EU Mandates Digital Wallets and Streamlines Customer Due Diligence to Boost Trade Finance Efficiency

The European Union is set to transform customer due diligence (CDD) and onboarding with new Anti-Money Laundering (AML) regulations that emphasize efficiency and digitalization. According to a February 13 report from EY, the new framework moves towards a risk-based approach, significantly streamlining compliance for financial institutions. A key change involves reducing mandatory data collection for standard CDD; for example, information on a customer’s source of funds and wealth will no longer be required except in higher-risk, enhanced due diligence (EDD) scenarios.

A cornerstone of the reform is the mandatory integration with eIDAS 2.0, which will compel financial institutions to accept the forthcoming European digital identity wallet for remote customer identification and verification. While these changes are designed to improve the customer experience and boost efficiency, EY warns that they will require major system upgrades for institutions to be compliant by the 2027–28 deadline.

The impact of this digital overhaul extends directly to international trade. The global expansion of supply chain finance is being driven by the need for more efficient financial solutions, as noted by Global Trade Review. The expedition of KYC and due diligence through automation and digital processes is a key factor in this growth. By minimizing manual paperwork, the EU’s new digital-first approach to identity verification is poised to improve the overall transaction journey, enabling quicker and more efficient financing for suppliers. This aligns with a growing demand for bespoke supply chain finance solutions that rely on fast, reliable, and streamlined compliance procedures.