The rapidly growing smartphone bank N26 could soon suffer a severe setback: According to a report by the Handelsblatt, the German financial supervisory authority Bafin is considering restricting the bank’s new business. The reason for this are organizational deficiencies in the fight against money laundering and fraud, which N26 has still not rectified. Among other things, the financial regulator could restrict the acceptance of new customers, it says in the report.
“The bank supervisor’s patience is broken”, the Handelsblatt quotes an unnamed observer and cites people who are familiar with the topic. The Bafin did not want to comment on the matter at the request of heise online, but did not deny such a project either. According to the report, the measure has not yet been formally decided. However, everything indicates that a decision will be made in a timely manner.
N26 was also rather cautious in the matter. Details of the cooperation with the supervisory authorities could not be commented on, said a spokesman. The bank emphasized in a press releasethat the cooperation with the financial and supervisory authorities is an elementary part of the daily work and has intensified further in the last few months. N26 also announced that it would be strengthening its management level for the management of regulatory requirements, including a new Chief Risk Officer and a Director of Group Risk.
In the sights of the Bafin
The Bafin has been targeting N26 for a long time because of defects. Most recently, in May 2021, the authority had urged N26 to take a stricter approach to money laundering and even appointed a special officer to monitor it. The smartphone bank should eliminate deficits both in IT monitoring and in the identification and verification of customers, explained the Bafin. Furthermore, the bank must ensure “adequate personnel and technical and organizational equipment to comply with its anti-money laundering obligations”.
Previously, in May 2019, Bafin had reprimanded Neobank’s deficits in fraud and money laundering prevention and warned for improvement. According to the insiders quoted by the Handelsblatt, N26 has not yet adequately complied with this from the perspective of the financial supervisory authority. The bank itself says that the requirements have been met.
In addition, N26 seems to be quite popular with fraudsters who use the account numbers to run fake shops, for example. In doing so, third parties are often called in, who are prompted to open accounts against payment or under false guidelines. A survey by the Handelsblatt among state criminal investigation offices showed that the bank also appears more than average in reports of suspected money laundering.
Growing too fast, too much fluctuation?
N26 was founded in 2013 and has had its own banking license since 2016. Over the years the company has grown rapidly and expanded internationally. According to its own information, N26 now has 7 million customers and 1,500 employees. Many observers wonder whether growth has been prioritized too much and the infrastructure has been neglected. “Growth always leads to organizational challenges,” said an N26 spokesman, referring to significant investments in systems and personnel. In the past few months in particular, expenditures in the area of security have been significantly increased and strengthened.
According to the Handelsblatt, one of the problems could also be the high staff turnover. Former employees therefore spoke of constant employee changes, so that accumulated knowledge is lost again and again. People who describe themselves as former employees also write something similar in theirs Reviews on the Kununu platform. “Either you get fired or people go very quickly voluntarily,” it says, for example.