Demystifying the Regulations: Exploring EU Wire Transfer Rules

In today’s fast-changing regulatory landscape, understanding the differences between key European Union wire transfer regulations is more important than ever. Regulation (EU) 2015/847 and Regulation (EU) 2023/1113 both aim to enhance the EU’s financial integrity by tackling money laundering and terrorist financing, yet they approach compliance and enforcement with distinct focuses.

This article explores the evolution of these regulations, outlining their key provisions and highlighting their impact on compliance, financial services, and international trade.

This post will explore these two regulations, highlighting their unique aspects and providing essential comparisons for those involved in compliance, financial services, and international trade.

Overview of Regulation (EU) 2015/847

Regulation (EU) 2015/847 was implemented to strengthen efforts against money laundering and terrorist financing. It specifically focuses on the processing and monitoring of cross-border payments. For example, this regulation mandates that detailed information on both the sender and recipient be included in all transactions, enhancing traceability and helping to combat illegal financial activities.

Financial institutions and payment service providers have specific obligations under this regulation. They must implement rigorous due diligence measures to prevent the EU’s internal market from being exploited for illicit financial flows. According to the European Commission, compliance with this regulation has led to a 20% increase in the number of reported suspicious transactions in the EU.

Overview of Regulation (EU) 2023/1113

Regulation (EU) 2023/1113 builds upon the foundation of the previous regulation but introduces stricter requirements for organisations involved in financial services. This regulation reflects the urgent need to adapt to the growing sophistication of financial crime.

One major change is the enhanced scrutiny around customer due diligence; organisations are now required to conduct more rigorous verification processes, particularly for high-risk clients, which can include individuals with complex corporate structures. Additionally, this regulation promotes greater information sharing among regulatory authorities across member states, allowing for quicker responses to potential financial crimes. For instance, reports indicate that regulatory authorities are now exchanging information 30% faster thanks to these new directives.

Similarities Between the Wire Transfer Rules

• A Shared Objective: Combating Financial Crime

Both Regulation (EU) 2015/847 and Regulation (EU) 2023/1113 target financial crime, including money laundering and terrorist financing. They stress the need for robust compliance mechanisms in the financial sector to uphold the integrity of financial transactions.

Moreover, both regulations demand that entities correctly verify client information and maintain ongoing monitoring procedures. This shared commitment reflects a broader EU strategy designed to enhance security and minimise vulnerabilities within the financial system.

• Focus on Transparency & Reporting

Transparency is another critical aspect found in both regulations. Each regulation requires that relevant transaction data be reported to appropriate authorities. This emphasis on transparency fosters increased trust and accountability within financial services.

Furthermore, both regulations require financial institutions to enhance their reporting measures. This includes maintaining precise records of transactions to aid in the monitoring and detection of suspicious activities. These collective efforts aim to create a safer financial environment across the EU.

Differences Between the Wire Transfer Rules

• Expanded Scope & Target Audience

One of the most significant differences between the two regulations is the expanded scope of Regulation (EU) 2023/1113. While Regulation (EU) 2015/847 applied only to fiat transactions processed through payment service providers (PSPs), the updated regulation extends its reach to crypto-asset transfers. This means that crypto-asset service providers (CASPs) are now subject to the same compliance obligations, ensuring that digital asset transfers are as traceable as traditional fund transfers. This shift reflects the EU’s growing awareness of how criminals exploit evolving financial technologies.

• Enhanced Information Requirements

Another key enhancement under Regulation (EU) 2023/1113 is the introduction of stricter information requirements for both fiat and crypto transactions. While Regulation (EU) 2015/847 mandated that payment service providers include essential details about the originator (payer) and beneficiary (payee) such as name, account number, and address or identification number, the new regulation goes further. It strengthens these requirements, particularly for crypto transactions, by enforcing additional data collection to improve traceability and prevent illicit activity. This change aligns with international standards, particularly the Financial Action Task Force (FATF) Travel Rule.

• Inclusion of Low-Value Transactions

  Regulation (EU) 2023/1113 removes certain exemptions for low-value transactions, strengthening controls on small-value transfers. Under the previous regulation, fund transfers below €1,000 were exempt from full originator and beneficiary information requirements. However, the new regulation eliminates some of these exemptions, particularly for crypto-asset transfers, ensuring that even small transactions remain traceable and subject to due diligence measures.

  
  

• Stringency of Compliance Measures

Regulation (EU) 2023/1113 has significantly tightened compliance requirements, especially regarding customer verification. It mandates more comprehensive customer due diligence practices for high-risk individuals and entities, signaling a move toward a more risk-based regulatory approach.

In comparison, while Regulation (EU) 2015/847 initiated important compliance measures, it does not require the same extensive verification processes found in its successor. This evolution illustrates a shift in the regulatory framework that responds to changing threats.

• Stricter Due Diligence for Intermediary Institutions

  Intermediary institutions, including both PSPs and CASPs, are also subject to stricter due diligence obligations under Regulation (EU) 2023/1113. While Regulation (EU) 2015/847 required intermediary institutions to ensure that the necessary payment information was retained, it placed fewer proactive obligations on them. Under the new regulation, intermediaries must now actively detect missing or incomplete information and take appropriate action, such as rejecting, suspending, or reporting transactions that do not meet the compliance standards. This change aims to prevent weak links in the payment chain that could be exploited for illicit financial activity.

  
  

• Information Sharing & Cooperation

A key difference between the regulations lies in their approach to information sharing among member states. Regulation (EU) 2023/1113 emphasises the importance of co-operation among regulatory bodies, advocating for a co-ordinated response to money laundering risks.

On the other hand, Regulation (EU) 2015/847 set out foundational compliance principles but did not stress multi-national cooperation to the same degree. The increased emphasis on collaborative efforts reflects the need to effectively address the 'borderless' nature of financial crime in today's interconnected economy.

• Stronger Penalties & Enforcement

A further key distinction is that Regulation (EU) 2023/1113 strengthens enforcement measures and penalties to improve compliance across both traditional financial institutions and the crypto industry. While Regulation (EU) 2015/847 granted national regulators discretion in enforcing compliance, the new regulation introduces harsher penalties and enhanced supervisory powers. These measures aim to create a more uniform and effective regulatory framework across the EEA, particularly given the rapid evolution of financial technology and emerging risks in the digital asset space.

Navigating the Regulatory Landscape

The adoption of Regulation (EU) 2023/1113 represents a significant step forward in the EU’s efforts to combat financial crime by modernising and strengthening the framework established under Regulation (EU) 2015/847. By expanding its scope to include crypto-assets, reinforcing due diligence obligations, enhancing information-sharing mechanisms, and ensuring alignment with the FATF standards, the regulation reflects the EU’s commitment to financial transparency and the prevention of illicit finance.

For organisations operating in financial services, staying ahead of these regulatory developments is not just a matter of compliance but a fundamental necessity to safeguard the integrity of the financial system. As financial crime risks continue to evolve, so too must the regulatory landscape, ensuring a robust, transparent, and secure environment for both traditional and digital financial transactions.

Stay Ahead of Regulatory Changes

Navigating evolving EU regulations is critical for ensuring compliance and protecting your business from financial crime risks. Our UK Funds Transfer Regulation white paper provides in-depth insights into Regulation (EU) 2015/847 and its impact on financial institutions.