Regulations Governing Cross-Border Payments

08.11.23 11:05 AM By Naushad Contractor

Regulations Governing Cross-Border Payments

With the increasing globalisation of the economy, the number of cross-border payments has increased significantly in recent years. The global cross-border payments market is expected to be worth USD$156 trillion in 2022.

According to a study by Visa GME, 87% of merchant executives across the globe view cross-border sales as having the most significant potential for growth. Although cross-border capital flows account for only one-sixth of overall transaction values, international payments revenues add up to $200 billion globally, with transaction fees and foreign exchange (FX) revenues split roughly evenly. It accounts for 27% of global transaction revenues and is growing at a 6% annual rate.

PYMNTS recently conducted research that outlined several key pain points for US and UK companies doing cross-border business. The top concerns were payment fraud (56 per cent), followed by data security (54.6 per cent). Overall, cross-border payments are subject to various regulations that aim to ensure the smooth and efficient functioning of the international payment system. National governments, central banks, and international organisations set these regulations.

Furthermore, cross-border payments may be subject to exchange controls. Exchange controls refer to restrictions on the movement of capital across national borders. Governments may impose these controls to protect their domestic economies or manage foreign exchange reserves. For example, a government may impose restrictions on the amount of foreign currency that can be bought or sold by its citizens, which can vary based on purposes like education has separate limitations from trade. It helps to protect the value of the domestic currency and prevent excessive capital outflows.

Regulations that govern cross-border payments vary by country and region. Still, some standard regulations include:

  • Anti-money laundering (AML) laws require financial institutions to verify the identity of their customers and report suspicious transactions to prevent and detect money laundering.
  • The Anti-Money Laundering Directive (AMLD) sets out rules and standards to prevent money laundering and terrorist financing.
  • Counter-Terrorist Financing (CTF) regulations require financial institutions to implement measures to prevent and detect terrorist financing. 
  • The Know Your Customer (KYC) regulations require financial institutions to collect and verify customer information to prevent fraud and money laundering.
  • The General Data Protection Regulation (GDPR) protects the personal data of individuals within the European Union (EU). It sets out requirements for collecting, processing, and storing personal data.
  • The Office of Foreign Assets Control (OFAC) regulations prohibit transactions with designated countries, individuals, and entities.
  • The Financial Action Task Force (FATF) Recommendations provide international standards for combating money laundering and terrorist financing.


The rapid pace of changing regulations can become overwhelming for any business to manage. Staying vigilant and updated has become crucial to adhere to the regulatory landscape. We hope this article gives you a primer into the current regulations your business needs to stay compliant with and administer efficiently. For more information about the latest developments within regulatory frameworks, get in touch with a cross-border payment solutions team now!

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