BaFin prioritizes anti-money laundering (AML) and know your customer (KYC) practices. However, the type of license required—either a full or partial banking license—depends on what the business plan includes. Understanding these rules is essential for meeting requirements and entering the market successfully. Since early 2020, crypto custody providers must get BaFin’s green light before offering services in Germany. It tells investors, partners, and customers that your business operates with integrity in a market known for strict oversight.
The Compliance Process: How to Get Authorized by BaFin
Entities that operate in Germany’s capital markets must follow the Market Abuse Regulation (MAR) and the Markets in Financial Instruments Directive II (MiFID II). Institutions must also keep detailed records of their checks and reports for at least five years to assist with regulatory reviews. Each institution must have an AML officer who will be the main point of contact with BaFin and manage compliance efforts. Financial institutions must conduct thorough checks on customers and continuously monitor their business relationships.
Insurance
- In this capacity, it conducts a range of supervisory practices under the authority of legislation including the German Civil Code, the Banking Act, the Insurance Supervision Law, and the Securities Trading Act.
- An essential component of these regulations is the suspicious transaction report — a requirement that prompts insurers to proactively contribute to maintaining market order.
- The inclusion of consumer risks is part of what Branson called an “integrated supervisory approach.”
- Leave the “Companies” field blank if you wish to receive a list of all companies or of all companies in a particular category.
- BaFin’s supervision helps in maintaining market integrity, protecting it from financial crime, and encouraging confidence in Germany’s financial system.
This confidential information was seen as potentially damaging to the creditworthiness of the banks and their sustainability and was seen as a serious breach by BaFin. In April 2009 an internal BaFin list containing the volume of loans and securities “from troubled business” and banks was leaked to the newspaper Sueddeutsche Zeitung. In September 2006 a report by PricewaterhouseCoopers and BaFin internal audit found that the requirements of the federal government to prevent corruption had not thinkmarkets review been implemented. An examination by the German Federal Court of Audit (Bundesrechnungshof) in Koblenz noted in March 2004 that the internal control system of authority is insufficient. This focus is informed in part by findings of the Financial Action Task Force (FATF), which has repeatedly cited Iran for systemic deficiencies in countering money laundering and the financing of terrorism.
BaFin highlights crypto influencers and ‘buy-now -pay-later’ in its annual ‘Risks in Focus’ report
By adhering to these stringent measures, financial bodies can collectively contribute to the integrity of the banking and insurance sector. bitbuy review It works proactively to counter financial risks and distress, bolstering the confidence of investors, customers, and the general public in the stability of Germany’s financial economy. BaFin’s supervision helps in maintaining market integrity, protecting it from financial crime, and encouraging confidence in Germany’s financial system.
BaFin oversees banks, insurance companies, and financial services providers, ensuring their adherence to established rules and policies. BaFin oversees Germany’s banks, insurance companies, and financial institutions, shaping the sector through regulation and policy while enhancing public confidence in financial stability. The Federal Financial Supervisory Authority, better known as BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) is Germany’s federal financial supervisory authority. BaFin supervises banks and financial services providers, private insurance undertakings and securities trading.
Today, it regulates a wide range of financial institutions including banks, insurers, fintechs, and crypto asset service providers. In 2021, the federal financial supervisory force imposed a staggering 8.66 million euros vast penalty on Deutsche Bank. BaFin’s scrutiny on credit institutions extends beyond mere regulatory compliances; it casts its net wide, focusing on the vigorous enforcement of internal controls and compliance procedures. As an independent federal agency, bitfinex review BaFin actively seeks partnerships with global regulatory bodies, sharing information and aligning standards to enhance collective efforts against financial crime.
Key AML/CFT Functions of BaFin
This shifts board reporting from a retrospective explanation of what happened to a forward-looking risk management dashboard showing what is being done to prevent future breaches. BaFin expects the management board to be proactively engaged, demanding clear, measurable KPIs (like compliance action closure rates) that signal the health of the control environment. This focus area concerns the structural integrity and top-down commitment to compliance. BaFin’s ‘Risks in Focus 2025’ identifies inadequate money-laundering prevention as a critical risk. BaFin expects banks to maintain a dynamic, real-time outsourcing register (not a static PDF) and prove they can survive the sudden loss of a critical ICT provider without material disruption. They are testing executable exit strategies and mapping concentration risk, for example, whether a bank is overly reliant on a single cloud provider for multiple critical functions.
Similar to bank supervision, the Insurance Supervision Law (VAG) requires insurance companies to receive and maintain their business with the approval of BaFin, and the conditions are similar to those of banking supervision.citation needed BaFin supervises insurance companies (including pension and burial funds), holding companies, security, and pension funds.citation needed This excludes insurers that operate in only one province.citation needed It unifies on- and off-chain monitoring with four-layer coverage across financial, governance, compliance, and security risks. With BaFin’s growing influence as Germany’s financial supervisory authority, compliance ensures that your operations remain legitimate, trustworthy, and scalable across the EU. Germany’s financial supervisory authority clearly states that if two companies offer the same type of service, they face the same rules — no matter what technology they use. Financial institutions must submit periodic reports detailing their financial health, risk exposures, and compliance status. The regulator oversees over 1,500 banks, 700 financial service providers, and hundreds of insurance companies.
- However, the type of license required—either a full or partial banking license—depends on what the business plan includes.
- The supervisor shall include the monitoring of security assets and solvency to ensure that insurance contracts can be met.citation needed
- Industry experts and insurance supervisors discussed this at BaFin’s Annual Insurance Supervision Conference.
- BaFin is addressing these issues with increased supervision of crypto providers, warnings against bad actors and dedicated consumer education.
- The laws on which banking supervision is based are consistent with the principles of the free market economy.
- Finanzdienstleistungsaufsicht), is Germany’s central regulatory body responsible for overseeing the country’s financial markets.
The special representative is tasked with monitoring the bank to ensure that it quickly and comprehensively resolves the disturbances affecting the retail banking business of its Postbank and DSL Bank branches. Nikolas Speer, Chief Executive Director of Banking Supervision, reflects in an interview on his first 100 days at BaFin, his priorities and why risk management continues to fascinate him to this day. Please send any disclosures about actual or suspected violations of supervisory provisions to our contact point for whistleblowers. BaFin has also been Germany’s national resolution authority (NRA) since 1 January 2018.
Suspicious Activity Reporting
Similarly, the European passporting system does not extend to crypto services, meaning providers cannot operate across EU states based solely on their home country’s authorization. This involves demonstrating adequate regulatory capital, ensuring management’s reliability and professional competence, and maintaining a proper business organization. With the rise of digital assets, BaFin has established specific regulations for crypto-related services.
If stablecoins become depegged from their reference values – and investors withdraw en masse – there is a risk of a scenario similar to a classic bank run. BaFin supports innovation and new business models, seeing them as the foundation for the future competitiveness of the German financial sector. A growing proportion of private households are purchasing consumer goods and services on credit. Given the ongoing weakness of the German economy, the number of company insolvencies is rising – and with it the proportion of non-performing loans on German banks’ balance sheets. Added to this is the unprecedented political pressure on institutions, which could jeopardise international cooperation in the event of a crisis.
Before banks, financial services providers, asset management companies, insurers or pension funds can commence operations, they need written authorisation from BaFin. BaFin’s solvency supervision activities help, for example, to counteract risks to the assets entrusted to institutions. In March 2025, BaFin issued a supervisory notice addressing the risks of circumvention transactions in the context of anti-money laundering and counter-terrorism financing.
BaFin is responsible for the protection of consumers as a whole in the field of financial services. However, BaFin is not the only institution helping to protect consumers and safeguard the financial market. In doing so, it represents the interests of Germany as a financial marketplace. Among BaFin’s tasks is to get involved in the creation of a single European financial market. The Single Supervisory Mechanism (SSM) places significant banks in participating countries under the direct supervision of the European Central Bank (ECB).
These are transactions deliberately structured to bypass legal, regulatory, or contractual obligations – often by obscuring the true origin of funds or misrepresenting the parties involved. Notably, the agency appointed special representatives with executive authority to help to run the European arm of VTB Bank (2022) and the German unit of Ziraat Bank (2022). BaFin enforcement powers range from the issuing of subpoenas and questioning people, suspending or prohibition trading in financial instruments up to being able to forward cases to the public prosecutor.citation needed BaFin is required to ensure the functioning of the German markets for securities and derivatives in accordance with the Securities Trading Act (WpHG).citation needed This includes in particular the prevention of insider trading and other market abuses such as price and market manipulation.citation needed The supervisor shall include the monitoring of security assets and solvency to ensure that insurance contracts can be met.citation needed The Banking Law provides BaFin an extensive arsenal of sanctions including criminal sanctions, ranging from written warnings of fines to withdrawal of banking license.