Four managers working at Germany’s digital bank N26 are reportedly being investigated by public prosecutors regarding suspicions about (allegedly) fraudulent client accounts, the Handelsblatt newspaper confirmed on Friday (February 4, 2022).
Criminals or bad actors have been suspected of opening a fairly large number of accounts in order to operate fake online shops or engage in money laundering activities. As reported by Reuters, clients had complained that many of reported accounts had not been blocked in a timely manner (the Handelblatt revealed).
A representative for digital bank N26 stated that the firm had no information about the ongoing probe.
Germany’s financial regulator BaFin has fined N26 for lapses or shortcomings when it comes to implementing appropriate money laundering controls (in September of last year).
In November 2021, BaFin had ordered N26 to limit the number of clients it’s onboarding and hired a second special representative to keep an eye on the bank’s activities.
In an interview with CI, the N26 team had noted (late last month):
“We have significantly increased and strengthened our investment and measures in the areas of AFC/AML and are working closely with the supervisory authorities to further prevent these issues from happening. As a result, we are able to record fraudulent accounts even faster, close them and report them swiftly.”
They also shared:
“It is of the utmost importance to N26 to be a part of the fight against global financial crime and online fraud. For fraud trends and organized crime to be prevented, it is also a collective duty that requires greater collaboration from the industry, society and authorities. All banks and financial institutions have a key role to play in this. As N26, we are aware of this responsibility and are taking action.”
Fraudulent accounts or activities appear to be on the rise in the financial services sector. Recently, PayPal actually admitted that 4.5 million accounts were illegitimate.
Fraud has continued to negatively impact Fintechs.
During its earnings call for Q4 2021, PayPal CFO John Rainey confirmed that the firm had been able to identify around 4.5 million accounts that it thinks “were illegitimately created.”
Mary Ann Miller, a VP at identity and fraud company Prove, stated:
“What we’re seeing at PayPal is a systemic issue. It’s related directly to the identity theft and synthetic fraud that we saw during the pandemic.”
She added that bad actors have been aggressively weaponizing the personal details that they’ve stolen during data breaches and have also been using bots to carry out malicious attacks.
She claims that they are going after all types of Fintechs and regularly attacking their account-openings processes.