Alipay Europe Sanctioned for AML Breaches as Regulators Tighten Grip on Fintechs

Alipay Europe has come under regulatory scrutiny following the publication of a sanctioning decision by Luxembourg’s financial supervisor on 2 September 2025. The announcement revealed that the electronic money institution had been fined €214,000 back in May 2025 for serious violations of anti-money laundering obligations. The delay between the decision and its disclosure illustrates how enforcement actions often play out in phases: first the investigation and sanctioning, then the eventual communication to the wider market.

The publication quickly captured attention within the payments and compliance industries. While the financial penalty may appear modest compared to the hefty fines faced by global banks, the case is significant for two key reasons. Firstly, it targets one of the world’s largest digital payment ecosystems, signalling that regulators intend to subject fintechs to the same level of scrutiny as traditional financial institutions. Secondly, the decision exposes the wide range of deficiencies identified at Alipay Europe, spanning transaction monitoring, suspicious activity reporting, customer due diligence, sanctions screening, outsourcing oversight, and account blocking procedures.

The inspection that triggered the fine was carried out between June 2023 and January 2024. During this review, supervisors identified at least six instances where Alipay’s monitoring systems flagged suspicious activity linked to counterfeit goods. Despite these clear warning signs, no suspicious transaction reports were filed with the national financial intelligence unit. In three of those cases, accounts were simply closed, thereby halting further transactions without escalating suspicions as required by law.

This failure represented a direct breach of legal obligations to report suspicions immediately once they arise. Regulators consider such omissions especially severe, as they obstruct authorities from tracing illicit proceeds or uncovering criminal networks behind the transactions. Inspectors also noted that alerts often remained unresolved for extended periods, sometimes weeks, undermining the institution’s ability to act swiftly. In several instances, operational backlogs delayed responses to suspicious patterns, leaving illicit funds free to circulate.

The case also uncovered vulnerabilities in sanctions compliance, one of the most critical areas of financial regulation. Some alerts involving international sanctions were handled too slowly, weakening the company’s ability to freeze activity without delay. This lag meant that, in theory, a sanctioned individual could have executed transactions before restrictions were enforced.

Failures also emerged in the account blocking framework. Even when accounts were flagged for possible money laundering or incomplete know-your-customer (KYC) checks, significant transactions continued to be processed. Furthermore, once accounts were blocked, follow-up reviews were either postponed or omitted altogether. These weaknesses undermined a safeguard designed to prevent suspicious accounts from becoming channels for criminal activity.

Equally concerning were deficiencies in customer due diligence. Inspectors found missing identification documents for both clients and beneficial owners, and in some cases, no verification of customer identities had been carried out. Because Alipay Europe relied entirely on remote onboarding, the risks were heightened. Financial institutions using such models are expected to compensate with robust controls like biometric verification or enhanced document authentication. Yet Alipay Europe admitted to receiving large volumes of falsified identity documents without deploying stronger safeguards, allowing individuals to register with fake credentials and exposing the platform to heightened money laundering risks.

Governance failures were also evident in the handling of outsourced compliance tasks. The outsourcing contract with a third-party provider lacked detailed provisions outlining AML responsibilities, leaving it unclear whether obligations were adequately met. The compliance monitoring plan was also deemed inadequate, with no specific controls, measurable benchmarks, or testing mechanisms in place. This meant the institution’s second line of defence was not exercising meaningful oversight of the outsourced compliance work, leaving accountability gaps unaddressed. Regulators stressed that outsourcing does not absolve institutions of liability, and firms remain fully responsible for failures by delegated parties.

The sanction against Alipay Europe sends a broader signal to the payments industry. The timing of the announcement—months after the fine was imposed—demonstrates how supervisory processes can culminate in public exposure long after initial sanctions are levied. For Alipay Europe, reputational harm may ultimately outweigh the €214,000 financial penalty.

The case offers clear lessons for the sector: transaction monitoring must be timely, suspicious activity must always be reported, sanctions alerts require immediate action, customer identities must be verified rigorously, and outsourced services must be managed with strict governance. Any failure to uphold these standards risks not only financial penalties but also the erosion of trust among regulators and industry partners.

For compliance professionals across Europe, the message is unmistakable: regulators will act, they will publish, and fintechs will be held to the same standards as global banks. With the forthcoming European Union Anti-Money Laundering Authority preparing to centralise oversight, the Alipay Europe case foreshadows a tougher, more harmonised enforcement regime across the continent.

By fLEXI tEAM