The Federal Financial Supervisory Authority BAIT (Bankaufsichtliche Anforderungen an die IT which translates to “Supervisory Requirements for IT in Financial Institutions”) or BaFin is the financial regulatory authority for Germany: BaFin supervises the German financial sector to ensure that the financial sector functions properly and safely. As Mark Branson, President of BaFin, explains:
“We want to enable innovations and accompany them intensively. One thing must be clear: In principle, innovations only advance the industry if they serve the customer and not the other way around,” adding to this, “We ensure fair framework conditions and contribute to the fact that innovative business models are also sustainable.”
BaFin is a regulatory authority whose primary function is to oversee the safety and protection of the financial sector in Germany; this includes banks and insurance providers. As part of this function, BaFin focuses on preventing fraudulent and unauthorized financial transactions. In addition, BaFin plays a critical regulatory role in mitigating risks associated with financial crime.
BaFin was established on May 1, 2002, to oversee the Financial Services and Integration Act of 2002, which covers the entire financial market of Germany. The German Banking Act (Gesetz über das Kreditwesen) provides the legal controls and power BaFin uses to enforce regulatory control.
BaFin was formed from a merger of three existing entities:
BaFin regulations cover banking, securities and stock exchanges, and insurance. BaFin also supervises companies active in the crypto-asset space under the German Crypto Asset Transfer Regulation (Kryptowertetransferverordnung – KryptoWTransferV), which is designed to mitigate the risk of money laundering associated with crypto assets.
To help promote and enforce anti-money laundering (AML) practices, BaFin has a dedicated “Department for the Prevention of Money Laundering.” This department is a competent supervisory authority under section 50 of the Geldwäschegesetz (GwG) Money Laundering Act. The department supervises the activities used to prevent money laundering by all institutions, companies, service providers, and persons under the GwG.
Akamai helps banks and other financial institutions protect their customer data and achieve regulatory compliance. Our security solutions provide the intelligence and end-to-end protection needed to prevent ransomware, DDoS attacks, and other breaches. Akamai helps your security teams to maximize the effectiveness and ROI of their security investments by moving away from traditional network segmentation. Using a combination of automation and human expertise, the platform can learn what your system looks like when it’s not under threat. This way, if your system is under threat, we know how to identify and protect against it.
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This platform includes active defense against DDoS and DNS attacks, protecting critical assets and resources while maintaining seamless access for customers and users.
BaFin focuses on serious risks and cyberthreats. Each year, BaFin publishes a report into the most serious risks under its watch. The latest report identifies ransomware and DDoS attacks as serious risks in the financial sector. The report states, “Companies of the financial sector face the risk of both financial losses and considerable reputational damage as a result of cyberattacks.” The following organizations are required to comply with BaFin:
BAIT details the supervisory requirements for IT in financial institutions (FIs). The financial sector is a target for cybercriminals who use various attack types against FIs, including phishing, data breaches, financial theft, ransomware attacks, and other cyberattacks such as DDoS. A report from the FS-ISAC has found that distributed denial-of-service (DDoS) attacks that target financial institutions were up 22% in 2022. Banks and FIs are also at risk of cyberattacks targeting data, with financial services being one of the most breached sectors. BAIT was updated to reflect data threats to the financial sector in 2021.
BaFin is designed to enforce good practices in areas in the financial sector that lead to fraud and money laundering. BAIT requirements ensure that an FI is resilient against cyberattacks targeting the sector. User access management and least-privilege access rights delivered using a Zero Trust security model are critical to these requirements. BAIT is also related to MaRisk, which meets minimum risk management requirements.
VAIT (Versicherungaufsichtliche Anforderungen an die IT) details BaFin’s supervisory requirements for IT operations in the insurance sector, including enforcement of required access rights management. Like the financial sector, insurance is at risk from various cyberthreats. A 2022 PwC Global Economic Crime and Fraud Survey found that two-thirds of insurance companies suffered a fraud or financial crime attack in 2021.
By following the requirements of BaFin and VAIT, insurance companies can help to protect their critical assets and prevent DDoS attacks. A Zero Trust security approach provides the framework and tools to ensure that insurance companies can comply with BaFin.
Akamai provides a comprehensive Zero Trust security solution to ensure critical asset protection in the financial sector. This solution enables the financial sector to prevent cyberattacks from causing major business disruptions by stopping ransomware from spreading to critical systems and data. Akamai’s leading security solutions are recognized as best in class by our customers who use Akamai to protect sensitive data across their entire digital infrastructure. Our world-class solutions provide the security controls required to meet BaFin’s regulatory requirements and the security measures outlined by BAIT and VAIT. Akamai provides deep visibility into your IT environment, critical assets, access requirements, and network flows across your expanded infrastructure. Used together, the Akamai family of security solutions will provide the tools to ensure adherence to BaFin now, and as the regulation updates to reflect new and emerging threats against the financial sector.
BaFin is responsible for enforcement of the Financial Action Task Force (FATF)’s “40 Recommendations” These long-standing recommendations are regularly updated to reflect technological changes and the evolving cyberthreat landscape. The FATF recommendation provides a framework to tackle financial crime. The organization takes a risk-based approach to AML/CFT; the following examples from the recommendations provide an insight into the type of measures required by BaFin to meet AML/CFT regulations:
Since Germany is part of the European Union (EU), BaFin also must supervise compliance with EU-wide regulations in the financial sector. The sixth AMLD (6AMLD) is the EU’s latest revision of the EU-wide anti-money laundering directive. As is typical of the EU, the AMLD is devised to simplify AML across the EU (including Germany).
BaFin is a law enforcement agency. As such, BaFin can initiate legal action against any covered entity that is in noncompliance with the regulation and in contravention of the requirements. A recent example is the 2021 fine of 8.66 million euros against Deutsche Bank for the following:
“As a supervised contributor, Deutsche Bank AG at times did not have in place effective preventive systems, controls and policies to ensure the integrity and reliability of all contributions of input data to the administrator.”
BaFin is the Federal Financial Supervisory Authority in Germany. It oversees banks, financial services institutions, insurance undertakings, and securities trading.
Yes, BaFin is a federal institution under the supervision of the Federal Ministry of Finance in Germany.
BaFin’s role is to ensure the functionality, integrity, and stability of the German financial system.
The GwG is the primary anti-money laundering regulation in Germany. Therefore, all covered entities within the Jurisdiction of BaFin and GwG must take an active stance on AML (anti-money laundering) and CFT (combating the financing of terrorism) by taking appropriate measures.
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