Gooood Morning BaFin – it’s time to start protecting, supervising, and cybercrime fighting!

Charlene Lensburg
Thu, 30 Jul 2020 07:42:14 +0000
AMF, BaFin, CNMV, Compliance, CONSOB, FCA, Illegal Broker Activities, Illegal Payment Services, Money Laundering, Felix Hufeld

It's stunning. Before the eyes of the world public, the scandal of the DAX listed Wirecard unfolded over years while the BaFin did nothing but file complaints against investigative journalists and traders. BaFin has the legal mandate to protect the capital market and investors. Despite numerous warnings and circumstantial evidence, it has not fulfilled this mandate. BaFin must be accused of gross negligence and embezzlement.

It’s stunning. Before the eyes of the world public, the scandal of the DAX listed Wirecard unfolded over years while the BaFin did nothing but file complaints against investigative journalists and traders. Sure, the messenger is always dead is an old saying but its a completely unacceptable approach for a supervisory authority. BaFin has the legal mandate to protect the capital market and investors. Despite numerous warnings and circumstantial evidence, it has not fulfilled this mandate. BaFin must be accused of gross negligence and embezzlement.

Presiding incompetence

The German regulator thus had the stage to dramatically prove its incompetence. BaFin is headed by Felix Hufeld who was CEO for the European business of the U.S. insurance broker Marsh until 2010. He also held several supervisory board positions and acted as an investment manager. Did this qualify him to preside the financial supervisory authority in one of the largest financial markets in the EU? Well, this question has answered itself, didn’t it?

Most recently, Felix Hufeld had misinformed the German parliament. In a non-public hearing, he said that the BaFin had contacted the regulator in Singapore (MAS) in the Wirecard case, but that response was still being awaited. Later, a BaFin spokeswoman corrected this Hufeld statement and rather confirmed that the regulator in Singapore (MAS) had replied and would cooperate. Both the MAS and the police in Singapore had provided BaFin with the necessary information. Ouch!

One would think that BaFin was shaken up by the collapse of Wirecard. Very wrong assumption! Compared to regulators of the other large EU jurisdictions such as the UK, Spain, Italy, or France, BaFin has attracted attention, for example, its low number of consumer and investor warnings. The Wirecard collapse has not changed this laissez-faire attitude.

The last warning by BaFin about an unauthorised business was issued on 22 July 2020 and brought the total number of warnings to 9 for July. Here is a brief comparison of issued investor warnings of some regulators for the month of July 2020

German BaFin warnings: 11

Italian CONSOB warnings: 19

Spanish CNMV warnings: 28

French AMF warnings: 31

UK FCA Warnings: 88

BaFin is mostly silent about scams. It is not that there are no scammers active in Germany and/or cybercrime and money-laundering is not being performed there. On the contrary. Germany is one of the main markets for online trading scammers, cybercriminals, and money-launderers. Boiler Room agents from Georgia, Ukraine, and the Balkans attack thousands of German consumers and small investors on any given day. BaFin largely neglects this. Another problem is the authority’s website, which makes it almost impossible for consumers to find warnings.

It is no exaggeration to say that BaFin neglects its job as a watchdog for capital markets and investors. Moreover, the German watchdog seems to have no clue and/or no willingness to take on the fight against cybercrime and scams. This fight against the financial cybercrime pandemics demands more than just a night watchman approach. Rather, it requires an active and aggressive approach a la SEC or CFTC.

How long will the politicians in Germany and EU stand by and thus tolerate this negligent BaFin approach?

In any case, Felix Hufeld will go down in the history of the German and EU capital markets as the president of BaFin who, with a dangerous composition of incompetence, unwillingness, and unpreparedness is responsible for the EU’s biggest financial cybercrime scandal. And for keeping the doors wide open for cybercrime, scams, and money-laundering. There have been enough warnings, whistleblowers, and public reports that would have obliged BaFin to take action. It failed to do so and is hence guilty as charged.