Payment Service Providers (PSPs) are facing an uphill battle against financial crime. As transaction speeds increase and new payment methods emerge, criminals are exploiting weak spots in AML controls—often faster than traditional defences can respond.
In 2023 alone, UK customers lost nearly £1.2 billion to financial crime, with
£580 million lost to Authorised Push Payment (APP) fraud in the first half of the year. These scams frequently mark the beginning of complex money laundering operations, making robust detection and prevention essential for PSPs.
Why traditional AML approaches are failing
For years, PSPs have relied on static rules, manual reviews, and after-the-fact detection to manage financial crime risks. But today’s criminals operate with increasing sophistication, using techniques such as:
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Professional mule networks – Large-scale operations that move illicit funds through multiple accounts across different jurisdictions.
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Blended payment methods – Fraudsters mix traditional bank transfers with digital wallets and cryptocurrencies, making detection harder.
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High-speed transactions – Real-time payments allow criminals to transfer funds instantly, often before red flags are raised.
These gaps in detection allow fraud to spread undetected—while outdated AML processes trigger false positives that frustrate legitimate customers and waste valuable compliance resources.
The five biggest AML challenges for PSPs
PSPs today face five major barriers to building effective AML defences:
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Regulatory pressure – Frameworks like 6AMLD and PSD2 demand real-time transaction monitoring, enhanced due diligence, and proactive risk detection. Falling short means fines, reputational damage, and increased scrutiny.
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Cross-border complexity – AML compliance is inconsistent across jurisdictions, making it difficult for PSPs to track financial crime effectively on a global scale.
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Real-time payment risks – Criminals take advantage of instant transactions to move money before red flags can be raised. Without real-time monitoring, illicit funds disappear before intervention is possible.
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The rise of money mule networks – Fraudsters are increasingly recruiting younger individuals, with a 60% rise in under-21s acting as money mules. These networks disguise illicit transactions across multiple accounts, making tracking incredibly
difficult. -
Balancing security with customer experience – Overly sensitive AML systems create false positives, blocking legitimate transactions and driving frustrated customers to competitors. But reducing friction without losing security is a major
challenge.
For PSPs, the challenge is twofold: strengthen AML controls without disrupting legitimate payments or burdening compliance teams with excessive false positives.
How PSPs can strengthen their AML defences
To keep pace with evolving threats, PSPs must shift towards intelligent, data-driven AML strategies. This means moving beyond rule-based systems to AI-powered analytics, real-time transaction monitoring, and privacy-preserving collaboration methods like
federated learning.
✅ AI-driven insights – Detect suspicious patterns faster and reduce false positives.
✅ Graph-based transaction monitoring – Identify connections between accounts used in laundering schemes.
✅ Proactive customer education – Help customers recognise scams before they happen.
✅ Stronger onboarding checks – Ensure fraudulent accounts are stopped before they enter the system.
The message is clear: PSPs who rely on outdated AML methods will fall behind—facing increased fraud risks, compliance failures, and reputational damage.
With regulators tightening requirements and criminals evolving their tactics, now is the time for PSPs to strengthen their AML defences.
