Criticism of Bafin's Internal controls

 The financial supervisory authority Bafin remains under considerable pressure following a series of blunders in connection with the Wirecard scandal. In an evaluation on insider trading by Bafin employees, the auditing firm Deloitte writes that Bafin itself did not apply some rules customary in the market to counter insider trading, such as the automatic recording and reporting of share transactions by employees who have insider information (duplicate record procedure).

 

For Bafin employees, there had also been no specific trading prohibitions, such as a ban on transactions in shares of institutions supervised by Bafin, during the period in question from January 2018 to September 2020. Transactions had been reported by employees, in some cases with a "considerable time delay", which called into question the completeness and accuracy of the reports made. The auditors recommend that Bafin strengthen its internal control systems.

"The Deloitte report is a slap in the face of Bafin's internal control system," criticized FDP financial expert Frank Schäffler, adding that State Secretary Jörg Kukies should be asked what he had done to prevent this development.

Bafin itself had investigated Wirecard-related employee transactions in a special evaluation and uncovered a possible insider case. The authority says it had already tightened its rules significantly in the fall. It will now examine how the auditors' recommendations can be implemented. All weak points will be eliminated, the supervisory authority promises. It will also examine how external service providers can be included in the control.

At the end of January, Bafin head Felix Hufeld had to vacate his post after it became known that an employee of his authority was accused of being involved in insider trading with derivatives of the financial services provider Wirecard. Even before that, Hufeld was under pressure because it became clear in the Wirecard investigation committee how much his authority had misled others with its short-selling ban on Wirecard shares.