Anti Money Laundering
Banks Challenger Banks Cybersecurity Europe

Bank of Italy Bans German Neobank N26 From Interacting With Its Customers Following AML Shortcomings

The Bank of Italy has banned N26 Bank from undertaking operations with new customers and from offering new products and services to existing customers.

The Italian branch of N26 Bank, originally a German neobank, has been completely forbidden by the Bank of Italy from forging new business relationships or engaging in any transaction whatsoever with their customers, including of an occasional nature, or with those who were not already customers as of March 2022.

The bank has adhered to Article seven of Legislative Decree 231/07 and Article 79 of the Consolidated Law on Banking (TUB) to justify its move.

Why has the Bank of Italy banned N26?

The Bank of Italy adopted this measure following an on-site inspection conducted between 25 October and 17 December 2021, which revealed significant shortcomings in respect of security legislation.

Back in June 2021, the Federal Financial Supervisory Authority (BaFin) handed N26 a fine for €4.25million, due to its delayed submission of less than 50 suspicious activity reports in regards to anti-money laundering (AML) incidences between 2019 and 2020.

The fine was paid in full a month later, and all related proceedings have reportedly been closed. N26 has since stated that measures to improve the reporting of suspicious activities have been implemented earlier this year.

“With the growing importance of e-commerce, we have taken numerous detailed measures and have also established structures and processes that meet the highest standards of financial crime prevention to address this pertinent global threat,” remarked N26.

“As always, N26 will continue to invest in maintaining and improving these standards to set us up well for the future, working in close collaboration with the responsible regulatory, financial and investigating authorities.”

AML has become quite a serious issue in contemporary banking. The UN estimates that monetary malpractice is responsible for the transition of $2trillion each year, whilst the UK’s National Crime Agency (NCA) reports that AML costs the country’s economy around £24billion annually.

European financial institutions that manage to fall short of AML strategies are typically hit with extortionate fines. According to Kyckr, a total of 28 financial institutions received fines for AML-related violations in 2020, totalling around £2.6billion.

NatWest received a large proportion of this figure when in December 2021, it was hit with a colossal fine of just under £265million for its less-than-satisfactory AML practices; which failed to flag almost £400million in dodgy transactions.

In terms of the next steps for N26, the bank has reportedly taken a number of actions to remedy its shortcomings.

The Bank of Italy intends to verify that all the anomalies detected have been addressed, also for the purpose of revising its ban.

Author

  • Tyler is a Fintech Junior Journalist with specific interests in Online Banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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