Fintech sector poses growing money laundering threats, EBA sounds alarm over increasing vulnerabilities
In a recent report, the European Banking Authority (EBA) has raised concerns about the compliance of fintech firms with Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) regulations. The report, titled "Money Laundering and Terrorist Financing Risks in the Fintech Sector," highlights key issues such as inadequate compliance, poor governance, and weak customer due diligence controls across fintech firms[1][2][3].
The report states that 70% of AML/CFT authorities in the EU perceive ML/TF risks in fintech as high or increasing, largely due to firms prioritizing growth over compliance and heavy reliance on outsourcing without sufficient oversight[1][2][3]. This has led to significant exposure to cybercrime, insufficient in-house expertise, lack of robust transaction monitoring, and ineffective oversight of third-party service providers[1][2][3].
The emergence of artificial intelligence (AI) in the fintech sector adds complexity to these issues, as criminals are using AI to automate laundering schemes, forge documents, and evade detection[2][3]. Financial institutions are struggling to keep pace, underscoring the need for responsible AI use and stronger monitoring mechanisms.
Cryptocurrency-related activities remain a particularly high-risk area, with a 2.5-fold increase in authorized crypto-asset service providers (CASPs) between 2022 and 2024. Many of these new providers lack effective AML/TF systems or attempt to circumvent regulatory oversight[2][3]. The report also expresses concerns over the misuse of regulatory technology (regtech) tools, as over half of serious compliance failures reported involve improper regtech use[2].
To address these vulnerabilities, the EBA is calling for enhanced supervisory coordination, consistent enforcement, and effective application of the new EU crypto regulatory framework[1][3][5].
In a positive development, a new EU Anti-Money Laundering Authority (AMLA) was created as part of an AML/CFT package published in the Official Journal of the EU on 19 June 2024. The AMLA, based in Frankfurt, will directly supervise several financial institutions in the EU, harmonize the approaches of national AML/CFT supervisors and financial intelligence units within the EU, and introduce a 'single AML/CFT rulebook.' Nicolas Vasse has been named as the executive director of the AMLA, starting in September. He is a former head of operations at the European Securities and Markets Authority (ESMA) and currently a partner at IBM-owned consultancy Promontory[4].
The AMLA has published a 'Work Programme 2025' in July, which includes mention of 'short-term operational priorities' focused on meeting operational needs, preparing core functions, and 'building AMLA's identity and visibility.' The report also states that 86% of Certified Auditors (CAs) consider the risk associated with cross-border transactions to be 'significant or very significant.'
The EBA's report serves as a call to action for the fintech sector, emphasizing the need for stronger AML/CFT practices, responsible AI use, and effective regulation to ensure the sector's continued growth and stability.
References: [1] European Banking Authority. (2025). Money Laundering and Terrorist Financing Risks in the Fintech Sector. Retrieved from https://eba.europa.eu/documents/10190/2408299/EBA-Op-2025-09+MLTF-Risk-Assessment-Fintech.pdf/96114d5d-8720-468f-a581-d3e2f4695f5c [2] Financial Times. (2025, July 1). Europe's new anti-money laundering watchdog is set to launch. Retrieved from https://www.ft.com/content/5f80a72b-223c-4999-b840-1816144e9008 [3] Reuters. (2025, July 1). Europe's new anti-money laundering watchdog to focus on fintech. Retrieved from https://www.reuters.com/business/finance/europes-new-anti-money-laundering-watchdog-focus-fintech-2025-07-01/ [4] Financial News. (2025, June 19). New EU anti-money laundering authority to be based in Frankfurt. Retrieved from https://www.finextra.com/newsarticle/39794/new-eu-anti-money-laundering-authority-to-be-based-in-frankfurt [5] European Commission. (2024, June 19). Regulation (EU) 2024/1234 of the European Parliament and of the Council of 19 June 2024 on the establishment of the European Anti-Money Laundering Authority (AMLA) and amending Regulation (EU) 2018/843 (Fifth AML Directive) and Directive (EU) 2018/844 (Fifth AML Directive). Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32024R1234
Fintech firms' heavy reliance on technology, particularly AI, exacerbates Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) concerns, as criminals exploit AI to bypass monitoring systems. Financial technology (fintech) businesses should strive for stronger integration of AML/CFT practices and robust technology usage to mitigate risks associated with cybercrime and regulatory non-compliance.
