N26 in hot water again with German regulators over anti-money laundering failures

It seems that N26 has received another slap on the wrist from Germany’s Financial Supervisory Authority, BaFin.

According to Finance Forward, the digital bank was told by BaFin that it has to improve its anti-money laundering (AML) capabilities.

As well as being told to improve its services, N26 will also have to play host to a special representative from BaFin to keep an even closer eye on the challenger bank.

Yesterday, the regulator posted this statement: “On May 11, 2021, BaFin ordered N26 Bank GmbH to take appropriate internal security measures and to comply with general due diligence measures in order to prevent money laundering and terrorist financing.” 

“A special representative will be appointed to monitor the processing of the order and the status of the elimination of other identified deficiencies. More specifically, BaFin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence.”

The statement also added that the challenger bank must “ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” meaning that the fintech did not have the proper systems or adequate staff to comply with regulations.

Following the news that BaFin was taking yet another look into the bank, N26 responded with this statement: “In recent years, N26 has already pushed ahead with the expansion of preventive measures against money laundering.”

“However, we recognize that more needs to be done in this area. N26 undertakes to implement all of the aforementioned arrangement points. "

N26 first found itself in hot water with the German regulator back in 2019 after similar concerns were raised.

The regulator investigated the bank for reported fraudulent transactions and issues with the bank’s staff and resulted in a special audit being carried out by BaFin as a result.

N26 has also recently come to blows with its own employees.

Following complaints of poor working life at N26, some staff moved to create a Works Council in August 2020 to better represent themselves, only for N26 to file a restraining order against the organisers of the group.

Max Tayenthal and Valentin Stalf, who founded the digital bank in 2013, obtained an injunction against six employees from a Berlin labour court, arguing that the group goes “against almost all values that we believe in at N26.” 

Despite the backlash from both the regulator and employees, N26 has continued to expand.

Most recently securing its Brazilian banking licence and adding another €30m to its €570m Series D funding round.