AML for payment service providers: how to stay compliant in a high-risk sector

Payment service providers (PSPs) sit at the centre of how people and businesses move money. They enable seamless payments across borders, currencies, and industries. 

But this essential role also comes with increased responsibility. Regulators in the UK and EU are placing PSPs under closer supervision, while expectations for effective AML frameworks are rising.

In this article, we'll explore the evolving AML landscape for PSPs, what makes the sector especially vulnerable, and how firms can build scalable, technology-driven compliance that supports both growth and trust.

In Sweden, for example, one major provider was fined SEK 130 million after supervisors identified serious weaknesses in its AML processes. The case served as a reminder that compliance is central to maintaining credibility and resilience in the payments ecosystem.

Why PSPs face higher AML risk

PSPs operate in a complex web of customers, merchants, and financial institutions, where visibility over every transaction can be limited. 

Their services are fast, borderless, and often connected to sectors with elevated AML exposure.

They are uniquely exposed because they:

• Handle very large volumes of cross-border payments, often without full insight into the underlying purpose.
• Act as intermediaries between banks, merchants, and individuals, making them attractive channels for illicit activity.
• Serve high-risk sectors such as online gambling, e-commerce, and international remittances.

When controls are fragmented or outdated, PSPs risk unintentionally becoming conduits for criminal funds. Strengthening the ability to identify, monitor, and understand each transaction flow is now essential to operating safely and sustainably.

The cost of weak AML in payments

Weak AML controls can impact every part of a PSP’s business. Financial penalties are the most visible, but the true cost often lies deeper, such as operational disruption, lost partnerships, and diminished trust.

PSPs face risks including:

• Regulatory fines: Supervisors are actively enforcing AML rules and issuing record penalties.
• License suspension: Authorities can restrict or withdraw permissions, halting business operations.
• Operational burden: Manual reviews and fragmented data increase workload and fatigue across teams.
• Reputational damage: Once a firm is labelled high-risk, rebuilding confidence can take years.

Common compliance challenges for PSPs

Many PSPs are scaling rapidly, adding new products, regions, and customer segments faster than their compliance systems were designed to handle. The result is pressure on teams, processes, and data.

The most common challenges include:

• High transaction volumes that make manual or rules-based monitoring unmanageable.
• Fragmented data sources that prevent a unified view of customer behaviour and risk.
• Frequent false positives that drain time and focus from genuine alerts.
• Regulatory complexity as firms navigate differing local AML expectations across borders.

Moreover, PSPs are subject to various legislations, such as the PSS Payment Services Directive 2 (PSD2), Market in Crypto Assets Regulation (MiCA), and the 5th Money Laundering Directive (5MLD). The added complexity of following rules and regulations is combined with the need for security, transparency, and convenience for users in the payment process.

To stay ahead, PSPs need technology and data strategies that allow compliance to scale, turning growing transaction volumes into clearer risk insight instead of noise.

How Trapets helps payment service providers

PSPs can use Trapets' solutions for AML throughout the customer journey. Some of the functionalities for effective AML processes include:

• Customer screening against PEP and sanction lists to remain compliant.
• Automation and collection of KYC information during customer onboarding and ongoing monitoring.
• Combining KYC answers with behaviours for up-to-date risk profiles.
• Managing customer cases and keeping records in one place to avoid duplication of work.
• Monitoring suspicious transactions and behaviours that require your attention.

Act now

Every transaction tells a story, and having the right tools helps ensure that story is a trustworthy one. Strengthen your AML framework, protect your reputation, and position your business for sustainable growth. Book a demo today to learn more about Trapets AML solutions.