The High Cost of AML Backlogs

The Executives are worried about the AML of things

European regulators are sending a clear message: compliance backlogs aren't just an operational issue — they are a regulatory violation that can cost you a business.

In fintech, growth moves fast. Customer onboarding accelerates, transaction volumes surge, and teams race to keep up. When compliance alerts start piling up, it's tempting to think you can clear the backlog "next quarter."

But European regulators have drawn a hard line: in AML and KYC compliance, falling behind is no longer acceptable.

The Numbers Don't Lie: Over €20 Million in Fines

Between 2022 and 2025, European financial regulators imposed substantial penalties specifically for compliance backlogs. The enforcement actions tell a sobering story:

• Revolut (Lithuania): €3.5 million—the country's largest-ever AML fine

• N26 (Germany): €9.2 million for systematically late suspicious activity reports

• Bunq (Netherlands): €2.6 million for failing to investigate alerts properly

• ING Spain: €3.9 million for delayed internal reporting

• TransferGo (Lithuania): €310,000 for insufficient transaction monitoring

These aren't isolated incidents. They represent a fundamental shift in how European regulators view compliance delays.

What Triggers Enforcement Action

When authorities inspect your compliance program, they're not just checking whether you have policies in place. They're examining whether you can execute those policies in real-time. Here is what draws regulatory concerns:

1. Transaction Monitoring Backlogs

Alerts sitting uninvestigated for weeks or months (an immediate red flag). Lithuania's central bank found that Transactive Systems had chosen monitoring models that simply couldn't handle their transaction volumes, leaving suspicious activity unreviewed. The penalty? A €280,000 fine and a complete license revocation.

2. Late Suspicious Activity Reports

Germany's BaFin has taken an especially hard stance. N26 was fined twice—in 2021 and again in 2024—because the bank couldn't file suspicious activity reports on time. BaFin's position is unambiguous: delays in reporting suspected money laundering are unacceptable, period.

3. Outdated Customer Due Diligence

When KYC files fall behind schedule, you're operating blind. The UK's FCA found numerous firms with significant CDD backlogs and warned that these delays dramatically increase the risk of missing sanctioned individuals or high-risk connections. Luxembourg's CSSF went further, sanctioning Dock Financial for incomplete KYC files that lingered unresolved.

4. Under-Resourced Sanctions Screening

The FCA's 2023 review discovered many firms lacked adequate resources for sanctions screening, with teams too stretched to clear alert backlogs. Their verdict: significant backlogs put you at greater risk of failing sanctions obligations.

5. The Pattern: When Growth Outpaces Compliance

A clear pattern emerges across enforcement cases: companies scaled their customer base and transaction volumes faster than their compliance capabilities. As Luxembourg's CSSF noted about Dock Financial, the compliance team was "not sufficiently staffed to cope with the high number of clients."

This resource mismatch creates predictable problems:

• Alerts closed without proper investigation

• High-risk customers bypassing enhanced due diligence

• Transaction monitoring models that can't keep pace with volumes

• Resolution delays are measured in months, not days

The Real Consequences Go Beyond Fines

While financial penalties grab headlines, the operational consequences can be far more damaging:

1. Business Restrictions: BaFin didn't just fine N26—they capped the bank's customer growth until AML controls improved. Your ability to scale can be frozen overnight.

2. License Revocation: Lithuania revoked Transactive Systems' license entirely. No fine, no warning period—just the end of the business.

3. Reputational Damage: Public enforcement actions become permanent records. The FCA, BaFin, and other regulators publish these cases, making them easily discoverable by potential partners and customers.

4. Increased Scrutiny: Once you're on the regulators' radar for backlogs, partial fixes are not enough. When DNB fined Bunq, they emphasized the "persistence of weaknesses"—showing that regulators expect complete sustained remediation.

What Actually Works: Lessons from the Field

Companies that have successfully addressed backlog issues share common approaches:

1. Right-Size Your Resources for Surge Capacity

Rabobank's experience is instructive. When sanctions surged after Russia's invasion of Ukraine, even a major bank struggled with alert volumes. They had to significantly invest in compliance staff and systems to satisfy regulators.

The lesson? Your compliance capacity needs headroom for surges, not just average loads.

2. Match Technology to Transaction Volumes

Transactive Systems failed because their monitoring model couldn't handle their transaction volumes. Your technology stack needs to scale with your business, not chase it from behind.

3. Measure Backlog as a Core KPI

The UK FCA explicitly warns that firms with significant backlogs face greater compliance risk. If you're not tracking alert aging, pending review volumes, and time-to-resolution as core metrics, you're flying blind.

4. Act Before the Inspection

Every one of these enforcement cases began with a routine regulatory inspection or review. By the time regulators discover your backlog, it's too late for a graceful resolution.

The Regulatory Message Is Crystal Clear

As Lithuania's central bank bluntly stated, "..breaches of AML requirements have never been, are not and will not be tolerated."

European regulators have demonstrated they're willing to use their full toolkit—fines, growth restrictions, and license revocations—when backlogs lead to missed suspicious transactions or overdue due diligence.

The math is simple: preventing backlogs is exponentially cheaper than the alternative. Whether through additional headcount, better technology, or more effective triage protocols, the investment in real-time compliance capacity pays for itself many times over.

Take Action Now

If any of these scenarios sound familiar, it's time to act:

Audit your current backlog: How many alerts are pending? How old is your oldest unreviewed transaction? When was the last periodic review completed?

Assess your capacity: Can your team handle current volumes plus a 30% surge? What happens during vacation periods or staff turnover?

Review your technology: Are your monitoring systems generating alerts your team can realistically investigate? Are you using automation where appropriate?

Document your remediation: If you have backlogs, create a clear plan with milestones and accountabilities. Regulators want to see progress, not excuses.

The cost of falling behind has never been higher. European regulators have made it abundantly clear: in AML/KYC compliance, there is no "catching up later." There's only keeping up—or facing the consequences.

Need help assessing your compliance capacity or clearing existing backlogs? Let's talk about building a sustainable, scalable compliance program that keeps pace with your growth.