Lax money laundering controls lands N26 with ban from Italian central bank

The central bank of Italy has banned German digital bank N26 from onboarding new customers to its Italian business, after a recent inspection of anti-money laundering (AML) controls.

The Bank of Italy said it “adopted a measure banning the Italian branch of N26 Bank from undertaking operations with new customers and from offering new products and services to existing customers (i.e. cryptoassets)”.

The Italian central bank said that the decision followed an on-site inspection late last year, which revealed “significant shortcomings in respect of anti-money laundering legislation”.

It added that N26 Bank has taken actions to remedy these shortcomings, and that Bank of Italy will check whether these have addressed the shortcomings before revising the current ban.

Berlin-headquartered N26 was founded in 2013 and has previously faced sanctions over its anti-money laundering controls. In September last year, N26 was fined €4.25m by the German financial services regulator, BaFin, for weak AML practices.

Money laundering and its links to organised crime is a serious global problem in which banks find themselves at the centre. 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 last year 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.

The UK is the location where the second-highest amount of money laundering occurs globally each year, with an estimated £88bn cleaned by criminals annually.

Only the US sees more, with £216.5bn laundered annually, while France (£54.5bn), Germany (£51.3bn) and Canada (£25.6bn) also rank among the top five countries in terms of value of money laundered.

The figures, from identity verification software maker Credas Technologies, put together using OECD data, also revealed that about £1.8tn is laundered globally each year, some 3% of total GDP.

In October, NatWest Bank admitted that operational failures, including weaknesses in automated monitoring systems, meant that it failed to prevent the money laundering of £400m. It pleaded guilty at Westminster Magistrates’ Court to failing to comply with anti-money laundering regulations between 2012 and 2016.

Following the admission, the bank’s CEO, Alison Rose, said: “In the years since this case, we have invested significant resources and continue to enhance our efforts to effectively combat financial crime.”

Technology is key to reducing money laundering, with systems using tech such as artificial intelligence for scanning transactions and highlighting suspicious activity.