In April 2019, German media outlets reported on a money laundering case around the German Fintech Startup N26. According to a research by the German TV station NDR and the newspaper Sueddeutscher Zeitung, several hundred accounts of the Berlin institute have apparently been used for money laundering in connection with online fraud. The two media outlets claim to have a list of almost 400 N26 accounts with German IBAN numbers which appear to have been used on the Internet for fakeshops or fraudulent Ebay accounts.
The BaFin response
On May 20, 2019, the German watchdog BaFin has issued an order against N26 Bank GmbH to take appropriate internal safety measures and to comply with general Customer Due Diligence (CDD) obligations.
In detail the BaFin ordered that N26 Bank must
- remove backlogs in IT monitoring,
- establish process descriptions and workflows in writing,
- reidentify a specified number of existing customers.
Laundering schemes giving hard times
The smartphone bank N26 (www.n26.com) is regarded as the star of the German start-up scene with more than 2.5 million users. In January, renowned investors such as Allianz and the Singapore state fund GIC invested € 260 million. The enterprise value of N26 was estimated at 2.3 billion euros back then. Undoubetly, N26 is the second most important German fintech company beside Wirecard which supported the startup with its banking license before 2016.
Evidently, it seems to be hard for the startup to scale its operation appropriately. In recent months, the company has been hiring customer support and anti-money laundering teams like crazy, by hiring more people directly and signing deals with subcontractors. The N26 workforce is to be increased from 1000 to 1500 employees by the end of the year.
Given the many illegal broker schemes which need to launder their illicit proceeds and stolen client money, it comes as no surprise that financial services companies like N26 run into KYC and AML issues. Those schemes work with fake