To better understand the legal implications of BaFin’s recent consumer notice and how such notices function under German law, we turned to Dr. Florian Putzka, a German-qualified lawyer and Doctor of Jurisprudence who has advised major financial institutions and worked with the international law firm Hogan Lovells on financial products, securities and regulatory issues in Germany.
1: BaFin recently published a consumer notice regarding WeFi. Under German law, what is the legal purpose of a consumer notice?
In simple terms, a BaFin consumer notice is a transparency and consumer protection tool. German law allows BaFin to publish such notices when it believes a foreign company may be offering regulated services in Germany. Service providers may be licensed in other countries, but those licensing requirements, information disclosure obligations and consumer protection rules – while often similar across, for example, OECD countries – may differ from those applicable to German institutions.
The main purpose is to inform consumers that BaFin does not supervise the foreign financial institution. BaFin cannot prohibit customers from using a foreign service if they choose to do so at their own responsibility, but it seeks to ensure that consumers understand this distinction.
It is important to understand what such a notice is not. It is not a criminal conviction, not a final regulatory sanction and not a formal ban. It is essentially a transparency measure designed to inform the public.
Another important function is to reduce information gaps. Ordinary consumers cannot easily verify whether a company is locally licensed. A BaFin notice publicly clarifies that the company is not authorized in Germany and notifies users to that fact.
2: Are such notices evidence of a concluded investigation, or can they be issued before the regulator has determined whether a violation occurred?
A BaFin notice is not evidence of a concluded investigation. It may be published even if the regulator has not yet finally determined whether a legal violation has occurred.
A notice is not a sanction and not a final decision in the traditional administrative sense. It does not establish criminal liability and does not require a completed investigation. The legal threshold is relatively low. BaFin only needs indications that regulated activity might be taking place. This is a preventive, risk-based standard, not the level of proof required for a fine, a prohibition order or criminal proceedings.
Put simply, such notices are often published when the regulator is assessing a company’s cross-border activities and determining whether they fall within German licensing requirements. This is standard supervisory practice not only in Germany but in many EU countries and such a notice by itself does not mean that there is or will be an investigation, sanctions or established violations.
3: Sections such as KWG §37 allow BaFin to publish a notice even in cases of uncertainty. How often is this tool used as a precaution rather than a sanction?
There are no official statistics on this. Based on practical experience, such publications are very often issued as a precaution. They are frequently used when the regulator is uncertain how a cross-border business model operates and wishes to inform consumers.
4: Does a BaFin warning automatically mean a company is accused of fraud or illegal activity?
No, it does not. A BaFin notice is purely a notification measure. It does not mean that the company has committed fraud or harmed its clients. The notice is independent of any assessment of how the company treats its customers.
5: If a company is licensed in another jurisdiction (for example as a Money Services Business abroad), does that eliminate the need for German authorization, or is the analysis more nuanced?
This question is quite nuanced. If a company is licensed in another EU country, that license can usually be passported into Germany. However, a license from a non-EU country cannot be passported in the same way.
That said, holding a foreign license can still be a positive factor. It shows that the company is supervised elsewhere and may be relevant in discussions with BaFin about how its activities should be structured going forward.
It is important to note that a non-EU company is not automatically prohibited from accepting customers from the EU. What matters is how the company acquires those customers. If customers sign up for the service on their own initiative – perhaps because they heard about it from a friend, watched a YouTube video or read about it in a blog – then it is their right to use a non-EU financial service. This is known as “reverse solicitation” and is generally accepted in Europe. By contrast, if a non-EU company actively markets itself in the EU, targets specifically EU residents or maintains offices or infrastructure in the EU, then the question of whether a local license is required becomes relevant.
6: In your experience, do such notices often lead to enforcement actions, or do they sometimes end with clarification and compliance adjustments?
There are no public statistics on this either. Based on practical experience, many cases are resolved through clarification and compliance adjustments rather than enforcement action. In everyday regulatory work, companies and regulators often reach solutions by adapting business models or marketing practices.
The European market is currently in a transitional regulatory phase. New rules, including MiCA, have entered into force, but enforcement practice is still developing. In these circumstances, regulators act preventively to clarify the regulatory status of companies’ activities. If that were not the case, regulatory lawyers like us would not have much work to do.
