The Italian central bank has barred the local arm of German digital bank N26 from onboarding new customers citing money-laundering lapses. 

N26 has also been asked to stop offering new products and services to existing customers.

“The Bank of Italy adopted a measure banning the Italian branch of N26 Bank from undertaking operations with new customers (through forging new business relationships or by engaging in any transaction whatsoever, including of an occasional nature, with those who were not already customers at that date) and from offering new products and services to existing customers (i.e. crypto assets),” the bank’s statement read.

The Bank of Italy announced these measures after conducting an on-site inspection between 25 October and 17 December 2021.

The regulator said it found shortcomings concerning the anti-money laundering legislation.

However, the regulator added that N26 has taken several steps to address these issues.

Furthermore, the Bank of Italy said it “intends to verify that all the anomalies detected have been addressed, also for the purpose of revising the measure.”

The news comes as the digital bank prepares to be structurally ready for the initial public offering by the end of 2022.

N26, which achieved a $9bn valuation following a $900m Series E round, could launch an IPO as early as 2024.

In mid-2021, N26 was fined approximately $5m by BaFin, the German financial regulator, for AML-related issues.