Digital bank fined by regulator due to weak anti-money laundering controls

German neo bank N26 has been fined €4.25m by the German financial services regulator for weak anti-money laundering practices.

The fine, from regulator BaFin, was paid in July, but only made public this week. It related to the late filing of about 50 suspicious activity reports in 2019 and 2020.

N26 said: “All measures to improve reports of suspicious activities have been implemented earlier this year.” It added that it takes its “responsibility in the fight against the growing threat of global financial crime, and in the prevention of money laundering, very seriously”.

Berlin-headquartered N26 was founded in 2013. According to a recent Sky News report, Dragoneer Investment Group has been in discussions about investing in N26, which could see the bank’s value reach $10bn

Money laundering and its links to organised crime is a serious global problem that banks find themselves at the centre of. According to the UN, up to $2tn is moved illegally each year, with criminals using banks to hide money. In the UK, the National Crime Agency (NCA) estimates that money laundering costs the country’s economy £24bn each year.

Banks that have fallen short in their AML strategies have been hit by huge fines from regulators across Europe in recent years. According to research published in February 2021 by business-to-business (B2B) information services company Kyckr, 28 financial institutions across the globe were fined for AML related violations in 2020, equating to roughly £2.6bn.

In March that year, regulators in Sweden and Estonia imposed fines worth €347m on Swedbank for breaching money laundering laws.

In the Netherlands, ING was fined €775m in 2018, after the regulator said the bank had failed to prevent the laundering of hundreds of millions of euros between 2010 and 2016.

In 2017, Citigroup agreed to pay almost $100m and admitted to criminal violations as it settled an investigation into breaches of anti-money laundering rules involving money transfers between the US and Mexico. In the same year, Deutsche Bank was fined $650m by British and US authorities for allowing wealthy clients to move $10bn out of Russia.