2023-07-17 14:15:23
N26 must take and maintain appropriate technical, organizational and personnel measures “to ensure proper business organization and to be able to meet their legal obligations at all times”.
According to Bafin, there are deficiencies in the reporting of suspected cases of money laundering to the Financial Intelligence Unit (FIU). Here, N26 must create adequate electronic monitoring, “build an appropriate quality assurance function and set up effective controls for outsourcing”.
“To reduce risk”, the financial regulator is extending the growth limit of 50,000 new customers per month that has been in place since November 2021. The special representative appointed in May 2021, who is to monitor the elimination of the deficiencies, also remains installed.
With a valuation of 7.7 billion euros, N26 is one of the most valuable German fintechs. According to the company, it has more than eight million customers in 24 countries.
From Bafin’s point of view, however, N26 has grown too quickly for many years and has not further developed its processes and controls accordingly.
According to financial circles, the authority had already made it clear in a conversation with the N26 management at the beginning of the year that it saw further deficits, especially in the fight against money laundering. This was set out in writing in the resolution that has now been published and has been final since the end of March.
>> Read here: Financial Supervisor Birgit Rodolphe – “Combating money laundering is like raising children”
N26 co-head Maximilian Tayenthal told Handelsblatt that the bank had made great strides in combating money laundering in the past two years, invested heavily in its control systems and separated from high-risk customers. The updated order of the financial supervisory authority is “mainly about detailed questions in which the Bafin still sees a need to catch up”.
In the 2021 order, on the other hand, Bafin criticized the monitoring of customer transactions, the prevention of money laundering and the verification of customers (KYC) even more comprehensively. “The background was that in the past N26 accounts had been used too often to scam third parties,” said Tayenthal. “For example, people sold a mobile phone online, but did not deliver the goods and used an N26 account for the transaction.”
Advances in business organization and risk management
In two other areas, N26 has now eliminated all of the deficits complained about by Bafin, said Tayenthal. “We have eliminated the deficiencies in business organization and risk management – there are no longer any requirements in these areas and the 2021 order has expired accordingly.”
The main focus was on staffing in internal audit, business continuity management and access management. Internal processes are checked in the internal audit. In business continuity management, potential threats or disruptions are identified and strategies are developed with which the business capability of an organization can be ensured in the event of a crisis. Access management regulates that every employee only gets the access rights that he needs for his work areas.
The Bafin’s growth restriction is very painful for N26. Since the smartphone bank is also losing users, the institute had “very, very limited customer growth” in 2022, said co-boss Valentin Stalf at the end of last year.
According to Tayenthal, N26 has been growing since November 2021 with almost the maximum possible number of 50,000 new customers per month. “Sometimes it’s a tiny bit less because we want to be absolutely sure that we don’t go over 50,000.”
Bafin: Relaxation of the measures depends on further developments at N26
Since strong growth is important for the development of N26 in particular and of start-ups in general, lifting the growth restrictions is a top priority for the Berlin company.
The Bafin did not comment on when the restrictions could be lifted or relaxed. However, she made it clear in principle that she will not put the brakes on once the deficits have been remedied.
“If the special representative or the Bafin determines that the institute is making reasonable progress in eliminating deficiencies, the restriction on new customer growth can be relaxed,” the authority said.
Elsewhere, the bank and those responsible can take a deep breath. The Berlin Public Prosecutor’s Office dropped investigations into suspected money laundering against four people responsible back in November 2022 because “there was not sufficient suspicion of a crime,” as the authority now announced when asked by the Handelsblatt.
The public prosecutor had been investigating since August 2021. The background was, among other things, suspected fraudulent customer accounts or the suspicion of fraudulent use of N26 accounts. Consumers had complained that reported accounts were not blocked in a timely manner.
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