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Germany’s Financial Regulator BaFin Set to Relax Crackdown on FinTechs


Germany’s financial regulator, BaFin, is reportedly set to relax its crackdown on FinTechs.

The move comes after several firms improved their controls, BaFin Executive Director Birgit Rodolphe told Bloomberg in a report posted Wednesday (Feb. 21).

“We are seeing progress at individual firms, but not all,” Rodolphe said in the report. “There will definitely be cases where we loosen restrictions this year.”

The regulator has been leading a clampdown on neobanks and payment firms, announcing sanctions on about a dozen companies in recent years, according to the report. The measures have included caps on customer growth, bans on certain transactions, and requirements to get approval for business partnerships.

The crackdown came after BaFin failed to prevent a scandal involving Wirecard, leading to the appointment of a new head at the regulator, Mark Branson, the report said.

Rodolphe, who oversees the anti-money laundering unit, acknowledged that the increased scrutiny has led to higher costs for FinTechs, per the report. BaFin has also appointed external monitors to oversee the sanctioned firms’ progress in improving controls.

Rodolphe emphasized that the regulator is not singling out payment firms and neobanks but is closely monitoring the sector to prevent financial crime, according to the report. She stated that one weak link in payment transactions can be an open door for money launderers.

The regulator is conducting more inspections at supervised firms, including FinTechs, to ensure sustainable improvements, the report said.

International watchdogs have criticized Germany’s system for preventing money laundering, citing a lack of coordination among relevant authorities, per the report.

Rodolphe stressed the need to raise the barrier to entry for money laundering in Germany’s financial system, the report said. She aims to conduct inspections at supervised firms to encourage sustainable improvements and move on to other areas of supervision.

In November 2022, BaFin launched a FinTech Innovation Hub designed to spark a dialogue between policymakers and companies developing new financial technologies.

The web portal acts as a knowledge source and publishing platform for the regulator, enabling BaFin to communicate its rules with existing and potential FinTech players that fall under its supervision.