Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.
“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.
N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.
A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.
Its rapid growth has rested in part on fast-track identity procedures for new customers.
In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.
N26 on Wednesday pledged to “work closely” with Bafin and the special representative.
It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.
The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.