How to cleverly combine EU fraud and money laundering laws for information sharing
- Back to overview
- Wiebe Fokma
The EU is introducing two new regulations containing information sharing: the Payment Services Regulation (PSR) as part of PSD3 for fraud, and the Anti-Money Laundering Regulation (AMLR) for money laundering and terrorist financing. The PSD3 is currently being drafted, while the AMLR has already been adopted and will come into force in July 2027. Although these regulations were drafted for different purposes, there is a unique opportunity to combine them for information sharing in a way that is not only permissible, but also practical and future-proof.
Why combine them?
While the PSR focuses on fraud and only allows information sharing between payment service providers, the AMLR is broader. It allows information to be shared with a wider range of parties – including Public-Private Partnerships (PPPs) and FinTechs – provided that the sharing of information is “strictly necessary” and relates to customers with a higher risk of money laundering or predicate offences. As fraud is a predicate offence, it is also permissible to share fraud information through this route.
Another advantage of the AMLR is that it allows for information sharing for both the detection and prevention of fraud and money laundering, whereas the PSD is inconsistent but seems to want to severely restrict sharing: only after two different customers have confirmed fraud. The restriction in the AMLR to higher risk customers is not a barrier in practice, as a serious suspicion (of preparation) of fraud at least justifies an investigation into whether the customer is higher risk, for which information sharing is allowed.
A combined approach reduces complexity, saves costs and speeds up implementation. Banks do not need to wait for the final PSR framework: the AMLR already provides a solid legal basis. It is also in line with the wider trend towards integrated Financial Economic Crime (FEC) strategies. Bringing fraud and AML teams closer together and sharing information will create a more effective detection system and make it harder for criminals to operate on separate tracks.
Another advantage of the AMLR is that it allows for information sharing for both the detection and prevention of fraud and money laundering, whereas the PSD is inconsistent but seems to want to severely restrict sharing: only after two different customers have confirmed fraud. The restriction in the AMLR to higher risk customers is not a barrier in practice, as a serious suspicion (of preparation) of fraud at least justifies an investigation into whether the customer is higher risk, for which information sharing is allowed.
A combined approach reduces complexity, saves costs and speeds up implementation. Banks do not need to wait for the final PSR framework: the AMLR already provides a solid legal basis. It is also in line with the wider trend towards integrated Financial Economic Crime (FEC) strategies. Bringing fraud and AML teams closer together and sharing information will create a more effective detection system and make it harder for criminals to operate on separate tracks.
Challenges to overcome
Using the AMLR and ignoring the PSR may lead to a discussion with regulators, especially with the Data Protection Authority (DPA). But using a law as intended should be able to overcome this. The exact meaning of “strictly necessary” will be fodder for legal experts for the years to come.
But the biggest hurdle is not regulatory or legal, but practical. Many banks still have separate AML and fraud teams, with different ways of working, and even restrictions on seeing each other’s investigations. This makes collaboration difficult. Finally, while international information sharing can be beneficial, it is often a challenge.
But the biggest hurdle is not regulatory or legal, but practical. Many banks still have separate AML and fraud teams, with different ways of working, and even restrictions on seeing each other’s investigations. This makes collaboration difficult. Finally, while international information sharing can be beneficial, it is often a challenge.
Conclusion
The AMLR can be used to share information for the prevention and detection of both fraud and money laundering. This can save significant costs and reduce complexity. For financial institutions prepared to tackle FEC seriously and efficiently, the AMLR offers the opportunity to fight fraud and money laundering together, through a single partnership for information sharing. So put together what belongs together – and stay one step ahead of the criminals.
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