Balancing Speed and Security: Assessing the Legislative Proposal on Instant Payments in Euro for AML/CFT Measures

Abstract: In October 2022, the European Commission announced a legislative proposal to make instant payments in euro available to all citizens with a bank account in the EU and EEA countries. When adopting new payment technologies, it can be challenging to balance security and convenience. Consideration must be given to whether compromised security is an unavoidable effect of instant payments or if both objectives may be achieved concurrently. The thesis aims to show how the proposal addresses the security concerns associated with Anti-Money Laundering and Countering the Financing of Terrorism risks and other mistakes while ensuring the speed and uptake of instant payments. The thesis concludes that by introducing the proposed legislation, the EU facilitates an environment that enables the uptake and speed of instant payments. However, the swiftness of instant payments might increase risks such as pre-payment frauds and mistakes. Likewise, the proposal will bring significant transformations for payment service providers, including much preparation to ensure compliance with added requirements. It is crucial to address these challenges in a way that does not create an excessive regulatory burden on payment service providers. The author believes that the proposal's approach finds an appropriate balance between security and the speed and uptake of instant payments. However, the thesis findings demonstrate that although the proposal takes a step toward promoting instant payments and enhancing security, numerous issues have been brought up at various levels, from ongoing conversations and different stakeholders’ feedback. Allowing sufficient time for the market to develop and implement reasonable efforts that preserve the speed and uptake is crucial.