The German financial regulator BaFin has issued a stern warning to Solaris SE, stating that the company could face financial penalties if it fails to enhance its controls. Solaris, which holds a banking license in Germany and primarily offers white-label services to other banks, has been instructed by BaFin to address certain issues since 2022. However, according to a statement from BaFin reported by Bloomberg, Solaris has not yet rectified these issues, and new problems have also emerged.
As a result, BaFin has extended the mandate of an independent monitor that was previously assigned to Solaris. This move indicates that BaFin is closely monitoring the situation and is prepared to take further action if necessary. Despite the regulatory scrutiny, a spokesman for Solaris expressed confidence that the company will successfully address the identified deficiencies in collaboration with the regulator.
BaFin has been particularly focused on digital startup banks, with an emphasis on their anti-money laundering processes and measures to prevent financial crimes. The regulator has previously imposed sanctions on a number of neobanks and payment firms, implementing measures such as customer growth caps, transaction bans, and requirements for approval of business partnerships.
Although BaFin had initially planned to ease its crackdown on FinTechs, the regulator remains committed to enforcing strict standards. While there have been instances where restrictions have been relaxed for certain firms, BaFin Executive Director Birgit Rodolphe emphasized that progress has not been uniform across the industry.
In a separate development, BaFin fined Commerzbank £1.5 million for breaching anti-money laundering regulations. The regulatory body found that the bank had failed to update customer data in a timely manner and had not implemented adequate security measures. In response, Commerzbank stated that it had undertaken measures to bolster its due diligence practices and enhance customer data management.
On a more positive note, European digital bank N26 announced that BaFin had lifted growth restrictions on the company, effective from June 1. This decision came after N26 made substantial investments in compliance, infrastructure, and dedicated teams to combat financial crime and money laundering. Over the past two years, N26 has allocated over 100 million euros towards these efforts.
Prior to the lifting of restrictions, BaFin had imposed a limit of 60,000 new customers per month on N26. The removal of this constraint signifies BaFin’s recognition of N26’s concerted efforts to strengthen its compliance framework and mitigate financial crime risks.
The regulatory landscape in the financial industry is evolving, with BaFin taking a proactive stance to ensure that banks and financial institutions adhere to rigorous standards. As the regulatory environment becomes increasingly stringent, it is essential for companies operating in the financial sector to prioritise compliance and risk management to avoid facing penalties and reputational damage. Moving forward, robust controls and comprehensive measures to combat financial crime will be imperative for financial entities to thrive in an environment of heightened regulatory scrutiny.