Part 3: Global Enforcement and Risk-Based Approaches

A Report by CYS Global Remit Legal & Compliance Office

The global payments industry is experiencing a seismic shift in regulatory enforcement. As digital transactions surge and cross-border payments become the norm, regulators worldwide are sharpening their focus on payment institutions with unprecedented intensity. No longer content with passive oversight, authorities are wielding enforcement actions as both sword and shield—punishing non-compliance whilst setting clear expectations for the future. 

This evolving landscape demands more than traditional compliance approaches. It requires a fundamental rethinking of how payment institutions manage risk, ensure accountability, and build resilience into their operations. 

The Rising Tide of AML/CFT Enforcement 

Anti-money laundering and counter-terrorist financing (AML/CFT) violations continue to dominate regulatory enforcement actions, with penalties reaching eye-watering sums. The message from regulators is crystal clear: inadequate screening and monitoring systems are no longer tolerable. 

Recent enforcement trends reveal common failings that payment institutions must urgently address: 

• Insufficient customer screening – Institutions repeatedly fall short in identifying high-risk customers and politically exposed persons (PEPs)

• Weak transaction monitoring – Outdated systems fail to detect suspicious patterns in real-time payment flows

• Poor record-keeping – Incomplete documentation hampers investigations and demonstrates systemic compliance failures

• Inadequate staff training – Front-line employees lack the knowledge to identify and escalate potential risks 

Building robust AML frameworks isn't just about avoiding penalties—it's about protecting the integrity of the global financial system. Payment institutions must invest in sophisticated screening technologies, implement continuous monitoring protocols, and foster a culture where compliance is everyone's responsibility. 

The Data Dilemma: Balancing Global Operations with Local Laws 

Data localisation and privacy regulations present a particularly thorny challenge for payment institutions operating across borders. The tension between operational efficiency and legal compliance has never been more pronounced. 

Consider the conflicting demands institutions face daily: 

• Data sovereignty requirements force organisations to store customer information within specific jurisdictions 

• Cross-border data transfer restrictions complicate global payment processing

• Varying consent mechanisms across regions create operational complexity

• Different breach notification timelines require sophisticated incident response capabilities 

The proliferation of privacy laws—from GDPR in Europe to emerging frameworks in Asia and Africa—means payment institutions must navigate a complex web of requirements. Success requires not just technical solutions, but strategic thinking about data architecture, processing locations, and contractual arrangements. 

Third-Party Risk: The Hidden Compliance Minefield 

Outsourcing has become essential for payment institutions seeking efficiency and scale, yet it introduces compliance risks that many organisations underestimate. Regulators increasingly hold institutions accountable for their vendors' compliance failures, making third-party risk management a critical priority. 

Effective oversight requires a multi-layered approach: 

• Due diligence must go beyond surface-level checks. Institutions need to scrutinise their partners' compliance programmes, security controls, and operational resilience. This means conducting on-site assessments, reviewing audit reports, and testing incident response capabilities. 

• Contractual safeguards provide essential protection. Service agreements must include clear compliance obligations, audit rights, and termination clauses. Equally important are provisions for regulatory access, data protection, and breach notification. 

• Continuous monitoring cannot be overlooked. Risk profiles change, and what was acceptable yesterday may pose unacceptable risks tomorrow. Regular reviews, performance metrics, and escalation procedures ensure ongoing compliance. 

The Evolution to Risk-Based Compliance 

Perhaps the most significant shift in regulatory expectations is the move from prescriptive, rule-based compliance to dynamic, risk-based approaches. This transformation recognises that one-size-fits-all solutions fail to address the diverse risks facing modern payment institutions. 

A risk-based compliance model offers several advantages: 

• Resource optimisation – Focus intensive monitoring on high-risk areas whilst applying lighter touch controls elsewhere

• Regulatory alignment – Demonstrate to authorities that compliance efforts match actual risk exposure

• Business enablement – Support innovation and growth whilst maintaining appropriate safeguards 

• Continuous improvement – Use data and insights to refine risk assessments and controls 

Implementing this approach requires sophisticated risk assessment methodologies, robust data analytics, and—crucially—buy-in from senior leadership. It's not enough to identify risks; institutions must demonstrate how their controls adapt to changing risk profiles. 

Building Resilience for Tomorrow's Challenges 

The compliance landscape will only grow more complex. Emerging technologies, evolving criminal methodologies, and shifting regulatory priorities ensure that yesterday's compliance programme won't suffice for tomorrow's challenges. 

Payment institutions must embrace several fundamental principles: 

• Compliance must be embedded in organisational culture, not treated as a separate function. Every employee, from the boardroom to the back office, plays a role in maintaining compliance. 

• Technology is an enabler, not a solution. Whilst RegTech tools offer powerful capabilities, they must be supported by robust processes, clear governance, and human expertise. 

• Collaboration strengthens the ecosystem. Information sharing, industry initiatives, and regulatory engagement help institutions stay ahead of emerging risks. 

  
  

The Path Forward 

Compliance in the payments industry has evolved far beyond box-ticking exercises. Today's regulatory environment demands sophisticated, adaptive systems that can respond to rapidly changing risks and expectations. Payment institutions that view compliance as a strategic advantage—rather than a burden—will be best positioned to thrive. 

The message from global enforcement actions is unambiguous: regulators expect payment institutions to be proactive, not reactive. They want to see robust frameworks, continuous improvement, and genuine commitment to compliance objectives. Most importantly, they expect institutions to own their compliance obligations, regardless of operational complexity or commercial pressures. 

As the payments landscape continues its digital transformation, those who build resilience into their compliance programmes today will be the industry leaders of tomorrow. The choice is clear: evolve your approach to compliance, or risk being left behind in an increasingly unforgiving regulatory environment.