The European Banking Authority (EBA) has issued a sharp warning: over 70% of national regulators in the EU now rate the risk of money laundering and terrorist financing in the FinTech space as high or increasing. The message is clear—despite rapid growth and innovation, the sector’s guardrails against financial crime are dangerously weak.
According to the EBA’s fifth biennial assessment of AML and CTF risks across the EU, regulators are particularly alarmed by how many FinTech firms are prioritizing customer acquisition and product expansion over proper compliance structures. The report covers findings from 2022 to 2024 and highlights vulnerabilities in areas like customer due diligence, outsourcing practices, and fraud monitoring systems.
While many companies have turned to RegTech to address compliance issues, the report reveals that more than half of the failures in AML processes stem from poor implementation of these very technologies. Firms often purchase off-the-shelf compliance tools without the in-house expertise to configure or monitor them effectively, resulting in a false sense of security.
One area of particular concern is the crypto sector. The number of registered Crypto Asset Service Providers (CASPs) in the EU has exploded, but regulatory oversight has not kept up. Many CASPs are operating without robust governance systems or appropriate AML controls. Some have even attempted to bypass licensing requirements altogether. Several jurisdictions also reported red flags related to the integrity and fitness of senior management in crypto firms.
The rising misuse of artificial intelligence is another key risk factor. Criminal networks are using AI to automate money laundering techniques, forge documentation, and mimic legitimate transactions at scale. While FinTechs continue to experiment with AI-powered compliance, they’re falling behind in combating AI-driven fraud.
The EBA’s report also highlights confusion and inconsistency in how financial institutions are applying the EU’s complex sanctions regimes. Many firms lack the resources or clarity to implement these restrictions correctly, leading to serious compliance gaps. In response, the EBA plans to release updated guidelines by the end of 2025 to unify sanctions enforcement procedures across the bloc.
Despite these challenges, not all the news is grim. The report notes a drop in tax-related money laundering risk and unwarranted de-risking. Most authorities agree that improvements are being seen in more traditional financial sectors, such as banking and insurance, where audits and thematic reviews have enhanced compliance efforts.
Looking ahead, the success of AML and CTF efforts will rely heavily on the new EU-wide regulatory framework, which is expected to roll out by late 2025. The EBA urges all stakeholders—regulators, firms, and service providers—to collaborate more closely, implement tailored controls, and avoid over-reliance on automated tools.
In short, FinTech’s future depends not just on innovation, but on its ability to prove that rapid growth doesn’t come at the cost of financial integrity.
