billion in debt. Several members of the executive team have been arrested or otherwise implicated in criminal proceedings.
Wirecard used for binary options trading
One of the biggest dominos fell when a group of securities regulators found a handful of websites that allegedly stole money from investors. These websites were used to sell binary options, a risky form of trading that locks holders into receiving either a predetermined amount or nothing at all. As detailed in internal company documents, the trading websites would collect users’ money from binary options using Wirecard.
In addition to using Wirecard to collect this money, executives from the company began staging an intermediary firm that took money from these binary options trading sites and passed it into mainstream payments ecosystems, attempting to shield the illicit behavior from financial institutions and credit card companies. In total, this company brought in over $160 million from 2013-2018 before getting flagged by the Commodity Futures Trading Commission (CFTC).
"Much of the payments industry is in effect self-regulated.”
Experts have voiced concern about how the world of digital payments leaves room for bad actors. This is due in part to the industry’s rapid expansion. But a lack of outside oversight presents a bigger problem: card schemes have had to enforce guidelines through the imposition of fines that may or may not deter more persistent, ambitious fraudsters.
EverC has been keeping an eye on the Wirecard situation for a while now; in 2021, EverC co-founder and president Ron Teicher spoke to The Wall Street Journal about the incidence of transaction laundering as a way of hiding illicit payments, saying, “There’s a huge hole in the wall [of anti-money laundering defenses] and it’s an easy way to get access to the legitimate financial system for a lot of money … A million Wirecards could pop up and do this.”
How can payment providers detect similar instances of fraud?
A million Wirecards may not mysteriously appear tomorrow, but the massive potential for merchant fraud should never be underestimated.
MerchantView is designed by experts to monitor, identify, and report scenarios identical to the ones that Wirecard proliferated, so you can mitigate merchant risk.