Digital wallets (also called e-wallets or mobile wallets) are software-based systems that store payment information or digital assets and allow users to make transactions online or in person via mobile devices. They provide convenience and speed, but also introduce new risks for money laundering and financial crime. For financial institutions and regulators, ensuring that digital wallets operate securely and in compliance with AML obligations is increasingly important.
Digital Wallets
A digital wallet is a tool (software, sometimes hardware) that holds funds or payment credentials and allows users to send, receive, or store value. This includes stored payment methods (e.g. credit/debit cards), prepaid balances, or even cryptocurrencies in some cases.
Key attributes:
Transactions can be peer-to-peer, online purchases, or in-store via NFC or QR code.
Wallets may be custodial (provider holds assets) or non-custodial (user holds control).
Rapid onboarding and ease of use are common selling points.
Because of their design, digital wallets often sit at the intersection of payments, identity, and risk, meaning AML, transaction monitoring, and customer screening are central to their safe deployment.
Why Digital Wallets Matter In AML Compliance
Digital wallets matter in AML compliance because they can be exploited by criminals to launder money, move funds across jurisdictions, or hide identity.
Their speed and ubiquity increase both the volume and complexity of risk.
Complex transaction chains: Multiple wallets can obscure money trails and make investigations harder.
Fraud and money mules: Criminals use wallets to move illicit funds quickly without triggering traditional banking controls.
Regulatory expectations: Global standards, including those from the Financial Action Task Force (FATF), require wallet providers to implement the same AML measures as other financial institutions.
Cross-border oversight: The European Commission is expanding its AML framework to cover digital wallets, ensuring providers apply consistent customer checks across Member States.
Core Compliance Considerations For Digital Wallets
Wallet providers must embed compliance into their processes because regulators expect wallets not to become loopholes.
Know Your Customer & Verification
Providers must verify identity and assess customer risk at onboarding. This includes ID checks, proof of address, and sanctions screening.
Transaction Monitoring
Continuous oversight of transfers helps detect unusual behaviour such as structuring, rapid layering of funds, or movement to high-risk jurisdictions. Tools like Transaction Monitoring ensure suspicious activity is escalated.
Risk-Based Controls
Institutions must apply enhanced due diligence to high-risk customers and transactions, while maintaining proportional measures for lower-risk users.
The Future Of Digital Wallets And AML Risks
The future of digital wallets is tied closely to regulatory development and technology adoption.
Increased regulation: Jurisdictions worldwide are broadening AML rules to cover digital wallets explicitly, closing gaps in oversight.
Technological safeguards: AI, blockchain tracing, and biometric verification are becoming standard tools to detect illicit use of wallets.
Cross-border consistency: The Bank for International Settlements (BIS) is working with central banks to modernise payment systems, making faster transactions safer and aligning compliance requirements globally.
Institutions that prepare for these trends will be better positioned to manage wallet-related risks.
Strengthen Your Digital Wallet Compliance Framework
As digital wallets expand, financial institutions and providers must ensure that AML safeguards evolve alongside them. Proactive compliance protects both institutions and customers.
Facctum’s Customer Screening and Transaction Monitoring solutions help digital wallet providers detect illicit activity, meet global AML obligations, and ensure regulatory confidence.
Contact Us Today To Strengthen Your AML Compliance Framework
