The City regulator was warned last year that Wirecard was allegedly linked to a scheme that used fake online stores to disguise the processing of high-risk payments.
The Financial Conduct Authority was given details of an operation whereby allegedly bogus ecommerce sites were used as a front for channelling online gambling proceeds through the international payments system.
It was provided with evidence of a “transaction laundering” network that had a series of supposed connections to Wirecard, including to the payments processors behind the sites, and to the site operators themselves.
Transaction laundering involves disguising payments to create the false impression that they are unrelated to the true product purchased, allowing payments that may otherwise have been blocked to go through.
It is used to disguise everything from the purchase of drugs to weapons, pornography and gambling payments.
In this case, Wirecard was accused of being linked to a scheme to process European gambling proceeds, including to the United States, where online gaming is restricted.
Wirecard, a German payments group, filed for insolvency last week amid an accounting scandal and the arrest of its former chief executive.
There are growing questions about the nature of some of the payments it facilitated.
An investigation by Reuters in 2017 alleged that seven European websites, purporting to sell ordinary household goods such as fabric, gift wrap and DVD cases, were “fake outlets”.
When reporters tried to purchase the items, payment was accepted but no delivery was made. Staff on the companies’ helplines said at the time that they did not sell the marketed product, but instead processed gambling payments, mostly for Americans.
It can be revealed that the allegedly bogus sites were owned by UK companies set up by a formations agent which Wirecard staff were shareholders in.
Brinken Merchant Incorporations was shut down in 2015 after a government investigation revealed concerns that shell companies it set up were linked to alleged money laundering.
Payments companies such as Visa and Mastercard rely on transactions being coded so they can block any that may be illegal.
Coding a gambling transaction as an innocuous household item would allow it to pass through the system more easily and is against the rules of Wirecard’s partners, Visa and Mastercard. In some circumstances it is illegal.
The payments identified by Reuters were processed by a Berlin-based company called Deutsche Payment.
In April 2019, evidence was shared with the City regulator by Fraser Perring, a short-seller, that Wirecard owned the Deutsche Payment brand. He noted that helpline staff Reuters spoke to were employed by a company called Agora, a payment services provider that also had alleged links to Wirecard.
Mr Perring, a critic of Wirecard, said he has raised concerns about the business with the watchdog for “four years and four months with a complete absence of public sanction or caution against the [business].
“Was the FCA asleep at the wheel?”
The authority said: “We cannot comment on specific allegations but we treat all such information seriously and take it into consideration in the supervision of our firms.”
A spokesman for the Serious Fraud Office said it was “aware of the allegations, but can neither confirm nor deny interest in the matter”.
Wirecard declined to comment. Agora and Deutsche Payment did not respond to an invitation to comment.