TL;DR

SEPA Instant Payments became mandatory across the EU in October 2025, requiring banks to process euro transfers within 10 seconds, 24/7/365. While headlines focus on lost interest revenue, the real challenge is compliance: banks must perform AML, sanctions screening, and fraud checks in under 10 seconds, something legacy systems weren't built to handle. Nearly half of European banks expect to lose millions in interest income, but 93% are more concerned about managing liquidity and compliance requirements. The solution? Unified, real-time compliance platforms that can screen transactions in milliseconds without creating bottlenecks.

What Is the SEPA Instant Payments Regulation?

The SEPA Instant Payments Regulation is an EU law that makes real-time euro payments mandatory for all banks and payment service providers operating in the Single Euro Payments Area. The regulation requires financial institutions to both send and receive instant payments within a maximum of 10 seconds.

Key requirements under the regulation:

  • 10-second settlement: Payments must complete within 10 seconds from initiation to recipient account credit
  • 24/7/365 availability: No downtime for weekends, holidays, or overnight processing
  • Universal coverage: All PSPs must offer instant payment services it's no longer optional
  • Sanctions screening: Banks must perform daily comprehensive screening of their customers against EU sanctions lists.
  • Confirmation of Payee: Name-matching verification to prevent fraud (required by 2025)
  • No premium pricing: Instant payments cannot cost more than standard SEPA transfers

The regulation took effect in stages throughout 2024-2025, with full mandatory compliance reached in October 2025.

When Did SEPA Instant Payments Become Mandatory?

SEPA Instant Payments became mandatory on October 9, 2025 for receiving payments, with banks required to accept incoming instant euro transfers by this deadline. The obligation to send instant payments took effect earlier in 2025 for most institutions.

The phased rollout worked as follows:

  • January 2024: EU Instant Payments Regulation entered into force
  • Q1-Q2 2025: Banks required to enable instant payment sending capabilities
  • October 9, 2025: Mandatory deadline for receiving instant payments
  • Late 2025: Confirmation of Payee verification requirements activated

This timeline gave banks approximately 18-24 months to upgrade systems, but many underestimated the compliance infrastructure changes needed.

What Are the Real-Time Compliance Challenges?

Real-time compliance is the biggest operational challenge of instant payments. Banks must perform complete AML checks, sanctions screening, and fraud detection within the 10-second payment window, a requirement that breaks legacy compliance systems.

The 10-Second Compliance Crunch

Traditional AML and sanctions screening systems were built for batch processing and manual reviews, not real-time decisioning. Key problems include:

Legacy system limitations:

The math doesn't work: When a flagged transaction requires human review, compliance analysts have seconds (not hours) to investigate and clear the alert. No human can review and adjudicate a potential sanctions hit in under 10 seconds, yet payments cannot be delayed.

Watchlist Screening Under Instant Payments

The EU took a unique approach to solve the sanctions screening bottleneck. Instead of requiring transaction-by-transaction screening (which would cause massive delays), the Instant Payments Regulation mandates daily customer screening.

How it works:

  • Banks must screen their entire customer base against EU sanctions lists at least once per 24 hours
  • Screening must occur immediately whenever sanctions lists are updated
  • If both sender and receiver are pre-cleared, their instant payment can flow without transaction-level screening
  • For payments outside the EU or as added precaution, many banks still perform transaction screening within the 10-second window

This shifts the burden from individual transactions to bulk customer screening but creates its own challenges. Large banks with millions of clients must automate daily scans, ensure they catch new sanctions designations immediately, and maintain audit trails proving compliance.

The result: More than half of banks surveyed reported a surge in payment rejections due to sanctions screening under SEPA Instant. Many institutions see 30-50% more flagged transactions because they're erring on the side of caution when they can't investigate thoroughly in real time.

What Are the AML Requirements for Instant Payments?

Anti-money laundering (AML) obligations apply equally to instant payments speed and does not reduce regulatory expectations. Both U.S. and EU authorities have made this explicit in guidance documents.

Regulatory Stance on AML

U.S. Treasury OFAC guidance (2022): Instant payment systems require a robust risk-based approach, with banks ensuring technology and processes can detect and block illicit transactions in real time.

EU position: The SEPA Instant framework emphasizes that sanctions laws apply equally to instant payments. The new EU Anti-Money Laundering Authority (AMLA), operational in 2025, has direct supervisory powers over high-risk institutions starting July 2025.

Key AML challenges for instant payments:

  1. Transaction monitoring in real time: Systems must flag suspicious patterns (structuring, rapid sequential payments, high-risk jurisdictions) as they happen, not in overnight batch runs
  2. False positive management: Legacy systems generate excessive false alerts. With instant payments flowing continuously, the inability to cut down false alerts in sanctions screening quickly becomes operationally unmanageable.
  3. 24/7 operations: Compliance staff and systems must be "always on" no more overnight queues or Monday morning alert reviews
  4. Data limitations: Instant payment messages often contain less information than traditional wire transfers (for speed), making it harder to distinguish legitimate from illicit activity
  5. No downtime for catch-up: In the old world, suspicious transactions could be queued overnight. In instant payments, the stream never stops.

The Sixth Anti-Money Laundering Directive (6AMLD)

The EU's 6AMLD explicitly mandates integration of technological tools to enhance AML effectiveness. Regulators expect banks to leverage advanced data analytics and real-time monitoring, not antiquated batch systems.

The cost of non-compliance carries severe penalties, including multi-million euro fines, legal action, and potential operational restrictions. If a bank's instant payments platform is deemed unsafe, regulators can force it to suspend services, an operational and reputational disaster.

Why Are Banks Concerned About Liquidity?

Banks are losing a significant revenue stream: interest earned on customer funds held overnight and over weekends. Under instant payments, money moves immediately rather than sitting in bank accounts earning interest.

The liquidity challenge in numbers:

Why Interest Income Is Disappearing

In traditional SEPA transfers, banks held customer funds for hours or days before settling. This "float" generated interest income when banks lent or invested those overnight balances. Instant payments eliminate the float by settling transfers within 10 seconds, leaving no time to earn interest and requiring PSPs to immediately identify whether any customer is subject to financial sanctions while processing payments in seconds.

As transaction limits (currently €100,000) are removed, banks need larger liquidity buffers, tying up even more capital in non-interest-earning reserves.

Pro Tip: Despite short-term revenue loss, most banks view instant payments as a competitive advantage. Enhanced customer experience and potential new business are expected to offset lost interest income over time.

How Are Legacy Compliance Systems Failing?

Most banks' AML compliance architectures were built for slower payment rails and are fundamentally mismatched to real-time payments.

Common Legacy System Problems

Siloed tools: Banks often use separate systems for sanctions screening, fraud detection, and transaction monitoring. These systems don't communicate efficiently, creating delays and blind spots.

Batch processing: Older systems scan transactions in bulk (hourly or daily batches), not transaction-by-transaction in real time.

Manual review dependencies: Legacy systems generate alerts that require human investigation impossible when payments must settle in 10 seconds.

Limited 24/7 capabilities: Many core banking systems and compliance tools weren't designed for always-on operations, lacking the infrastructure for weekend and overnight processing.

Real-World Impact

According to a Finextra survey, banks had to prioritize upgrading fraud and sanctions screening tools, with nearly half citing this as their top preparation step for SEPA Instant. Two in five banks are overhauling entire risk management frameworks.

The European Banking Authority (EBA) found that fraud risks are 10 times higher in instant payments compared to traditional credit transfers, putting additional pressure on real-time fraud detection systems.

What Can Banks Learn from Global Instant Payment Systems?

Europe isn't the first to implement instant payments. The U.S. FedNow (launched 2023) and UK Faster Payments (operational since 2008) offer valuable lessons.

United States: FedNow

Launch: July 2023

Key requirement: Banks must maintain compliance programs aligned with Bank Secrecy Act/AML standards at instant speed

The Federal Reserve made clear that instant payments don't reduce AML obligations. OFAC guidance urged banks to adopt innovative technology and risk-based approaches to ensure sanctions checks keep pace with instant settlement.

Lesson: U.S. banks invested in real-time screening solutions and fintech partnerships to upgrade compliance capabilities before launching FedNow services.

United Kingdom: Faster Payments

Operational since: 2008

Major challenge: Authorized Push Payment (APP) fraud

The UK experienced an explosion of scams where criminals trick customers into sending instant payments. This prompted regulators to introduce:

  • Confirmation of Payee: Verifying recipient names match account details before payments are sent
  • Enhanced fraud monitoring: Real-time fraud detection became essential
  • Mandatory reimbursement: Banks now must reimburse APP fraud victims in many cases

Lesson: Instant, irrevocable payments require instant fraud defense. The EBA identified eight types of APP fraud in the UK alone, emphasizing the need for sophisticated real-time fraud monitoring in SEPA Instant.

How Do Modern Compliance Platforms Solve Real-Time Challenges?

Banks need unified, real-time compliance infrastructure that operates at the speed of instant payments. Financial technology (RegTech) firms are building solutions specifically for this challenge.

Key Features of Modern Compliance Platforms

1. Sub-second processing:

High-performance rules engines evaluate transactions and customer events with response times measured in milliseconds, not minutes. Even complex risk rules (pattern detection, name matching) execute fast enough to stay within the 10-second payment window.

2. Unified architecture:

AML transaction monitoring, watchlist screening, fraud detection, and AML case management integrated into a single platform. This eliminates silos, ensures all risk signals are considered together, and speeds up investigations.

3. 24/7 operation:

Cloud-ready, API-based systems designed for always-on availability. Compliance checks run continuously with no downtime for nights, weekends, or holidays.

4. AI-driven intelligence:

Machine learning models reduce false positives by learning to recognize legitimate patterns versus genuine risks. Without this context, automated screening to distinguish legitimate customers from bad actors, leading to more false positives. According to industry surveys, two-thirds of European banks plan to use AI to cut false alerts in sanctions screening.

5. Real-time rules engine:

Compliance teams can define risk scenarios (e.g., transactions involving high-risk countries, rapid sequential payments, unusual amounts) and apply them instantly to every transaction as it flows through the system.

Example: Flagright's Approach

Flagright offers a unified platform where sanctions screening, AML monitoring, fraud detection, and case management work together seamlessly. The platform's sub-second API response times ensure compliance checks don't bottleneck instant payments.

Benefits of unified platforms:

  • Speed: Millisecond transaction screening keeps pace with 10-second payments
  • Integration: All risk data in one dashboard for faster investigations
  • Scalability: Can process thousands of transactions per second without degrading performance
  • Intelligence: AI forensics help distinguish real threats from false positives

For smaller PSPs, payment processors, and fintechs without large compliance teams, these platforms provide enterprise-grade compliance through simple API integration.

Pro Tip: Modern compliance platforms serve as drop-in upgrades. Instead of retrofitting real-time capabilities onto legacy software, banks can route instant payments through external engines that screen and decide transactions in milliseconds, then return results within the 10-second window.

What Are the Regulatory Consequences of Non-Compliance?

Regulators are tightening AML/CFT enforcement alongside the instant payments mandate, leaving no room for compliance failures.

Increased Regulatory Pressure

EU Anti-Money Laundering Authority (AMLA):

Starting July 2025, AMLA has direct supervisory powers over high-risk financial institutions, with a mandate to intervene swiftly if it detects serious AML control failures. Banks facing such failures may be subject to immediate supervisory or enforcement action.

Sixth Anti-Money Laundering Directive (6AMLD):

Explicitly requires integration of technological tools to enhance AML effectiveness. Antiquated systems won't meet regulatory expectations.

European Banking Authority (EBA):

Warned that fraud risks are significantly higher (up to 10x) in instant payments, putting banks on notice that robust real-time fraud detection is mandatory.

Potential Penalties

  • Multi-million euro fines for AML/sanctions violations
  • Legal action against institutions and executives
  • Operational restrictions: Regulators can force banks to suspend instant payment services if deemed unsafe
  • Reputational damage: Public enforcement actions destroy customer trust

The cost calculation: Lost interest revenue is predictable and manageable. A major compliance lapse could result in sudden, catastrophic fines or operational shutdowns that dwarf any interest income concerns.

As Warren Buffett said: "It takes 20 years to build a reputation and five minutes to ruin it." In instant payments, a bank might not even have five minutes to contain a compliance incident.

How Can Banks Implement Real-Time Compliance?

Successful implementation requires modernizing technology, processes, and operating models for 24/7 real-time operations.

Step 1: Assess Current Capabilities

Conduct a compliance infrastructure audit:

  • Can your sanctions screening system operate in real time with sub-second response times?
  • Do transaction monitoring rules run continuously or in daily batches?
  • Can compliance staff handle alerts at 3 AM on Sunday as effectively as 3 PM on Tuesday?
  • Are your systems cloud-ready and scalable for 24/7 uptime?

Step 2: Upgrade Technology

Prioritize unified compliance platforms:

  • Integrate sanctions screening, AML monitoring, and fraud detection into one system
  • Ensure sub-second API response times for transaction screening
  • Implement real-time rules engines that can evaluate complex scenarios instantly
  • Adopt AI/machine learning to reduce false positives

Pro Tip: For many banks, partnering with RegTech providers is faster and more cost-effective than building custom real-time systems from scratch.

Step 3: Automate Daily Customer Screening

Meet EU sanctions requirements:

  • Screen entire customer base against EU sanctions lists at least once per 24 hours
  • Automate immediate screening when sanctions lists are updated
  • Maintain audit trails proving daily compliance
  • For large banks with millions of clients, optimize bulk screening to complete within required timeframes

Step 4: Establish 24/7 Operations

Ensure always-on compliance:

  • Set up on-call compliance teams or automated decisioning for overnight/weekend alerts
  • Review vendor SLAs to ensure 24/7 support and uptime guarantees
  • Test failover systems and disaster recovery plans
  • Implement continuous monitoring with no "catch-up" periods

Step 5: Optimize for False Positives

Reduce alert fatigue:

  • Use AI and machine learning to distinguish legitimate transactions from genuine risks
  • Regularly tune rules and thresholds based on false positive rates
  • Implement risk-based approaches that focus resources on highest-risk scenarios
  • Monitor performance metrics: alert volumes, resolution times, false positive rates

Frequently Asked Questions

What is the SEPA instant payments deadline?

The mandatory deadline for receiving SEPA instant payments was October 9, 2025. Banks were required to enable instant payment sending capabilities earlier in 2025, with most institutions meeting compliance by mid-2025.

Are SEPA instant payments mandatory?

Yes. Under the EU Instant Payments Regulation, all banks and payment service providers in the SEPA zone must offer instant euro payment services. Both sending and receiving instant payments is mandatory; it's no longer optional.

How long do SEPA instant payments take?

SEPA instant payments must complete within a maximum of 10 seconds from initiation to the recipient's account being credited. In practice, most instant payments settle within 5-7 seconds.

Do instant payments work 24/7?

Yes. SEPA instant payments operate 24 hours a day, 7 days a week, 365 days a year with no downtime for nights, weekends, or holidays. Banks must process instant payments at any time, including Christmas Day or at 3 AM on Sunday.

What are the compliance requirements for instant payments?

Instant payments must comply with the same AML, sanctions, and fraud prevention requirements as traditional transfers. Key requirements include: daily customer sanctions screening, real-time transaction monitoring, fraud detection, and maintaining audit trails all within the 10-second payment window.

How do banks screen for sanctions in real time?

Under the EU Instant Payments Regulation, banks must screen their entire customer base against EU sanctions lists at least once every 24 hours and immediately when lists are updated. This pre-clearing approach allows instant payments between verified customers to flow without transaction-level screening delays.

What happens if a payment is flagged for compliance review?

If a payment is flagged during the 10-second window, banks must either clear it immediately using automated decisioning or reject it. There is no option to "hold for review" as in traditional payments. This is why reducing false positives through AI and smart filtering is critical.

Can banks charge extra for instant payments?

No. Under the regulation, banks cannot charge more for instant SEPA payments than they charge for standard SEPA credit transfers. The cost must be the same or lower.

Are there transaction limits for SEPA instant payments?

The current limit is €100,000 per transaction, but regulators are working to remove or significantly raise this cap. Banks must be prepared to handle larger instant payments with appropriate liquidity buffers and compliance checks.

What is Confirmation of Payee in Instant payments?

Confirmation of Payee is a security feature that verifies the recipient's name matches their account details before a payment is sent. This helps prevent misdirected payments and fraud. It became mandatory for SEPA instant payments in late 2025.

What is the European Banking Authority's role in instant payments?

The EBA provides regulatory guidance, sets standards for fraud prevention, and supervises compliance with instant payment requirements. The EBA has warned that fraud risks are up to 10 times higher in instant payments and expects banks to implement robust real-time fraud detection.

How does instant payments affect bank liquidity?

Banks can no longer earn interest on customer funds held overnight or over weekends because money moves instantly. Approximately 45% of banks expect to lose significant interest revenue. Banks must also pre-fund accounts in the ECB's instant settlement system (TIPS) to cover 24/7 payment flows.

What is the difference between SEPA and SEPA instant?

Standard SEPA credit transfers can take 1-2 business days to settle. SEPA instant payments (SCT Inst) settle within 10 seconds and are available 24/7/365. Both use the SEPA payment infrastructure, but instant payments require separate technical capabilities and settlement through the ECB's TIPS system.

How does SEPA instant compare to FedNow and UK Faster Payments?

All three are instant payment systems with sub-10-second settlement. FedNow (U.S., launched 2023) and Faster Payments (UK, since 2008) provided lessons for Europe: instant payments accelerate fraud risks, require real-time compliance infrastructure, and demand sophisticated fraud monitoring. The UK's experience with Authorized Push Payment fraud directly influenced EU fraud prevention requirements.

What technology do banks need for real-time compliance?

Banks need unified compliance platforms with: sub-second transaction screening, real-time rules engines, AI-driven false positive reduction, 24/7 availability, cloud scalability, and integrated sanctions/AML/fraud monitoring. Many banks are partnering with RegTech firms rather than building these capabilities in-house.

Key Takeaways for Financial Institutions

The compliance imperative is clear: SEPA instant payments demand equally instant compliance capabilities. Legacy systems built for overnight batch processing cannot support 10-second payment windows. Banks must:

Modernize compliance infrastructure immediately – Invest in unified, real-time platforms that operate at millisecond speeds

Automate daily sanctions screening – Meet EU requirements for bulk customer screening and instant list updates

Implement 24/7 operations – Ensure compliance teams and technology are always-on with no downtime

Reduce false positives with AI – Use machine learning to distinguish genuine risks from noise

Establish real-time fraud monitoring – Combat the 10x higher fraud risk identified by the EBA

Partner with RegTech providers – Leverage specialized compliance platforms for faster, more cost-effective implementation

Final Tip: The banks that view instant payments compliance as a competitive advantage, not just a regulatory burden, will be the institutions that win customer trust in the real-time economy. Investing in real-time risk infrastructure and a robust AML compliance solution enables secure instant payments and remittances, prevents catastrophic failures later, and positions institutions as both fast and secure. The era of 10-second payments has arrived. The question is: can your compliance keep pace?

‍

Book a demo