Germany’s financial regulator has lifted a cap on the number of new clients that N26 Bank AG can take on after the fintech company improved its anti-money laundering controls. BaFin, the country’s financial watchdog, will remove the cap entirely from June 1, 2024.
N26, which began as a challenger bank offering account and card management through a mobile app, has attracted millions of customers with its user-friendly approach. The company’s expansion into additional markets and product diversification came alongside decent funding rounds and hiring sprees.
However, N26 has recently narrowed its focus to key European markets, specifically Germany, France, Spain, and Italy. This consolidation is partly driven by regulatory scrutiny from Germany’s financial watchdog BaFin, which currently restricts N26 to accepting only 60,000 new clients per month.
N26 CEO Valentin Stalf said “We are pleased about the trust of our regulators and will continue our close exchange in the future. In recent years, we have been able to make significant progress in preventing and combating money laundering and financial crime.”
Maximilian Tayenthal, co-CEO and COO of N26, added: “Our infrastructure and our use of modern, intelligence-based technology enable us to detect and combat fraud and money laundering in real time. We want to play a pioneering role among European banks in this field over the next few years.”
The news also comes shortly after BaFin imposed a fine of €9.2 million ($10.00 million) on the online bank for systematic delays in filing reports of suspected money laundering in 2022, the regulator announced on Tuesday.
Credit institutions are required to submit reports to the Financial Intelligence Unit (FIU) if they suspect that a transaction could be related to money laundering or terrorist financing. These reports must be submitted promptly to enable authorities to take action if necessary, BaFin said in a statement.
The challenger bank said in a statement that it had already addressed the problems behind the BaFin fine. N26 also stated that it invested more than €80 million to meet “the highest standards” in combating financial crime and is fully committed to complying with all aspects of BaFin’s order. This came despite downsizing its workforce by cutting 71 jobs, roughly four percent of its headcount, due to a challenging macro-economic business climate.
Earlier in 2023, BaFin extended money laundering controls at challenger bank N26, which is one of Europe’s most highly valued fintechs, due to the ongoing “deficiencies” in its systems.
BaFin fined the business €4.25 million in 2021 for its lax money laundering controls and placed a temporary limit on the number of new customers the bank could onboard each month, capping it at 50,000 new customers. In a rare move, the regulator also appointed a special supervisor to monitor the digital lender.
BaFin urged N26 twice since 2019 to “rectify deficiencies both in IT monitoring and in customer due diligence” and to “ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law”.
