German financial supervision extends measures against money laundering at N26

German financial supervision extends measures against money laundering at N26

n26: Passage problems in the fight against money laundering

The German financial supervision Bafin has again complained N26 for defects in money laundering prevention and extended measures to help the bank. Bafin had already complained to the bank in this area in May 2021. Since November 2021 there has also been a growth limit for Neobank: N26 may only record 50,000 new customers per month. At the same time, a special auditor was sent to the bank to observe progress in the fight against money laundering.

The special auditor will now extend his mandate because the financial guards are still dissatisfied with N26. The BAFIN calls for N26 to take suitable technical-organizational and personnel measures and maintain them in order to ensure proper business organization. The BaFin extension was decided in March, but only now announced.

In particular, suspicion is criticized. The BAFIN calls for N26 to create sufficient EDP monitoring, build up an appropriate quality assurance function and set up effective controls of outsourcing. This means the reports of suspicion of money laundering to Financial Intelligence Unit (FIU). As an authority, the FIU examines the cases registered by the banks.

N26 indicates that you have already invested comprehensively in prevention measures, strengthened the personnel and to have optimized the technology to prevent money laundering. Now the bank wants to implement the plan created by Bafin to remove the open topics. In other areas that have been criticized by the financial supervision, N26 has already remedied this. The defects in the business organization and risk management were removed, and the BaFin editions in these areas were canceled.

The problems with money laundering prevention have been pursuing N26 for a long time. Even before the Bafin dealt with it, defects were reported to the media when checking customers (KYC), which led to fraudsters using the bank's accounts. The public prosecutor also determined about suspicion of fraudulent customer accounts or fraudulent use of N26 accounts. Customers had previously sued that reported accounts were not blocked promptly. However, the proceedings against those responsible in the bank were stopped in November. Due to late suspected money laundering reports, N26 had to pay a record penalty of 4.25 million euros in autumn 2021.

The growth limit of BaFin is also an unpleasant brake for the bank's expansion. N26 is the largest Neobank in Germany and today has around eight million customers in 24 countries, ten years after the start. Despite the growth limits, N26 was able to increase sales by around 30 percent in 2022. However, the bank continues to write losses, although gross yields have recently increased by 50 percent to 182 million euros.

The investors are not initially bothered by the Bafin requirements. At the last round of financing in autumn 2021, the bank was rated around eight billion euros. However, there are rumors that this assessment may not be kept. The Allianz should want to get rid of its shares in Neobank and thus accept a significantly lower evaluation offer of around $ 3 billion. The reason for the lower evaluation should be the growth restrictions of the financial supervision. Allegedly, investors have been secured in the small print if the Bafin edition should still apply.