N26 issued order by German regulator to improve AML measures

German digital bank N26 has been issued an order by its country’s financial regulator, Bafin, to improve its current anti-money laundering (AML) measures.

This isn’t the first time N26 has received a reprimand on the issue by Bafin, which first highlighted the fintech start-up’s AML deficiencies back in May 2019.

To oversee these changes, Bafin has appointed a “special commissioner”, Major German lender Deutsche Bank also received a similar regulatory order last month, showcasing the German regulator’s new crackdown following the Wirecard scandal.

Bafin issued its latest statement on the matter, first reported by Hamburg-based publication Finance Forward on May 11.

It said it had ordered N26, “to take appropriate internal security measures and to comply with general due diligence”. The regulator says both of these orders are in an effort “to prevent money laundering and terrorist financing”.

Bafin cites “IT monitoring and in the identification and verification of customers” as two key areas of weakness for the Berlin-based start-up. Though it did not specify any violation on the part of the company.

The regulator also says N26 needs to ensure it has “adequate personnel and technical and organisational equipment to comply with its obligations under money laundering law”.

To oversee these changes, Bafin has appointed a “special commissioner”. They will monitor N26’s actioning of the order and to track “the status of the elimination of other identified deficiencies”.

The same day as this announcement N26’s group money laundering officer, Thomas Bell, shared the news of his departure from the company on LinkedIn. He joined in November 2018 from Deutsche Bank.

Back in May 2019, Bafin published an ‘Order for the Prevention of Money Laundering and Terrorist Financing’ to N26. In the order, the German regulator highlights “backlogs in IT monitoring”. As well as the lack of written down process descriptions and workflows. And said the bank needed to “re-identify a specified number of existing customers”.

According to Finance Forward, at the time such a public assessment represented a rare escalation level by a supervisory authority. N26 has put a number of measures in place since this 2019 announcement. These include a hotline to exchange information with other banks, and more customer service employees to manage onboarding.

The start-up has also since changed the way Bafin regulates it. Instead of just N26 Bank GmbH being monitored by Bafin, the entire N26 Group is now under the authority’s supervision.

According to Finance Forward, this means N26 co-founder Maximilian Tayenthal can oversee the digital bank without the need for external managers with banking experience.

This will see its chief financial officer, Richard Groeneveld, leave next month. Shortly followed by the bank’s CEO, Markus Gunter. Hired as far back as 2016, Gunter will leave in the second half of this year.

“With a view to a possible IPO, this step makes sense anyway,” Tayenthal told Handelsblatt in March. “It helps us to further reduce complexity and to establish simple structures more strongly.”