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The UK’s Electronic Money Institution (EMI) sector is evolving rapidly. As digital payments, embedded finance, and cross-border transactions continue to grow, so does regulatory scrutiny. Today’s UK EMIs are expected to deliver seamless customer experiences while maintaining robust Anti-Money Laundering (AML) controls that can withstand increasingly sophisticated financial crime threats and evolving AML regulations UK.
For compliance leaders, staying FCA compliant is no longer just about meeting regulatory requirements, it’s about building resilient, scalable compliance programmes that protect customers, reduce operational risk, and support sustainable business growth. From customer onboarding and transaction monitoring to sanctions screening and ongoing due diligence, every stage of the customer lifecycle must be governed by a proactive, risk-based AML framework.
The challenge is that compliance expectations are evolving just as quickly as payment technologies. The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), together with the Proceeds of Crime Act 2002 (POCA), and FCA guidance, require EMIs to implement effective systems and controls that can identify, assess, and mitigate money laundering and terrorist financing risks. Recent regulatory updates, enhanced safeguarding requirements, and stricter enforcement actions further reinforce the need for firms to continuously strengthen their AML programmes.
Failure to comply can result in substantial financial penalties, regulatory intervention, reputational damage, and, in serious cases, criminal liability. More importantly, ineffective AML controls can undermine customer trust and restrict an EMI’s ability to scale in an increasingly competitive market.
This blog outlines 10 AML best practices that every UK Electronic Money Institution should implement to strengthen AML compliance, meet evolving FCA expectations, and build a future-ready financial crime compliance framework. You’ll also discover the most common compliance challenges facing UK EMIs, practical recommendations for addressing them, and how intelligent automation can help organisations improve efficiency without compromising regulatory standards.
Why AML Compliance Is More Complex for UK Electronic Money Institutions
EMIs sit at the intersection of the Electronic Money Regulations 2011 (EMRs) and the Payment Services Regulations 2017 (PSRs), layered on top of the MLR 2017 and UK law governing financial crime. That creates a uniquely complex compliance environment.
Here’s what makes it harder for EMIs specifically:
Hybrid regulatory obligations. EMIs must satisfy safeguarding rules under CASS 15 and SUP 3A while simultaneously meeting anti money laundering obligations across customer onboarding, ongoing monitoring, and sanctions screening.
Cross-border exposure. Many EMIs facilitate international transfers, creating money laundering risks tied to high-risk countries, correspondent relationships, and varying national law requirements.
Rapid product innovation. Digital wallets, crypto rails, and embedded finance create evolving typologies. Stricter AML compliance measures can lead to increased operational costs for businesses, but the alternative – enforcement action – is far more expensive.
Client money complexity. Safeguarding funds involved in e-money issuance requires segregation, reconciliation, and audit trails, all of which interact with anti-money laundering supervision duties.
Understanding AML Regulations UK: What the FCA Expects from EMIs
The FCA expects EMIs to embed AML compliance at every level: strategy, operations, and governance. Its published Approach Document for Payment Services and Electronic Money set out expectations around risk assessment, customer due diligence, transaction monitoring, and senior management responsibility.
Key regulatory expectations include:
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Risk-based supervision under the MLRs. Firms must carry out documented risk assessments, appoint a money laundering reporting officer, implement policies controls and procedures, and report suspicious activity. Suspicious Activity Reports must be submitted to the National Crime Agency if money laundering is suspected routed through the UK financial intelligence unit.
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Safeguarding updates. New rules effective May 2026 require monthly reporting, enhanced reconciliation, and resolution packs to protect client money in insolvency.
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Enforcement intensity. In 2025/26, the FCA opened 33 enforcement operations, issued 30 Final Notices, secured 17 criminal convictions, and imposed over £129 million in fines. About three-quarters of enforcement work focused on financial crime.
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MLRs 2026 changes. Enhanced due diligence triggers narrowed from “complex” to “unusually complex or unusually large” transactions. Mandatory EDD now applies only to FATF Call for Action jurisdictions (not the broader grey list). Thresholds have moved from euros to sterling – for example, occasional transactions now trigger at £800.
For the full breakdown of UK MLR amendments, including what changed for high risk third countries, see our dedicated resource.
10 AML Strategies Every UK EMI Should Prioritise
1. Build a Risk-Based Customer Due Diligence Framework
Firms must conduct a written risk assessment under MLR 2017, covering product, customer, geography, and channel risk factors. A risk-based approach focuses resources on high money laundering risks rather than applying blanket rules. Customer due diligence verifies customer identities and ownership structures and applies to both business relationships and occasional transactions.
Enhanced due diligence is required for higher-risk customers, including those in a country identified by the FATF Call for Action list. Simplified due diligence may apply to low-risk relationships such as certain regulated financial institutions, but firms must still perform a risk assessment before applying it. Customer due diligence records must be kept for five years.
Businesses must keep their risk assessments up to date regularly, and firms should monitor money laundering trends from external sources such as the National Risk Assessment and FATF reports. AML compliance requires tailored controls based on the assessed risk level of customers, not a one-size-fits-all approach.
For a deeper dive into customer due diligence requirements, including the intended nature of business relationship checks, see our CDD guide.
2. Use Certified Digital Identity and Verification Tools
Under guidance published in February 2026, EMIs may use digital verification services certified under the UK Digital Verification Services Trust Framework to satisfy diligence requirements. Only services listed in the government’s certified register qualify. This helps automate KYC and KYB processes while satisfying due diligence measures for both new business relationship onboarding and existing customers.
3. Implement Strong Sanctions Screening and PEP Monitoring
Screen customers, transactions, and entities against OFSI sanctions lists and relevant watchlists. PEPs are defined under regulation 35(12) of MLR 2017, and UK PEPs are included in the definition of politically exposed persons. Enhanced due diligence is required for customers who are PEPs. Firms must have systems to identify PEPs and their associates, because PEPs pose higher risks of money laundering and corruption.
Ongoing adverse media monitoring and screening of the beneficial owner of corporate customers is equally critical. This also extends to art market participants, high value dealers, company service providers, insolvency practitioners, legal professionals, and any entity in the regulated sector. For EMIs specifically, the risk profile of cross-border payment corridors means sanctions screening must be real-time.
Explore PEP screening solutions and AML name screening tools that cover global watchlists.
4. Deploy Dynamic Transaction Monitoring
Businesses must monitor customer transactions for consistency with the customer’s business profile, source of funds, and stated activities. Transaction monitoring systems should flag unusual patterns – rapid movement of funds, structuring, transactions inconsistent with the customer’s known risk profile, or dealings with sanctioned counterparties.
Modern systems use AI and machine learning for anomaly detection. However, firms need human oversight, explainability, and clear escalation paths. Learn more about transaction monitoring in AML and why it matters for preventing money laundering.
5. Safeguard Relevant Funds Diligently
EMIs must segregate customer funds from their own, perform regular reconciliations, maintain resolution packs, and produce safeguarding audit reports. The new safeguarding rules under SUP 3A and CASS 15 require the first external audit within six months after the audit period end, then every four months thereafter. This protects client money and ensures funds involved in e-money issuance are recoverable in insolvency.
6. Strengthen Governance and Senior Manager Accountability
Firms must appoint an MLRO to manage AML risks. The MLRO oversees the firm’s compliance with anti-money laundering obligations, must report suspicious activities to authorities, is responsible for training relevant employees on AML policies, and must ensure compliance with AML regulations overall. This is the same person who acts as the focal point for internal escalation.
Senior management must have sufficient authority and overall accountability for AML systems. Directors and officers must be fit and proper. The governing body should receive regular reports on the firm’s business risk exposure, and changes in control must be notified to the FCA promptly.
7. Report Breaches and Suspicious Activity Promptly
Under the MLRs 2026, material breaches must be reported to the FCA within 30 days. Staff must know how to report suspicious activity internally, escalating to the MLRO, who decides whether to file a suspicious activity report with the National Crime Agency. A failure to report can be a criminal offence under the Proceeds of Crime Act 2002 and the Terrorism Act 2000, sometimes referred to as the crime act and terrorism act respectively.
EMIs must also ensure they can launder money risk indicators through adequate measures, meaning alert thresholds, case management, and documentation trails that support high-quality SAR submissions.
8. Maintain Robust Internal Controls
Businesses must implement internal controls to prevent money laundering. Internal controls should alert staff to potential money laundering threats and must be suitable for the business’s size and nature. A policy statement outlines a business’s anti money laundering controls, and regular assessments of internal controls are necessary for effectiveness.
This includes documented policies, screening of relevant employees for integrity, ongoing training, and independent audit of AML controls. For higher-risk EMIs, independent testing should cover sanctions, transaction monitoring, and the firm’s compliance with diligence measures across all customer types.
9. Keep Training, Policies, and Procedures Current
Update training materials to reflect the MLRs 2026 changes, including revised EDD triggers, the shift to sterling thresholds, high risk countries treatment, and digital verification rules. Anti money laundering guidance should be tailored to the EMI’s specific products and geographies. Training must cover how to prevent money laundering, recognise terrorist financing risks, handle the risk of money laundering in different product lines, and understand the firm’s business relationship ends procedures and record-keeping.
10. Use Technology and Automation Wisely
Name screening, entity risk assessment, adverse media monitoring, and ESG risk scoring can all be automated. But technology must be paired with human oversight, data quality controls, and audit trails. For further information on building an end-to-end AML system, see our components guide.
Common AML Compliance Challenges for UK Electronic Money Institutions
Even with clear regulatory expectations, EMIs routinely struggle with:
Over-application or under-application of EDD. Before the MLRs 2026, many firms triggered enhanced due diligence for all “complex” transactions or grey-list jurisdictions. The narrowing of mandatory EDD creates a new challenge: documenting risk-based reasoning for each decision.
False positives overwhelming compliance teams. High volumes of alerts from name screening and adverse media monitoring consume resources and delay legitimate customer onboarding.
Enforcement risk is real and rising. Metro Bank was fined £17 million for AML failures. Starling Bank faced a £29 million fine for weak AML controls. Fines for AML non-compliance can exceed £1 million, and the UK government has signalled continued escalation.
Balancing safeguarding with liquidity. Segregation, reconciliation, and audit requirements impose operational burdens that smaller EMIs find difficult to resource.
Keeping pace with draft guidance and regulatory change. From digital identity frameworks to crypto compliance rules, the regulatory landscape shifts faster than many firms can update their policies.
How Intelligent AML Technology Helps UK EMIs Stay FCA Compliant
RegTech platforms address the core pain points EMIs face: volume, speed, consistency, and auditability.
Challenge | Technology Solution |
|---|---|
False positives in name screening | AI-powered fuzzy matching with configurable thresholds |
Manual PEP and sanctions checks | Automated watchlist screening with real-time updates |
Inconsistent risk scoring | Entity risk assessment engines using multi-source data |
Slow EDD decisions | Automated adverse media and beneficial ownership lookups |
Audit trail gaps | Centralised case management with full documentation |
Evolving typologies (crypto, ESG) | Modular risk engines covering crypto entity risk and ESG factors |
The key is combining automation with human escalation. Regulators expect explainability, an algorithm flagging a transaction must produce reasoning a compliance officer can review and an auditor can verify.
For EMIs evaluating integrated AML risk management platforms, the priority should be configurability, multi-jurisdictional coverage, and the ability to adapt rule sets as anti-money laundering regulations evolve.
FCA AML Compliance Checklist for UK Electronic Money Institutions
Quick Reference Compliance Checklist
Use this checklist to evaluate whether your AML framework aligns with FCA expectations:
Conduct enterprise-wide AML risk assessments.
Implement risk-based Customer Due Diligence (CDD).
Apply Enhanced Due Diligence (EDD) for high-risk customers.
Monitor customer transactions continuously.
Screen customers against sanctions, PEP, and adverse media databases.
Maintain detailed audit trails and documentation.
Provide regular AML training across the organisation.
Review AML policies periodically.
Conduct independent testing of compliance controls.
Invest in technology to automate AML processes and improve operational efficiency.
Beneficial ownership verified through UBO identification processes
Conclusion
AML compliance is no longer just about meeting regulatory requirements, it’s about building a resilient, scalable compliance framework that supports growth while protecting your institution from financial crime. By implementing these best practices, UK Electronic Money Institutions can strengthen FCA compliance, improve operational efficiency, and stay ahead of evolving regulatory expectations.
To gain a deeper understanding of the UK’s evolving AML landscape, explore our UK AML Regulations Guide 2026.
If your organisation is looking to modernise its AML framework, discover how ZIGRAM’s AML Compliance Solutions can help automate customer due diligence, sanctions screening, transaction monitoring, and ongoing risk management through a unified compliance platform.
Frequently Asked Questions (FAQs)
What qualifies as electronic money under UK law?
E-money means electronically stored monetary value, represented by a claim on the issuer, issued on receipt of funds, and accepted by someone other than the issuer as a means of payment. Prepaid cards and online wallets are common examples.
What's the difference between an AEMI and a SEMI?
Small e-money institutions (SEMIs) are registered with lighter capital requirements and volume thresholds. Authorised EMIs (AEMIs) must meet stricter ongoing regulatory oversight, including higher capital, governance, and money laundering supervision standards.
When is enhanced due diligence required under the MLRs 2026?
EDD is required when a transaction or relationship is “unusually complex or unusually large” given the nature of the firm’s business, and mandatorily for persons in FATF Call for Action jurisdictions. Grey-list jurisdictions no longer automatically trigger EDD – firms must apply reasonable measures proportionate to risk.
Who do I report suspicious activity to?
Internal reports go to the money laundering reporting officer, who decides whether to submit a suspicious activity report to the UK financial intelligence unit at the National Crime Agency. The same person is responsible for deciding on Defence Against Money Laundering requests.
What are the consequences of AML non-compliance?
Beyond fines, which can exceed £121 million, firms risk authorisation cancellation, criminal prosecution of individuals, and reputational damage. In 2025/26 the FCA cancelled authorisation of 1,264 firms.
