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The Swedish government has introduced a new legislative proposal aimed at strengthening measures against financial crime by enhancing the oversight of the country's payment system.
The bill, which has been submitted to the Swedish parliament, seeks to equip law enforcement agencies, financial regulators and banks with better tools to prevent the misuse of financial services by criminal networks.
Under the proposed law, companies that act as intermediaries in financial transactions, known as clearing houses, will be required to monitor and report suspicious transactions to banks.
In addition, these institutions will have a legal obligation to report potential cases of money laundering or terrorist financing to the Swedish Police Authority.
The bill also proposes granting the Swedish Financial Supervisory Authority (Finansinspektionen) greater power to evaluate the suitability of payment service agents representing foreign companies.
These agents are often targeted by criminal organisations to move illicit funds across international borders, including through informal transfer networks such as hawala.
Expanded obligations
Under Sweden’s existing Money Laundering Act, banks and other financial entities are already required to monitor transactions and report suspicious activity.
The new bill expands these obligations to clearing houses, recognising their role in facilitating large volumes of payments across multiple institutions.
For example, clearing houses such as Bankgirocentralen BGC AB (Bankgirot) and financial infrastructure providers such as Getswish AB (Swish) will need to enhance their monitoring systems.
This includes tracking customer transaction patterns and sharing relevant data with financial institutions and law enforcement.
The legislation also suggests that the transition to the ISO 20022 payment standard, which increases the amount of information transferred with transactions, will support more effective financial crime detection.
The bill has undergone a consultation process with industry stakeholders and received input from the Legislative Council; pending no setbacks, it should enter into force on July 1, 2025.
Resilience and security
The ominous term "payments as a weapon" is increasingly common in payments circles.
It refers to the exploitation of payments by bad actors – whether that be criminals or state-sponsored cyber attacks.
The issue is causing increased anxiety among lawmakers and policy specialists in Europe.
What would happen if US firms were shut off from the EU in a trade war? Once unlikely on the part of EU policymakers, this has become a slightly more realistic prospect that has been heightened by the new US administration, and one firms need to be thinking about.
Sweden is one of Europe’s most agile states when it comes to payments, as demonstrated by its early consideration of central bank digital currencies (CBDCs) and payment methods, such as Swish.
Perhaps the country’s clear keenness to shore up security and resilience guarantees in the payments space is another.
Both the Swedish government’s proposed legislation on monitoring and reporting obligations for clearing companies, and the Riksbank’s recent Payments Report, highlight concerns about the resilience, security and transparency of Sweden’s payment system.
For example, the government’s proposed legislation focuses on tightening money laundering regulations by expanding reporting obligations to clearing companies and giving the Finansinspektionen better tools to oversee foreign payment service providers (PSPs).
The Riksbank is primarily concerned with payment resilience, but is also calling for greater transparency in payment service pricing and improved access to basic financial services.
Meanwhile, both documents highlight the transition to the ISO 20022 standard, which will improve data quality and cross-border payment compatibility.
The Riksbank also emphasises the need for more instant payments, aligning neatly with the government’s legislation, which implicitly supports infrastructure improvements by increasing oversight over clearing and settlement.
In the coming years, such legislation will likely be introduced elsewhere as countries figure out how best to operate in a less globalised world.
This will challenge payments players to develop their understanding of how they can most effectively continue to thrive and scale.
