Money Transfer Regulation in Europe

Matt Di Vincere (Chief Editor)
Last Edited May 08, 2023

Is My Money Safe and Secure with European Regulated Money Transfer Providers?

Understanding international money transfer regulations in Europe is crucial when seeking the safest money transfer options. The European Union has established a legal framework to ensure that money transfer providers adhere to specific standards for safe and secure transactions, similarly to the FCA money transfer regulation.

European International Money Transfer Regulations FAQ

What is the European regulatory framework for payment providers?

The European Union implemented the Payment Services Directive (PSD2) in 2015 to regulate payment services throughout the EU and European Economic Area (EEA). PSD2 updated the original directive (PSD1) and aims to improve consumer protection, promote innovation, and enhance the security of payment services.

How does the European Union regulate payment providers?

The EU, through PSD2, sets legal requirements that payment service providers must meet to operate in the region. National financial authorities supervise providers to ensure they comply with these requirements. Areas of focus include financial crime prevention, anti-money laundering, know your customer requirements, operational risks and controls, and the segregation and safeguarding of client funds.

What authorizations do international money transfer providers need?

Companies providing payment services in the EU/EEA must be authorized as payment institutions or e-money institutions. The authorization process differs across countries, with each nation’s financial authority handling the applications. Authorized providers can offer services across the EU/EEA under the “passporting” rules.

Which are the best-rated authorized companies for safe money transfers?

Many money transfer services are authorized under European regulations and have a strong track record of upholding international money transfer regulations. These companies are recommended for secure money transfers in Europe. It’s advisable to check a provider’s authorization status with the relevant national financial authority before engaging in transactions.

How the European Union Regulates International Money Transfers

The EU’s PSD2 directive regulates a wide range of financial services, including international money transfers. Companies wishing to provide payment or remittance services in the EU/EEA need to be authorized under the directive. National financial authorities in each EU/EEA country supervise the activity of payment service providers to ensure compliance with PSD2 requirements.

Official website:

Core responsibilities of EU/EEA financial authorities for safe money transfers:

  • Ensure firms correctly adopt PSD2 requirements
  • Monitor business conduct and capital resources
  • Oversee segregation and safeguarding of client funds
  • Supervise reporting and notifications
  • Investigate customer complaints and disputes
  • Enforce regulations through fines and license revocation if necessary
  • Supervise financial crime prevention and anti-money laundering efforts

Why Choose European Regulated Payment Providers for Money Transfers?

Opting for European regulated payment providers ensures your transactions, whether transferring money from Spain to UK, France to UK, or any other destination are protected by a strong regulatory framework. This framework mandates providers to adhere to specific standards, maintain segregated client accounts, and implement safeguarding policies. Choosing a regulated provider reduces the risk of fraud and guarantees a higher level of security for your international money transfers.

You can easily verify the status of any money transfer firm to see if it is authorized under European regulations. Check the authorization status with the relevant national financial authority before engaging in transactions. A list of authorized payment institutions offering secure money transfers can be found on the official websites of respective financial authorities in EU/EEA countries.

Foreign Exchange Rigging Fines in Europe

As detailed on our bank scandals page, European regulators have also played a critical role in addressing malpractices within the financial system, particularly in the foreign exchange market. In 2019, the European Commission imposed fines totaling €1.07 billion ($1.2 billion) on five major banks for their involvement in two separate cartels in the foreign exchange market.

The banks fined for their participation in the “Forex – Three Way Banana Split” cartel were: Barclays (€210.3 million), RBS (€249.2 million), Citigroup (€310.8 million), and JPMorgan (€228.8 million). UBS was granted immunity for revealing the cartel’s existence, avoiding a potential fine of €285 million.

In the “Forex – Essex Express” cartel, fines were imposed on Barclays (€94.2 million), RBS (€110 million), and MUFG Bank (€69.7 million). Bank of Tokyo-Mitsubishi (now part of MUFG Bank) was also involved but was not fined because it had not participated in the infringement for long enough.

The European Commission discovered that banks colluded in manipulating the foreign exchange market through sharing sensitive information and trading plans, ultimately distorting the normal functioning of the market. The cartels operated in online chat rooms, where traders exchanged information on outstanding customers’ orders, bid-ask spreads, and their open risk positions.

European Money Transfer Regulations: European Central Bank and National Competent Authorities

In the European Union, the regulation of international money transfers is a shared responsibility between the European Central Bank (ECB) and National Competent Authorities (NCAs) in each member country. The ECB provides guidelines and recommendations for the harmonization of financial regulation across the EU, while NCAs are responsible for implementing and enforcing these regulations within their respective countries.

The main European regulations governing international money transfers are the Second Payment Services Directive (PSD2) and the Electronic Money Directive (EMD). These directives aim to establish a single legal framework for payment services across the EU, ensuring transparency, security, and efficiency in the provision of these services.

Payment Service Providers (PSPs) operating within the EU must be authorized or registered by their respective NCAs. Authorized PSPs are subject to strict regulatory requirements, including capital requirements, safeguarding customer funds, and implementing robust anti-money laundering and counter-terrorism financing measures.

Why Choose European Regulated Payment Providers for Money Transfers?

Similar to the reasons for choosing FCA-authorised payment providers, opting for European regulated providers ensures that the firm has been scrutinized by an independent regulatory body with no vested interest in the firm. This regulatory oversight provides a level of security and confidence when engaging in international money transfers.

A European regulated provider must comply with the PSD2 and EMD, ensuring transparency, security, and efficiency in their services. Moreover, these providers are subject to strict capital requirements, safeguarding customer funds, and implementing robust anti-money laundering and counter-terrorism financing measures.

To find a list of authorized payment institutions offering secure money transfers within the EU, you can refer to the respective NCA websites or the ECB’s website.

Post-Brexit Changes in European Regulation and UK Licensing

Brexit has brought about several changes in the financial sector, including the end of passporting rights, which allowed UK firms to conduct business throughout the EU/EEA without additional authorisation. EU/EEA firms now require a Part 4A permission under the Financial Services and Markets Act (FSMA) to continue operating in the UK. To facilitate this transition, the UK has implemented a Temporary Permissions Regime (TPR), enabling firms to continue business in the UK while seeking authorisation from UK regulators.

Although the UK continues to follow EU rules through the EU Withdrawal Act 2018, it retains the capacity to introduce changes to UK law. The UK remains part of the Single Euro Payments Area (SEPA), allowing electronic euro payments and transfers to continue, albeit with potential increases in processing times.

Despite these changes, most financial services for UK nationals living in the EU/EEA should remain unaffected. However, rules regarding UK banks providing accounts to EU/EEA residents may vary, with some countries disallowing UK banks from serving their residents or closing accounts. It is essential for customers to communicate with their financial service providers to understand any impacts on their products or services.