BaFin Orders Challenger Bank N26 to Improve AML Process

BaFin, Germany's Federal Financial Supervisory Authority, ordered challenger bank N26 to implement appropriate internal controls and safeguards and comply with general due diligence requirements. The intervention from the regulator aims to prevent money laundering and terrorist financing.

In addition, the regulator also appointed a special commissioner to the implementation of the order as well as the neobank’s progress in resolving other shortcomings identified.

According to N26, scammers were misusing the platform by pushing third parties to open accounts, which were used for fraudulent purposes. 

“Since the start of the COVID pandemic, criminal activity in connection with online trade has increased strongly around the world,” the neobank said.

“The demands of BaFin aim among other things to prevent the opening of such accounts, to identify illegal financial transactions as quickly as possible, and to block them.”

BaFin did not specify any violation on the part of the company. N26 is closely working with the regulator to improve its systems and implement the orders.

BaFin ordered N26 to rectify deficiencies both in IT monitoring and in customer due diligence. The company is also required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law. These measures must each be implemented within a set time period without disclosing it to the public.

As Fazzaco reported earlier this year, N26 secured a Sociedade de Crédito Direto (SCD) licence from the Brazilan Central Bank​, enabling to carry out credit operations including third-party credit analysis and the ability to issue electronic currency.