Money transfer regulation plays a vital role in Europe’s financial sector. It helps keep tabs on the funds people send between different countries and banks.
Whether transferring money as a gift to a loved one, paying a bill or simply moving funds between your own bank accounts, following the rules helps everything run as smoothly as possible.
Read on to explore how money transfer regulation works in the European Union (EU) and what it aims to achieve. We’ll also cover its important role in supporting money laundering prevention. Get all the answers you need with Western Union.
In this article
- What is the EU money transfer regulation?
- Who is liable for the prevention of money laundering?
- How do you prevent money laundering?
- Resources and government pages
- FAQs and guides
The EU has created a range of directives in recent years to increase its money laundering prevention efforts and help protect international payments. The most recent was the Sixth Money Laundering Directive in 2021. This aimed to pin down the definition of a money laundering offence.
There’s also a specific EU money transfer regulation, designed to root out fraudsters and terrorists when funds are transferred from one place to another. Officially known as the Funds Transfer Regulation, it’s something European money transmitters and payment services need to comply with.
What’s the purpose of the EU Funds Transfer Regulation?
The EU Funds Transfer Regulation requires money transmitters to include certain information when funds are sent electronically to another provider.
By including these important details, it should be possible to trace money transfers if illegal activity is suspected.
What information needs to be included?
Whatever the currency, money transmitters must ensure certain details are provided with each money transfer they make.
For the payer (person sending the money), the information includes their:
- Full name
- Address and postcode
- Account number or a unique code that can be traced
- Date/place of birth, a national identity number or a customer identification number – if their address is unavailable
For the payee (individual receiving the money), the required information includes their:
- Full name
- Unique account number or code that could be traced if needed
What other checks are required?
In some cases, money transmitters need to check the information given to them is correct. Details about the payer and payee must be verified if:
- The money transfer is worth €1,000 or more
- Cash or anonymous e-money helped fund the money transfer
Providers can use a range of official documents to confirm the accuracy of people’s details, including:
- Driver’s licences
- Government documents
The EU’s Funds Transfer Regulation places the onus on money transfer services to clamp down on terrorist financing and money laundering. Its rules cover money transfers from one bank account to another, cash and cheque payments, and debit or credit card payments.
But the responsibility doesn’t stop there. The EU’s wider anti-money laundering framework also expects the following organisations to play their part:
- Financial services companies
- Accountants and external auditors
- Legal firms
- Real estate brokers
- Tax consultants
- Goods dealers
What responsibilities do these organisations have?
Organisations use a range of measures to meet their money laundering prevention responsibilities. They include:
- Regular customer checks. Verifying details about new and existing customers can flag any suspicious activity. This process is called customer due diligence.
- Creating an anti-money laundering policy. This helps clearly set out procedures and plans in a single place.
- Keeping effective records. Ensure any customer data is stored carefully for easy reference.
- Hiring a money laundering reporting officer. A bespoke role can help keep track of each process and any internal wrongdoing.
What penalties are in place?
Organisations that fail to fulfil their anti-money laundering duties can face strong financial penalties. However, the reputational consequences may also be far-reaching, with any breaches potentially damaging customer trust.
Money launderers use a range of techniques to clean their ‘dirty’ cash. The process aims to make funds from criminal sources – such as drug trafficking – look like they were earned legally.
Flagging any suspicious activity to the authorities is always important to help bring money launderers to justice. But it’s also vital to avoid becoming a money mule yourself – where you inadvertently transport or launder dirty money on behalf of others.
The following steps can all prove useful when it comes to money laundering prevention:
- Check the identity of anyone sending you money. Has someone offered to pay you to move money to another account? What sounds like an easy payday could drag you into the illegal world of money mules. Don’t be the middleman in a criminal plot – always check the credentials of anyone sending you money.
- Do some background research. Are inappropriate sums of money landing in your account for a small task or favour? Do some digging and you may find the cash is being generated by illegal activities.
- Don’t respond to social media requests. Social networks have made everyone more accessible and instantly contactable. Keep your guard up if you receive a message out of the blue that sounds too good to be real.
- Watch out for red-flag phrases. Terms such as ‘extra income’ and ‘commission’ are always worth scrutinising.
Use these resources to stay up to date with the latest money transfer regulation and money laundering policy changes:
- Europol – Learn more about money muling and the potential warning signs.
- European Commission – For information on the latest EU directives.
- BaFin – Guidance on the steps being taken to prevent money laundering.