Cross-Border Banking Regulatory Challenges [+Solutions]

Cross-border banking refers to financial services and transactions between individuals, businesses, or financial institutions in different countries.

According to the Bank for International Settlements (BIS), the global cross-border payments market was estimated at over $190 trillion and could grow to more than $300 trillion over the coming five to ten years.

As cross-border activity grows, you must navigate different regulatory requirements, payment rules, data-sharing restrictions, and fraud and compliance obligations throughout multiple jurisdictions.

In this article, we will explore the main cross-border banking regulatory challenges and ways to address them.

Key Takeaways

• Cross-border fraud is hard to manage because regulatory requirements vary by market

Banks need to account for differences in fraud classification, liability, reimbursement, reporting deadlines, privacy requirements, and payment-rail rules when a case spans multiple jurisdictions.

• Cross-border fraud collaboration must be proportionate, permissible, and purpose-bound

Banks should share only the intelligence needed to prevent fraud and mule account activity, in line with local laws. Privacy-enhancing technologies limit what each bank can see, while legal requirements and agreed rules determine what information can be shared.

• Recipient and network risk matter as much as sender risk

Assessing previous recipient activity, fraud reports, account connections, and movement of received funds can help banks identify mule accounts and suspicious networks that may not be apparent from a single transaction.

• Acoru helps banks strengthen cross-border fraud detection

Acoru combines Continuous Account Intelligence, recipient risk assessment, dynamic account classification, and privacy-preserving consortium sharing to help institutions identify fraud and mule risk across their own accounts, external recipients, and broader account networks.

What Are Cross-Border Banking Regulatory Challenges?

Cross-border banking regulatory challenges arise when a payment or customer activity falls under the rules of more than one country or regulatory framework. Banks may need to follow different requirements based on:

• Where the payment starts
• Which payment rail it uses
• Which intermediaries process it
• Where the recipient is located

This becomes especially difficult for banks managing fraud and determining liability because jurisdictions can define unauthorized and authorized payments, reporting deadlines, customer protections, and reimbursement rules differently.

The UK, EU, and US apply different rules to payments and payment fraud. Some govern specific domestic payment systems, while others also cover cross-border transfers. The table below explains the main frameworks and where they apply.

SEPA Cross-Border Payments and Upcoming Changes Under PSD3 and the Payment Services Regulation

The SEPA Regulation applies directly and uniformly across the EU, but it sets the technical and business rules for euro credit transfers and direct debits, not everything that governs a payment. Customers’ refund and liability rights come from PSD2, which each Member State transposes into national law, and national authorities supervise and enforce the rules.

Switzerland, though part of SEPA, is not bound by the Regulation and applies its own law. The Payment Services Regulation would move PSD2’s rules on customer rights and liability into a directly applicable regulation, leaving less room for national differences.

Under the November 2025 provisional agreement, payment service providers would have to share fraud-related information, verify that a payee’s name matches the IBAN, and refund customers in defined impersonation scam cases. The package is not yet adopted, and the Commission’s proposal also asks the European Banking Authority to set binding standards for fraud reporting.

3 Cross-Border Banking Regulatory Challenges and Their Solutions

Cross-border banking introduces several regulatory challenges that can make it harder for banks to prevent fraud, investigate cases, share information, and determine liability across jurisdictions. Here are the main ones and ways to solve them:

1. The Same Incident Can Receive Different Legal Classifications

Cross-border fraud becomes more complicated when the countries involved classify the same incident differently. This can create uncertainty about which rules apply and what banks must do.

The classification can depend on factors such as:

• Whether the customer authorized the payment
• How the fraudster obtained or influenced that authorization
• Whether the customer’s account or credentials were compromised
• Whether the customer was deceived into sending the payment
• How the applicable framework defines the type of fraud

Solution: Map the Rules That Apply to Cross-Border Payments

Banks can create a clear reference that shows how to handle fraud cases across the countries and payment rails they operate in. It can outline the relevant reporting deadlines, investigation requirements, reimbursement rules, and escalation steps for each situation.

2. Privacy Rules Can Make Cross-Border Fraud Data Sharing More Difficult

Banks often need to share information with institutions in other countries to investigate fraud, identify connected accounts, and trace suspicious activity. However, transferring customer data across borders can be subject to additional privacy and data-protection rules.

For example, under the EU GDPR, transfers of personal data outside the EEA generally need an approved legal mechanism, such as an adequacy decision, standard contractual clauses, or binding corporate rules. UK GDPR requires restricted transfers to be covered by adequacy regulations, appropriate safeguards, or a permitted exception.

Regulatory developments are also addressing the need for greater fraud intelligence sharing. The proposed EU PSD3/PSR framework would require payment service providers to share fraud-related information, with processing limited to what is strictly necessary for fraud prevention under GDPR Article 6(1)(f). However, the legislation has not yet been formally adopted.

Solution: Enable cross-border collaboration, governed by members

Banks can compare fraud intelligence across institutions and borders without sharing more than they need to. Collaborators decide what is shared, with whom, and for what purpose. Every exchange should be:

• Proportionate: Banks should share only the fraud intelligence needed to act, without exposing unnecessary customer data. They can use keyed tokens to replace personal identifiers and blinded matching to identify overlaps between institutions. Where practical, zero-knowledge proofs can also verify specific risk criteria without revealing the underlying information.
• Permissible: Members set the rules for what is shared and received. Those rules reflect the legal basis and national requirements in each participating jurisdiction, including conditions for cross-border data transfers.
• Purpose-bound: Shared information should be used exclusively for fraud and mule-account prevention. To enforce this, members should define permitted uses and establish access controls and retention limits that prevent the information from being used for unrelated purposes.

3. Mule Risk Is Often Clearer at the Network Level Than in One Transaction

A newly opened recipient account may receive payments that look normal when viewed individually. The risk can become much clearer when the account is connected to:

• Payments from several unrelated senders
• Rapid movement of received funds
• Shared devices or contact details
• Accounts previously linked to fraud
• The same group of suspicious counterparties

This becomes harder with cross-border mule networks, where activity is spread across different banks and countries. One institution may see only the recipient account, while another sees the sender or a different part of the network.

Banks may use shared blacklists to fill some of these gaps, but static lists of known mule accounts, suspicious IP addresses, phone numbers, or compromised credentials can quickly become outdated and provide limited context. A flagged account may also tell the bank very little about whether the account holder is being exploited, unknowingly facilitating fraud, or deliberately participating in it.

Solution: Assess Recipient and Network Risk Alongside Sender Risk

Before approving a payment, banks should assess the recipient as well as the customer sending the funds. Looking at what is already known about the recipient and their connections can reveal risks that may not be visible from the individual payment alone.

This can include:

• Previous payments involving the recipient
• Past fraud reports or payment recalls
• Findings from previous investigations
• Connections to accounts associated with fraud
• Unusual patterns in incoming and outgoing payments
• Speed at which the recipient moves received funds to other accounts

Worth knowing:

Acoru can assess external accounts that bank customers interact with, using previous encounters and wider account connections to identify potentially risky recipients and mule networks. It can then provide more context about the role a recipient account may be playing by classifying it as:

• Regular
• Scam victim
• Unwitting mule
• Witting mule
• Complicit mule
• Laundering
• Honeypot

Strengthen Cross-Border Fraud Prevention with Acoru

Acoru's Consortium Manager connects financial institutions through a member-governed intelligence network. Instead of relying solely on static blacklists, it allows you to share actionable fraud intelligence, strengthen fraud and mule account detection, and identify risks beyond your own customer base. Every exchange is designed to be proportionate, permissible, and purpose-bound.

Acoru provides account intelligence across three coverage levels:

Level 1: Accounts within your institution

Level 2: External accounts your customers transact with

Level 3: External accounts with no direct relationship to your customers, covered through optional consortium sharing

Its key capabilities include:

• Identifying mule accounts that your customers transact with at other institutions using your own data across Levels 1 and 2; optional consortium sharing extends this visibility to external accounts beyond your customers’ direct relationships
• Sharing proportionate risk signals through keyed tokenization for pseudonymization, combined with privacy-enhancing technologies such as blinded matching and zero-knowledge proofs, instead of customer records
• Member-governed rules that set what is shared and received, in line with the legal basis, national requirements, and cross-border transfer conditions in each jurisdiction
• Purpose-bound use, with members defining the permitted purposes for shared signals, along with matching access controls and retention limits
• Integrating with existing fraud detection systems so institutions can strengthen collaboration without replacing their current fraud technology
• Supporting members’ compliance with regulatory and privacy requirements for collaborative fraud prevention under frameworks such as the EU and UK General Data Protection Regulation (GDPR) and the US Gramm-Leach-Bliley Act (GLBA)

Beyond consortium intelligence, Acoru provides additional capabilities that help you build a more complete view of fraud risk:

• Unified account view: Brings together information from online and mobile banking, payment systems, authentication tools, contact centers, and other sources so fraud teams can assess risk with more context
• Continuous risk assessment: Continuously evaluates new activity and risk signals instead of assessing the account only when a transaction takes place
• Recipient risk assessment: Uses previous encounters and account connections to identify potentially risky recipients before a transaction is initiated
• Dynamic account classification: Classifies accounts based on their potential role, such as victim or mule
• AI-powered investigation support: Helps fraud teams analyze account activity, investigate suspicious patterns, and turn available evidence into actionable fraud intelligence

Request a demo to see how Acoru strengthens cross-border fraud detection with Continuous Account Intelligence and broader visibility into account risk.

See Acoru in Action

Fraud in Latin America is moving fast, and the institutions keeping pace are the ones rethinking how they detect, share, and act on intelligence. If the challenges discussed in this episode sound familiar, we would be glad to show you how Acoru works in practice. 

FAQ:

1. Which country’s regulations apply to a cross-border payment?

No single rule decides this. Each leg of a payment is governed by the law of the country where its payment service provider is located, plus the rules of the payment rail. Banks should map reimbursement, reporting, payment information, and data-sharing obligations leg by leg rather than assume one framework applies end to end.

2. Can banks share fraud data across borders without breaching privacy law?

Yes, within limits. Shared data needs a lawful basis, which in the EU is typically legitimate interest under Article 6(1)(f) of the General Data Protection Regulation (GDPR). Transfers outside the EU or the UK also need a transfer mechanism, such as standard contractual clauses or the UK’s international data transfer agreement. Keyed tokens and other pseudonymized identifiers are still personal data. Privacy-enhancing technologies reduce what each institution can see, but they do not remove these obligations.

3. How can banks prepare for new cross-border payment rules?

Track the changes that already have dates:

• Verification of Payee in non-euro Member States by 9 July 2027
• The Payment Services Regulation once adopted
• The FATF Recommendation 16 changes by the end of 2030

In the UK, the Payment Systems Regulator’s functions are moving to the Financial Conduct Authority. Map each change to the payment legs it affects, then update fraud controls, data-sharing agreements, and investigation procedures.