To say that N26 appears to be struggling to comply with anti-money laundering legislation on the other side of the Rhine is an understatement. In June 2021, BaFin – the German Federal Financial Supervisory Authority – had already imposed a fine of 4.25 million euros on the neobank for reporting too late around fifty suspicious transactions. The regulator then ordered the neobank to take measures to strengthen its anti-money laundering controls.
But clearly, these injunctions were not enough. Despite the warnings, N26 again transmitted numerous reports of suspicion late in 2022, which earned it this new, even heavier sanction of 9.2 million euros.
No surprise for N26
The neobank, however, assures that since 2022, it has “implemented measures to improve its reporting processes while investing more than 80 million euros in human resources and technical infrastructure in order to continue to fight financial crime and money laundering with the highest standards of the industry”. The online bank has also reorganized itself by appointing a risk director and a compliance manager in the process.
Its managers were also well aware of these shortcomings since they claim to have made provisions in the 2022 accounts to cover this fine, which therefore did not fail to fall.
A sector under close surveillance
With 3 million customers in France alone, N26 seems to be struggling to reconcile hypergrowth and regulatory compliance. The neobank is very active on the offers front, with in particular N26 Crypto launched just a few weeks ago. But it must also prove to the German regulator that it is capable of putting in place very robust procedures to filter risky transactions. A challenge all the greater as its model attracts a more volatile and international clientele than traditional banks. N26 is therefore particularly exposed to fraud and money laundering attempts. Faced with these risks, BaFin had already placed N26 under reinforced supervision since 2021. It appointed a special commissioner to monitor the bank’s progress and temporarily limited the number of new clients it can recruit each month. Constraints which undoubtedly weigh on its development.