AML at a Crossroads: The UK-EU Split on Wire Transfer Regulation

As global threats evolve, so too must the legal frameworks designed to prevent the movement of illicit finance. In the post-Brexit era, regulatory divergence between the United Kingdom and European Union is becoming increasingly visible, particularly in the governance of wire transfers and the traceability of financial flows. Once harmonised under shared EU legislation, the UK and EU are now pursuing distinct approaches to implementing anti-money laundering (AML) and counter-terrorist financing (CTF) standards, with growing implications for cross-border compliance.

Divergence from Shared Foundations

Historically, the UK and EU worked in legislative lockstep. Regulation (EC) 1781/2006 (FTR1) established the EU’s baseline for payment transparency, requiring accompanying payer information. This was later reinforced by Directive (EU) 2015/849 (MLD4) and the first version of the Funds Transfer Regulation - Regulation (EU) 2015/847 (FTR2). The UK transposed these requirements into domestic law via the Money Laundering, Terrorist Financing & Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017), capturing both FTR2 and MLD4 obligations.

This alignment began to fracture following Brexit, with the UK no longer obligated to implement new EU directives or regulations. Nonetheless, the UK has demonstrated an independent commitment to meeting international standards and in some cases, exceeding them.

Timeline of UK & EU Wire Transfer Regulations: From Alignment to Divergence in 2017

UK: Early Regulation of Cryptoassets

A case in point is the UK’s treatment of cryptoasset service providers. In 2019, the UK became one of the first jurisdictions to bring crypto exchanges and custodian wallet providers within scope of AML regulation, through the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLR 2019). These firms must register with the Financial Conduct Authority (FCA), conduct customer due diligence, and comply with suspicious activity reporting obligations.

This proactive stance predated the EU’s adoption of MLD5 and laid the groundwork for the UK’s implementation of the Financial Action Task Force’s (FATF) Recommendation 16 Travel Rule requiring that originator and beneficiary information accompany virtual asset transfers.

EU: Recast FTR2 & MLD6

Meanwhile, the EU’s regulatory momentum has gathered pace. In 2023, it adopted the recast FTR2 (Regulation (EU) 2023/1113), expanding wire transfer rules to explicitly include cryptoasset transfers. This regulation obliges cryptoasset service providers to obtain and transmit detailed information about senders and recipients, thus bringing the EU closer in line with FATF Recommendation 16.

The recast FTR2 is part of a broader AML package that includes the Sixth Money Laundering Directive (MLD6) and the establishment of a new Anti-Money Laundering Authority (AMLA). However, MLD6 will be implemented in phases from 2025 to 2029 raising questions about how the EU will respond to further international developments in the interim.

FATF Wire Transfer Regulation Revisions on the Horizon

These questions are becoming more urgent as the FATF conducts its second public consultation on proposed changes to Recommendation 16, the international standard governing wire transfers and virtual asset traceability. The revised text is due to be published in June 2025.

Key issues under review include the application of the Travel Rule to decentralised platforms and intermediaries, more granular data collection requirements, and alignment with evolving financial technologies. Once finalised, these revisions will set a new benchmark for AML compliance and test how agile jurisdictions like the UK and EU can be in adapting their legal frameworks.

Anticipating the UK & EU Response

The UK’s current legislation already incorporates the Travel Rule for cryptoasset firms, and guidance from the FCA has clarified expectations for information sharing. However, the FATF’s updated standards may go beyond what is currently required under the MLR 2022. If that is the case, the UK will likely need to amend the regulations again to remain aligned with global best practice - either via secondary legislation or further updates to FCA rulebooks.

In the EU, the timeline is more complex. Whilst the recast FTR2 is forward-looking, full implementation of MLD6 will not be complete until 2029. This creates a lag between the FATF's June 2025 revisions and the EU’s ability to fully embed them. The EU may face a choice: either fast-track targeted changes to the existing framework or risk being out of step with global standards for several years.

Cross-Border Compliance Implications

For firms operating across UK-EU borders, the divergence creates both compliance burdens and strategic risks. Wire transfers between jurisdictions will continue to be subject to dual requirements, particularly where cryptoassets are involved. Differences in implementation timelines, data standards, and regulatory oversight will necessitate enhanced controls, due diligence processes, and system interoperability.

At a strategic level, the divergence may also impact how each jurisdiction is perceived by international partners and financial institutions. Whilst the UK can act with speed and agility, the EU's centralised structure offers long-term harmonisation but with less flexibility. How each responds to the FATF revisions will serve as a key test of their AML leadership.

Conclusion: Divergence in Motion

The split in wire transfer regulation between the UK and EU is no longer theoretical; it is here, and it is widening. Whilst both jurisdictions remain committed to combating financial crime and adhering to FATF standards, they are doing so on different timelines and through different mechanisms.

As the FATF prepares to publish its revised Recommendation 16 in mid-2025, attention will turn to how swiftly and thoroughly the UK and EU can respond. Whether through amendments to the UK’s MLR 2022 or further revisions to EU regulations before MLD6 is fully operational, the next 18 months will be pivotal in defining the global AML landscape.

For financial institutions, the priority is clear: stay ahead of regulatory developments, understand the evolving cross-border obligations, and ensure compliance frameworks are adaptable enough to manage change wherever it comes from.

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We take an in-depth look at Directive (EU) 2015/847 in our white paper, UK Funds Transfer Regulation: A Guide for PSPs. This directive remains the legal foundation for fiat currency wire transfers in both the UK and EU; it's unchanged by the EU’s adoption of the recast Funds Transfer Regulation (2023/1113), which focuses exclusively on cryptoasset transfers.