James Freis

Freis joined the Federal Reserve Bank of New York's legal department as an Attorney in 1996,[7] where he advised on financial market regulations, payment and settlement system issues at wholesale and retail levels, and foreign government and central bank accounts. He worked on the successful defense before the Iran–United States Claims Tribunal of claims brought against the Bank by the Central Bank of Iran arising out of the hostage crisis.[8][9]

In 1999, Freis moved to Basel, Switzerland and became Senior Counsel in the Legal Service at the Bank for International Settlements, an international organization known as the "bank for central banks."[10] There he supported the provision of financial services to central banks; advised on international law such as privileges and immunities; and supported the Basel-based experts’ committees of global financial standard setters, through 2005.[11]

Freis was appointed Director (CEO) of the Financial Crimes Enforcement Network (FinCEN) on March 5, 2007, by United States Secretary of the Treasury Hank Paulson.[7] At the time, FinCEN's mission was "to safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity."[17] FinCEN had faced criticism from the financial industry over difficulties of complying with anti-money laundering regulations,[18] which had been expanded in 2001 under USA PATRIOT Act, Title III. On June 22, 2006, Secretary Paulson visited FinCEN and together with Director Freis launched initiatives to improve FinCEN's Regulatory efficiency and effectiveness.[19]

Freis also oversaw FinCEN's broad IT Modernization Program to collect, analyze, and share data collected under FinCEN's regulatory authority, estimated to cost $120 million. While earlier FinCEN IT projects had failed, under Freis the modernization project was managed on time and on budget.

Freis became known for his efforts to combat fraud, and in particular mortgage fraud.[20][21] He made the business case to bankers that combatting fraud was inter-connected with anti-money laundering responsibilities.[22][23][24]

On the regulatory front, Freis expanded cooperation with State financial services regulators,[25] and he expanded FinCEN's regulations to non-bank mortgage lenders,[26] Fannie Mae and Freddie Mac,[27] and initiated the rules for investment advisors.[28] He amended the regulations for money services businesses and in July 2011, issued regulations for "prepaid access[29][30]." The latter changes formed the basis for FinCEN regulation of virtual currency.[31][32][33] In testifying before the Congress, Freis explained, "Recognizing that payment systems evolve rapidly,... The rule was developed to be technologically neutral and hopefully cover new developments for years to come."[34]

Freis initiated rulemaking requiring financial institutions to collect information on beneficial owners of accounts.[35] The final rule was issued in 2016,[36] at which time President Obama in referencing the regulation “call[ed] on Congress to pass new legislation that requires all companies formed inside the United States to report information about their real owners to the Treasury Department's Financial Crimes Enforcement Network.[37][38]" On December 11, 2020, Congress mandated the remaining component of the decade old policy proposal, by including in the National Defense Authorization Act of 2021 a chapter expanding FinCEN's powers, most prominently requiring companies to disclose information about their beneficial owners which would be available to law enforcement through a national database to be developed and maintained by FinCEN.[39] Freis also initiated rulemaking to implement a Congressional mandate to collect data on cross-border electronic transfers of funds, which was supported by law enforcement but faced criticism from the financial industry for potentially collecting too much data, and which has not yet been implemented.[40][41][42]

On an international basis, Freis also oversaw FinCEN's role as the financial intelligence unit of the United States, and a member of the Egmont Group of Financial Intelligence Units. He promoted greater sharing of information among financial institutions, including on a cross-border basis.[43] Under Freis, FinCEN worked closely with counterpart regulators and the financial intelligence unit in Mexico, and in law enforcement efforts along the Southwest Border.[44][45]

Freis left FinCEN after an apparent disagreement over how independent FinCEN should be as a Bureau of the Treasury Department.[46][47][48][49][50] In September 2012, he was awarded the Treasury Medal as the longest serving FinCEN Director.[2]

He was appointed effective April 1, 2014, as the new Chief Compliance Officer for the Deutsche Börse Group, to oversee compliance as well as responsibilities towards supervisory authorities, among all Group entities.[52] Based in Frankfurt, Germany, the international financial market infrastructure provider includes the Frankfurt Stock Exchange; the Eurex Exchange offering futures and options derivatives; Eurex Clearing central counterparty (CCP); Clearstream, the International Central Securities Depository (ICSD); commodities and FX trading platforms; and various IT, financial index providers, and analytics businesses. Freis served concurrently as the Chief Compliance Officer for the Clearstream Group holding company with about EUR 15 trillion in assets under custody.[53][54]

While at the Deutsche Börse Group, Freis worked with counterparts at other leading companies to promote sustainable best practices to enhance the integrity of the financial markets.[55]

On May 8, 2020, Wirecard AG, the payments processor and financial services provider based in Germany announced that effective July 1, 2020, James Freis would be joining as Executive board member[56] ("Vorstand"). Wirecard had faced criticism and allegations of accounting irregularities over the prior two decades as it grew globally, but that notwithstanding, by 2018 it had become a member of the DAX stock index[57] of German blue chip companies. Wirecard was viewed as needing a "new start," and markets reacted positively to the appointment of Freis as a "Game Changer.”

Freis's appointment was described as part of a "comprehensive change" in the Management Board, and he would be responsible for a newly created department "Integrity, Legal and Compliance." Together with the announcement of Freis's appointment, then CEO Markus Braun apologized for past turbulence at Wirecard, and both he and Chairman of the Supervisory Board, Thomas Eichelmann, described Wirecard's business model as "sustainable and highly profitable."[58]

On June 18, 2020, Wirecard announced Freis had joined the Management Board with immediate effect, earlier than his planned start date of July 1.[59] Later that evening, Freis was introduced by Markus Braun in a video[60] in which Braun announced that Wirecard might have been the victim of fraud in connection with its funds held in overseas bank trustee accounts.[61][62] Working through the night to investigate, Freis quickly concluded that there was obvious fraud in the purported Wirecard accounts and in the morning informed the Supervisory Board.[63]

On June 19, 2020, Wirecard announced the resignation of Markus Braun as CEO and the appointment of James Freis, one day after being appointed to the Management Board, as interim CEO[64] with sole power of representation.[65] After working through the weekend in reviewing the company's business activities and finances, Freis wrote an announcement published by Wirecard in the early morning of Monday, June 22, 2020, that the bank trustee account balances in the amount of 1.9 billion euro likely did not exist, and that previous Wirecard descriptions of its so-called third party acquiring business were not correct. Freis was in constructive discussions with Wirecard's lending banks and was considering restructuring options,[66] yet from Thursday to Monday, Wirecard's stock price had lost 90% of its value.[67]

On June 25, 2020, less than a full week after having joined Wirecard, Freis decided to initiate insolvency proceedings.[68] Bank creditors of Wirecard had been willing to roll over credit lines[69] for a period of months, and some initially criticized Freis for the decision to place Wirecard into insolvency, because they became forced to book losses immediately.[70]

Freis continued to oversee day-to-day operations of Wirecard, and announced to staff on September 11, 2020, that he was stepping down from management at Wirecard. The Wirecard scandal is likened to a "German Enron" in light of the company's inflated financial accounts and failure of its auditors to detect them[71] and as the greatest financial fraud in modern German history.[72]

In September 2020, the German Parliament launched an investigation of Wirecard.[73]