EU Law Enforcement to Gain Ability to Track vIBAN Fund Movements

Funds transferred using Virtual IBANs (vIBANs) will soon be subject to increased scrutiny across EU member states, allowing law enforcement authorities to track such transactions, according to Ireland’s deputy Central Bank governor, Derville Rowland.

Speaking at the Afore Annual FinTech and Regulation Conference, Rowland explained that this regulatory change is part of the EU’s Anti-Money Laundering Regulation (AMLR), which was adopted last year. The AMLR aims to create standardized anti-money laundering (AML) rules across the European Union.

“The EU has addressed a number of emerging risks in the package,” Rowland stated. “Details of Virtual IBANs which are linked to other payment accounts will have to be recorded in member states’ Bank Account Registers. This will allow law enforcement to trace any funds being moved by such Virtual IBANs.”

Unlike traditional IBANs, which correspond on a one-to-one basis with a specific bank account and enable transactions in a single currency, vIBANs function differently. A single bank account can be associated with multiple vIBANs, allowing users to receive payments in different currencies and segregate incoming funds without opening separate accounts.

Regulators across the EU have expressed concerns that vIBANs could be exploited for illicit financial activities. The European Banking Authority previously indicated that the issue would be addressed in the AMLR. More recently, some national regulators have raised specific concerns, with authorities in Italy stating that vIBANs are not being utilized by small businesses in the country, while Germany’s BaFin financial watchdog warned that they present an increased risk of money laundering.

Rowland’s remarks come as she has been shortlisted as a finalist for a position on the executive board of the newly established Anti-Money Laundering Authority (AMLA). During her address, she also discussed various ways in which technology could be leveraged to combat financial crime across Europe.

She emphasized the significance of the AMLR’s provisions regarding artificial intelligence (AI), particularly the requirement for firms to maintain human oversight over AI-generated decisions that could impact customers. “The AML package is by design technology neutral. It obliges all types of firms that come within its ambit to comply with a set of AML/CFT rules that have now been harmonized across Europe,” she said.

Rowland further explained that compliance methods would be left to individual firms, whether through traditional AML and Countering the Financing of Terrorism (CFT) programs or by adopting regulatory technology (regtech) solutions. “How these firms comply with the rules is up to them, via traditional AML/CFT compliance programmes or by using regtech tools. What’s essential is that the means used are effective, and that such effectiveness can be demonstrated to supervisors.”

The AMLR’s provisions will apply equally to traditional financial institutions as well as emerging fintech and cryptocurrency firms, with oversight divided between AMLA and national AML authorities. According to Rowland, this regulatory framework will ensure uniform compliance across the EU, impacting both the 40 companies that AMLA will oversee directly and the wider financial sector regulated at the national level.

By fLEXI tEAM