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Electronic Funds Transfer (EFT) definition and meaning | AML glossary

What is an Electronic Funds Transfer (EFT)? Definition and AML compliance meaning.

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Electronic Funds Transfer (EFT) definition: What it means in AML compliance.

An Electronic Funds Transfer, or EFT, is a broad term used to describe any digital movement of money from one bank account to another. You’re already seeing it in action, probably hundreds of times a day across your firm, and it forms the bedrock of how payments flow through the regulated financial system. EFTs cover everything from payroll deposits and supplier payments to card transactions and online banking transfers. They’re fast, relatively low-cost, and increasingly invisible to the end user. But behind the speed and simplicity is a dense network of systems, regulations, and, of course, compliance responsibilities.

At its core, an EFT replaces the need for physical cash or cheques. The payment is processed through electronic channels – most commonly via networks like BACS, CHAPS, SWIFT, or Faster Payments. Each of these systems has its own format, speed, and limits, but they all do the same thing: move money securely from one place to another using digital rails.

You’ll often hear EFT used interchangeably with other terms like wire transfer or online banking, but there are some differences worth keeping in mind. For instance, a wire transfer usually refers to a high-value, one-off payment that’s often international. EFTs, on the other hand, can also include lower-value, everyday transactions, like a recurring direct debit or a card payment at the till.

From a technical standpoint, EFTs rely on banks, clearing houses, and payment service providers to authenticate users, transmit data securely, and settle funds. Each step is regulated, monitored, and, for the AML community, packed with data. That makes EFTs a rich source of information for financial crime monitoring – but also a channel criminals exploit when they think no one’s paying attention.

EFT definition

“In the first half of 2024, the total number of non-cash payment transactions in the euro area increased by 7.4% to 72.1 billion compared with the first half of 2023, while the corresponding total value increased by 1.9% to €113.5 trillion.”

European Central Bank

Payments statistics: first half of 2024

What do Electronic Funds Transfers (EFTs) mean for compliance teams?

If you’re responsible for AML in a regulated UK business, EFTs are one of the main highways you need to watch. These transactions tell stories – about the customer, the counterparties, the timing, the amounts, and the patterns. But EFTs move fast, which means your controls need to work just as quickly.

First, EFTs increase your exposure to transaction-based risk. That means you’ll need to build controls that can make sense of thousands – sometimes millions – of payments a day and flag what matters. You can’t afford to rely on simple threshold rules. It’s about context. A £9,000 transfer might mean nothing for one customer and everything for another. Your systems need to know the difference.

Second, EFTs make it easier for illicit funds to be layered and passed between accounts to obscure their origin. That puts more pressure on your monitoring framework. You’ll need tools that can catch structuring, rapid movement of funds, and links between seemingly unrelated accounts. These aren’t just nice-to-haves – they’re standard expectations from the FCA and the PRA during supervisory reviews.

Speed is another challenge. EFTs, especially via Faster Payments, settle almost instantly. That compresses your response window. If something slips through fraud or sanctions screening at the onboarding stage, you’ve got a limited time to stop or recall the funds. So the effectiveness of your front-line detection tools – including sanctions screening, fraud indicators, and data analytics – becomes mission-critical.

So what does this mean for your AML strategy? It’s time to move from static policies to dynamic controls. Revisit how your systems treat different types of EFTs, how your alerts prioritise risk, and how your teams respond in real-time. The regulators are looking not just for compliance, but for insight: can you spot the unusual when it hides in the normal? Can you act before a payment lands where it shouldn’t?

With the right approach, EFTs can become your most reliable source of AML intelligence.

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