The European Union, a global financial powerhouse, grapples with a pervasive and deeply entrenched problem of money laundering. Despite decades of regulatory efforts and the implementation of multiple directives, the bloc continues to serve as a significant conduit for illicit funds. Estimates of the total value of dirty money flowing through the EU’s financial system annually vary dramatically, with figures ranging from €117 billion to as high as €750 billion. This vast sum underscores the scale of the challenge, as the EU’s status as a primary global financial market naturally positions it as a magnet for criminal proceeds. Evidence suggests a stark reality: approximately 70% of criminal networks operating within the EU leverage the single market’s financial infrastructure to launder their ill-gotten gains, and a substantial 80% utilize legal business structures to facilitate the movement of these funds. This indicates a systemic failure not only within the financial services sector to identify, prevent, and report suspected money laundering activities but also a lack of robust preventative action from other key professions, including accountants, tax advisors, and law firms. Compounding these issues, law enforcement agencies face significant hurdles in asset recovery, with EUROJUST reporting that on average, only a meager 2% of assets derived from organized crime are confiscated annually, despite a concerning 15% surge in detected cases.
In a significant move to confront this persistent challenge, the EU has established the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA). Formally launched in July of this year, AMLA is poised to become the central coordinating body for the bloc’s anti-money laundering (AML) efforts. While its direct supervisory functions will not commence until January 1, 2028, the agency’s mandate is comprehensive. It aims to ensure consistent implementation of EU AML rules across all member states and foster enhanced cooperation among the 27 national Financial Intelligence Units (FIUs). AMLA is also tasked with directly supervising the EU’s highest-risk financial institutions with substantial cross-border operations, as well as exercising indirect supervision over both financial and non-financial sectors. To facilitate this integrated approach, AMLA has already entered into memorandums of understanding with other key European supervisory bodies, including the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Central Bank (ECB).
Despite the considerable optimism surrounding AMLA’s creation, which promises a unified European voice in a landscape previously marred by fragmented national oversight and high-profile money laundering scandals, the agency faces significant hurdles. One immediate concern is its financial capacity. With a budget of €119 million allocated for the period between 2024 and the end of 2027, and an anticipated annual operational budget of €92 million from 2028 onwards (comprising 70% from fees and 27% from EU contributions), questions arise about its ability to fund its extensive mandate. Furthermore, the agency’s operational commencement in 2028 means a substantial period where illicit funds will continue to flow unchecked. Leadership continuity is also a concern, with the initial executive board set to serve for only one year, potentially impacting strategic implementation and long-term vision.
The EU’s historical record in combating money laundering is a mixed one. Over 34 years, the bloc has seen six iterations of AML directives, with the last three implemented in rapid succession over the past decade, spurred by a series of major scandals involving prominent financial institutions such as Danske Bank, Latvia’s ABLV Bank, Estonia’s Versobank, ABN Amro, and Commerzbank, which came to light around 2017 and 2018. Last year, the EU finalized its comprehensive "AML Package," a suite of new rules designed to bolster defenses against money laundering and terrorist financing. This package includes regulations on information accompanying fund transfers and cryptocurrencies, an updated AML Regulation, and the sixth AML Directive, all set to take effect from July 2027. The regulation will be directly applicable across the EU, while the directive requires transposition into national legal frameworks by member states.
However, even with these strengthened regulations, the EU struggles to gain a firm grip on the problem. A study released in March by Nasdaq Verafin indicated that an estimated $750 billion in illicit funds flowed through the EU’s financial system in 2023 alone. This figure represents a staggering quarter of the global total and is equivalent to 2.3% of Europe’s Gross Domestic Product (GDP), highlighting the immense economic impact of financial crime. While AMLA’s establishment marks a significant step towards a cohesive European strategy, its ultimate effectiveness will hinge on the efficacy of its implementation and its ability to overcome deeply ingrained challenges. The agency’s core priorities—harmonizing rules, enhancing cooperation, supervising high-risk cross-border institutions, and addressing emerging threats like cryptocurrencies—directly target the fragmentation and intelligence gaps that criminals have historically exploited. Yet, significant obstacles remain.
A key limitation is that non-financial sectors, such as real estate, largely fall outside AMLA’s direct supervisory purview. This creates opportunities for criminals to shift their laundered funds to less regulated areas. Furthermore, the complexity of harmonizing regulations across 27 member states, each with its own entrenched national approaches, presents a formidable task. Directly supervising key entities, coordinating the efforts of numerous FIUs, and developing sophisticated IT and data systems require substantial resources, skilled personnel, and significant financial investment, which the agency is still in the process of acquiring. The competition for experienced talent in the financial crime compliance sector is fierce, and AMLA faces the challenge of attracting and retaining the necessary expertise. There is also a concern that the two-year lead-up to AMLA’s full operational status in 2028 will provide criminal organizations ample time to reconfigure their money laundering operations to exploit less supervised sectors. The extent of AMLA’s powers also appears to be more dependent on political will in Brussels than on concrete legal frameworks, raising questions about its long-term influence. Willem Wellingoff, Chief Compliance Officer at payments platform Ecommpay, notes that while AMLA presents a strong deterrent on paper, its true test will be its ability to investigate national "champion" banks, questioning whether member states will fully support such investigations or prioritize shielding their domestic institutions. Ultimately, the success of combating money laundering within the financial sector depends on the willingness and capability of financial services firms themselves to go beyond mere box-ticking compliance and actively combat the problem. Delays in reporting and the siloed nature of fraud and AML functions within firms continue to give criminals an advantage.
The burgeoning fintech, regtech, and cryptocurrency sectors present an additional layer of complexity, as innovation often outpaces regulatory governance. The European Banking Authority (EBA) has expressed concerns that money laundering and terrorist financing risks may be inadequately managed due to weak controls and compliance among these new entrants. The risk-based approaches adopted by financial regulators across the EU for these firms are often inconsistent, lacking clarity and uneven in their effectiveness. The EBA’s biennial opinions on money laundering and terrorist financing risk (ML/TF) have consistently highlighted these issues. Their latest opinion in July indicated that the sector’s drive for innovation and growth might be exceeding its capacity to manage associated risks. The EBA specifically pointed to the "unthinking" use of regtech solutions meant to enhance AML compliance, coupled with spill-over risks from increased interconnectedness between traditional financial providers and emerging players like crypto firms, as particular areas of concern. The authority found that many fintech providers prioritize rapid growth over robust compliance, with fast onboarding often coming at the expense of thorough Know Your Customer (KYC) controls, creating exploitable gaps for criminals. Alex Clements, Global Head of AML, CFT, and Sanctions at TransferMate, explains that once illicit funds enter the system, criminals leverage digital wallets, virtual IBANs, and instant cross-border payment schemes to layer and move funds in ways that significantly complicate tracing. The rise of privacy coins and decentralized finance platforms further obfuscates the origin of funds, providing anonymity that shields illegal flows.
Regulatory oversight is further strained by insufficient staffing and a lack of appropriate training for those tasked with overseeing ML/TF risks. A significant majority (52%) of surveyed regulators believe that fintech institutions lack a proper understanding of the risks associated with their products and services. The EBA also identified over-reliance on third parties, increased exposure to cybercrime, ineffective customer due diligence, and the high-risk nature of cross-border transactions as key concerns. The practice of "white-labeling," where fintechs provide infrastructure for other firms to market products under their own brand, is also a concern, as regulators may underestimate its prevalence and associated risks. While regtech offers significant benefits in the fight against financial crime, the EBA warns that money laundering risks have increased due to inadequate testing, improper implementation, and a lack of in-house expertise. Furthermore, financial institutions’ heavy reliance on a limited number of regtech solutions creates a systemic risk: vulnerabilities in one product could impact a large number of firms simultaneously.
In the United Kingdom, the struggle to shed its reputation as a major hub for illicit finance persists, despite having comprehensive AML legislation and sanctions in place. Approximately 40% of the world’s total illicit cash flows through the UK’s financial system. Experts suggest that progress is hindered by a fragmented regulatory landscape characterized by numerous poorly resourced and ill-equipped bodies. AML monitoring is dispersed across 25 different organizations, coordinated by the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), a division within the Financial Conduct Authority (FCA). Since OPBAS’s inception in 2018, the effectiveness of this patchwork system has been repeatedly questioned. Colette Best, Director of Anti-Money Laundering at Kingsley Napley, notes that such a system would be unlikely to be designed from scratch. A September 2024 OPBAS report revealed weaknesses in how supervisors enforce their powers and found that none were "fully effective in all areas" of AML measures. The report also indicated a decline in the number and value of fines issued compared to the previous year, and "inconsistent" proactive information and intelligence sharing with regulators and law enforcement. In response to these findings, the UK government announced in October 2025 a reform to create a single professional services supervisor (SPSS), which will see the FCA assume direct responsibility for ensuring accountancy and legal firms comply with AML rules, rather than their respective professional bodies. However, the timeline for these changes and their practical implementation remain unclear.
The prosecution of AML cases has historically been slow. In the decade leading up to December 2021, the FCA initiated only 23 criminal cases against individuals and corporations for failing to report suspicious money laundering-related activity. A significant contributing factor to the UK’s AML challenges is a reporting strategy that generates a massive volume of reports, many of which are false positives. Approximately 900,000 such reports are generated annually, but resource constraints prevent meaningful investigation of most. The high cost of AML compliance also compels larger institutions to rely on automated systems, which are not always as effective as intended.
The cryptocurrency sector continues to present elevated money laundering and terrorist financing risks, partly driven by a surge in transaction volumes and a 2.5-fold increase in the number of authorized crypto asset service providers in the EU between 2022 and 2024. A significant factor is the persistent approach of many crypto firms, where senior management often fails to prioritize compliance, internal controls are inadequate, and firms deliberately attempt to bypass regulations, believing that traditional rules do not apply to them. Marit Rødevand, CEO of AML tech company Strise, attributes this to a combination of cultural and structural issues, with growth and speed to market often taking precedence over compliance, which becomes an afterthought. In the crypto space, there’s an added reluctance to act until regulators mandate it, resulting in a cycle of under-resourced compliance, insufficient controls, and firms playing catch-up. Research from the ACCA found that fintech and regtech firms acknowledge internal mechanisms often fail to translate into meaningful action, leading to a "persistent misalignment" between written policies and actual practices, creating fertile ground for illicit activities.
The proliferation of Artificial Intelligence (AI) is exacerbating cybercrime, fraud, and money laundering risks. A 2024 report by Signicat revealed that a staggering 42.5% of fraud attempts in financial services are now AI-driven. Criminals are employing AI to automate financial schemes, obscure fund sources, and conduct high-risk transactions with reduced detectability. AI can also generate sophisticated fake documents, simulate legitimate operations, and evade customer due diligence measures through deepfakes. Recent enforcement actions against new entrants, crypto, and fintech firms do little to alleviate fears that financial crime will continue to escalate as European regulators intensify their monitoring and enforcement efforts. In 2023, Lithuania revoked the license of PayRNet, the European payments unit of Railsr, for "gross, systematic and multiple violations" of ML and terrorist financing laws. In May 2024, Germany’s BaFin fined online bank N26 €9.2 million for late filing of suspected money laundering reports. In July 2024, the UK’s FCA fined CB Payments, part of Coinbase, £3.5 million for onboarding 13,416 high-risk customers. The previous year, Coinbase settled with New York’s DFS for $100 million over AML failings. In April 2025, Lithuania’s central bank fined Revolut €3.5 million for AML failures.
Nick Henderson-Mayo, Head of Compliance at VinciWorks, observes that AML compliance is "butting against" the AI-enabled tech revolution. He highlights that fintechs compress onboarding into minutes, regtech tools often function as "checkbox tech" rather than embedded risk management, and crypto continues to facilitate anonymous, borderless value transfer. He notes that nearly 40% of illicit crypto transactions originate from sanctioned jurisdictions and entities, with oligarchs exploiting the speed, liquidity, and borderless nature of crypto to bypass traditional compliance checkpoints, likening it to a river of money disappearing underground, its origin untraceable upon resurfacing.
Notable recent offenders underscore the scale of the problem. Danske Bank became entangled in what is considered the world’s largest money-laundering scandal, with approximately €800 billion in suspicious transactions flowing through its Estonian network between 2007 and 2015. The bank pleaded guilty and agreed to a $2 billion fine with the US Department of Justice in December 2022, with further substantial fines anticipated from other financial regulators. In April 2021, ABN Amro reached a €480 million settlement with the Netherlands Public Prosecution Service to resolve money laundering charges. In August 2024, Nordea Bank agreed to a $35 million settlement with the New York Department of Financial Services for "significant compliance failures" in its AML program, following its involvement in facilitating offshore tax havens revealed in the 2016 Panama Papers investigation and engaging in high-risk transactions through its international branch in Denmark.
Experts concur that AML compliance within fintech firms is hindered by a scarcity of skilled personnel and a lack of specific regulatory requirements for the skills needed in AML roles. Other factors further undermine AML monitoring effectiveness. Many firms operate without full licenses, relying on agents or distributors who may lack sufficient expertise in AML reporting. Criminals frequently utilize "money mules" to conduct transactions on their behalf, circumventing detection. While AML detection technologies are valuable, they require extensive integration to ingest sufficient data, and by the time they are implemented, they can often be outdated. The EU has identified key problem areas in its fight against money laundering, but the efficacy of its proposed solutions remains to be seen. Success will depend on a confluence of factors, including more effective and closely coordinated regulatory approaches. Ultimately, stemming the flow of illicit funds hinges on the willingness and preparedness of industry players to bear the costs of robust compliance, rather than prioritizing client acquisition and new opportunities. Thus far, the allure of profit has outweighed the investment in preventing illicit financial flows.
