The European Banking Authority (EBA) released new guidelines on November 14 for Payment Service Providers (PSPs) and Crypto-Asset Service Providers (CASPs) to ensure adherence to the European Union’s restrictive measures regimes. These guidelines are designed to enhance oversight in the crypto sector and mitigate financial crime risks.
“These Guidelines clarify how restrictive measures policies and procedures interact with financial institutions’ wider governance and risk management frameworks, to avoid operational and legal risks for financial institutions and ensure an effective implementation of restrictive measures,” the EBA stated.
Set to take effect on December 30, 2025, the guidelines require PSPs and CASPs to implement effective screening systems to comply with EU sanctions and address the risk of users attempting to bypass regulatory requirements. These controls are expected to be integrated into financial institutions' broader governance and risk management systems.
While the EBA tightens oversight on decentralized finance (DeFi), traditional financial institutions still face challenges in combating money laundering. In July 2024, Nordea Bank in Denmark was accused of failing to prevent money laundering linked to Russian clients, involving transactions totaling €3.8 billion. Despite earmarking €95 million for potential fines, the bank's penalties could be significantly higher, possibly nearing $1 billion.
This case highlights that even with stricter measures for the DeFi sector, conventional financial institutions continue to struggle with significant money laundering risks. The EBA's guidelines underscore the necessity for strong internal controls across all financial sectors to avoid such failures.
The guidelines are part of a broader legislative initiative by the EU, which began with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) reforms launched in 2021. These reforms aim to boost transparency and safeguard the financial system against illicit activities. Regulations enforcing the new measures were enacted on June 9, 2023, and will become enforceable on December 30, 2024.
These initiatives are part of the EU's strategy to fortify the financial sector and clarify regulatory expectations for crypto-asset service providers. According to a report by Chainalysis, crypto-related money laundering has decreased by 30% compared to last year, with cryptocurrencies projected to account for only 0.47% of money laundering activities in 2024. A report from Grand View Research valued the global AML market at $1.51 billion in 2023, with an anticipated compound annual growth rate (CAGR) of 16.0% from 2024 to 2030.