The swift rise of instant payment platforms such as Venmo and Zelle has revolutionized financial transactions, offering unmatched speed and convenience, but this transformation introduces significant compliance challenges for financial institutions—especially international banks—primarily due to the complexities involved in adhering to anti-money laundering (AML) and economic sanctions in an area where regulatory guidance is sparse or unclear.

International banks in particular operate across multiple jurisdictions and diverse regulatory environments, making the application of AML and sanctions laws more intricate. The Bank Secrecy Act, along with AML regulations and the economic sanctions programs administered by the Office of Foreign Assets Control (OFAC), mandates rigorous know your customer and customer due diligence processes, which are further complicated by the need for effective transaction monitoring and suspicious activity reporting procedures.

The primary challenge for both domestic and international financial institutions in complying with these requirements lies in the inherent characteristics of instant payment transactions: their near real-time transaction processing and the often limited user information they rely on, such as phone numbers or email addresses, which is often inadequate for the comprehensive identity verification mandated by AML and sanctions laws. These characteristics present significant challenges for financial institutions seeking to implement effective AML and sanctions compliance measures. Traditional banking transactions, which allow for a more thorough vetting process, starkly contrast with the near-instantaneous transfers facilitated by platforms like Venmo, Zelle and PayPal, among others. Additionally, with respect to international banks, the inherently global nature of international banking can reduce transparency concerning the parties involved and the underlying purposes of these transactions.