Monday, August 11, 2025

MONEY LAUNDERING FRAUD IS ALSO BEING MODERNISED

 Filenews 11 August 2025 - by Theano Thiopoulou



Money laundering and money laundering and terrorist financing (ML/TF) risks are constantly emerging affecting the EU financial sector.

This time, the European Banking Authority's bell rings for the careless use of innovative products and indicates that "in a context of significant geopolitical developments, legislative reforms and digitalization, new vulnerabilities are emerging for ML/TF (terrorist financing).

The European Banking Authority's assessment states, among other things, that for FinTech companies, 70% of competent authorities report high or increasing risks in the financial sector.

They point to weak controls and poor governance, as companies seem to prioritize growth over compliance. They explain that FinTech products and services, i.e. technology-backed financial innovations, are becoming more widespread and established. This is partly due to the increase in the number of licensed e-money institutions that have historically been among the main providers of FinTech products and services.

It is also due to the introduction of new innovative products and services, the increasing supply of such products and services by traditional financial services institutions, and a related, upward trend of mergers and acquisitions of FinTech companies by credit institutions.

Also, criminals are increasingly using AI to automate money laundering schemes, forge documents and avoid detection. Financial institutions are struggling to keep up with these sophisticated threats, which underscores the need for responsible use of AI and strong monitoring.

The criminals' plans, the EBA says, use artificial intelligence to create highly realistic narratives that incorporate popular social themes, making them increasingly convincing. Fraudsters also adapt their techniques to avoid applying the strict customer authentication requirements imposed by EU law.

Even the complexity of the EU's sanctions regimes poses compliance challenges. The EBA notes that institutions often lack adequate systems for the effective enforcement of sanctions. The new EBA guidelines, which will apply from the end of 2025, aim to harmonise standards across the EU.

It indicates that the EBA's Consumer Trends Report 2024/2025 identifies payment fraud as the most important issue for EU consumers. The EBA's risk assessment report (June 2025) highlights that the risk of fraud has increased sharply over the past two years, from 33% in March 2023 to 52% in March 2025. It is now considered the second most important operational risk, according to the risk assessment questionnaire for banks.