Germany orders online bank N26 to take new steps against money-laundering

German financial markets watchdog Bafin said Wednesday it had ordered online bank N26 to tackle gaps in its measures against financial crime, including in its systems for verifying clients' identities.

Germany orders online bank N26 to take new steps against money-laundering
The founder of N26 Bank, Valentin Stalf. Photo: DPA

Bafin told AFP last October it was concerned by a report from business weekly Wirtschaftswoche, which said it successfully opened accounts using forged IDs.

“On May 20th, Bafin ordered N26 to take appropriate internal security measures to prevent money laundering and terrorism financing,” the authority said in a statement.

SEE ALSO: The complete guide to opening a bank account in Germany

N26 must re-confirm the identities of “a given number of existing customers”, as well as improve its data processing and formalize internal processes.

“What's more, N26 bank must ensure an appropriate provision of staff, technology and organization to uphold its obligations regarding money laundering,” Bafin said.

The authority did not reveal the deadline it has set the financial firm to comply with the order.

Popular with internationals

With its “no bullshit” adverts plastered around Berlin and standout transparent debit cards, N26, which is popular among internationals in Germany, claims it has gathered more than one million customers around Europe.

The bank said it became Germany's first financial technology or fintech “unicorn” — a tech firm valued at over $1 billion — when it raised a new funding round in January to expand into the US.

Its rapid growth has rested in part on fast-track identity procedures, with clients asked simply to scan or photograph a document before verifying it in a video interview with an employee.

N26 said in a statement Wednesday it had taken the order “very seriously” and would “where necessary carry out a repeated identity verification of customers”.

“We have already agreed the necessary measures and deadlines for implementation with Bafin in advance,” the firm added said, saying it was “sure” of making the improvements in time.

N26 also said it would finish working through a backlog of suspicious transactions flagged by automated systems by the end of the month and was “continually” hiring new staff.

Member comments

  1. Doesn’t make sense. The article says that N26 has recently raised $300M to operate in the US. So why not also operate in the UK?

Log in here to leave a comment.
Become a Member to leave a comment.


German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.