BaFin Letter: Correct Handling of BaFin Notices
We often get enquiries from entrepreneurs who have received mail from the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) or the Bundesbank. The subject of the corresponding letters is usually "Possible unauthorized conduct of banking transactions and/or provision of financial services".
If you have been approached by BaFin or the Bundesbank and asked to answer questions about your business activities, you should take these demands very seriously. The German authorities want to give those affected the opportunity to answer unresolved questions about their business model. The purpose of these hearings is usually to examine whether and to what extent business activities requiring a permit are being conducted in Germany.
In which cases does BaFin send letters concerning unauthorized business operations?
BaFin will only send you such a message if the authority has become aware of facts that indicate an illegal activity. The authority may obtain such indications from the contents of your homepage or an advertisement, for example.
If your place of business is not in Germany but another country, a homepage in German language already represents a targeted national business activity. A German internet presence alone may therefore be enough to appear on the BaFin's radar.
Financial service providers outside Germany also need to act
If you receive mail from BaFin or the Deutsche Bundesbank, you should seek legal advice by a specialized lawyer. This also applies if you have not established your business in Germany. It is true that your activities are generally subject to the supervisory law of your home country. However, it is still possible that your activities may have a connection to the German domestic market.
If you fail to respond to the BaFin, you run the risk that the BaFin will publish orders against you on the internet and distribute them worldwide.
What are the risks for those affected who do not respond to mail from the BaFin?
If banking and/or financial services, payment services or other activities requiring a license are provided in Germany, a written authorization from BaFin is required.
If business activities are conducted without a license, the activities requiring a license are performed without permission and BaFin may order the discontinuation of business operations and the liquidation of transactions already carried out. At the same time, this constitutes a criminal offense punishable with a fine or by up to five years imprisonment.
BaFin denounces affected companies online
BaFin may also publish the company name and the claims against the financial service provider on its homepage. In most cases they will also publish that the suspension of business operations and the liquidation of transactions already carried out have been ordered. Those affected are thus publicly denounced by BaFin.
The associated damage to your reputation with customers, your house bank and other business partners is often considerable. We recommend that all affected parties take immediate action and contact BaFin if such a letter arrives.
Which points are relevant when communicating with BaFin?
The first necessary steps when contacting BaFin are
- the disclosure of the transactions carried out,
- the regulatory classification of the operations and
- the evaluation of possible courses of action.
This ensures appropriate action vis-à-vis the authorities and counteracts BaFin orders effectively.
If your business activities actually do require a BaFin license, you have two options:
- The business activity can be restructured in such a way that it may be conducted without requiring a permit.
- The BaFin licensing procedure is carried out step by step in order to perform the financial service without any modifications.
We are happy to support you with both options as well as regarding the entire interaction with BaFin and the Bundesbank.
Your German attorney for communication with BaFin and the Bundesbank
Your partners for the correct handling of letters from BaFin and the Bundesbank are
- Attorney Dr. Annette Wagemann (Certified Specialist for Banking and Capital Markets Law, head of the department) and
- Attorney Michael Kissler.
The easiest way to reach us is by e-mail (email@example.com) or by telephone (+49 69 76 75 77 80). Do not hesitate to contact us with your questions.