On 26 June 2024, the European Union's new anti-money laundering framework formally entered into force, establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) as the bloc's first supranational AML supervisor. The reform appears to be another step towards strengthening financial integrity after a series of high-profile money laundering scandals across Europe. However, the significance extends well beyond regulatory harmonisation with centralising supervision, standardising enforcement, and strengthening cross-border coordination. While AMLA aims to strengthen the fight against money laundering and terrorist financing, it also reinforces the EU's capacity to safeguard the stability and integrity of its financial system at a time when financial regulation is increasingly intertwined with economic security and geopolitical resilience.
The rise of AML governance and the Western foundations of global financial regulation
Over subsequent decades, AML standards became integrated into the broader architecture of global financial governance. Organized by G7, the Financial Action Task Force (FATF) and its yearly recommendations became the international benchmark for assessing national AML effectiveness, while International Monetary Fund (IMF), World Bank and Basel Committee incorporated AML considerations into financial sector assessments and banking supervision frameworks. Therefore, AML compliance evolved from a domestic regulatory issue into a condition of participation in international finance.
The influence of this system reflects the structural position of Western economies within global financial networks. The United States, Europe and other advanced economies historically dominated international banking, regulatory institutions and financial infrastructure. The centrality of the US dollar to global reserves (57.13% in 2026 Q1), foreign-exchange transactions and international banking (89% by March 2026), knitting with the dependence of cross-border payments on correspondent banking networks, has created a financial architecture in which certain jurisdictions and institutions occupy critical chokepoints. Regulatory standards developed in these financial centres can therefore acquire influence far beyond their formal territorial jurisdiction.
From financial integrity to financial statecraft: the emergence of financial chokepoints
Farrell and Newman argue that states occupying central positions within global networks can convert economic interdependence into political leverage. Financial governance creates such opportunities but control over these chokepoints does not require complete domination of global finance, even partial influence over critical points can create significant leverage. The growing use of financial sanctions, export controls and investment restrictions has reinforced this perception.
In the past century, states implemented sanction as a prominent tool of power, operating primarily through direct exclusion to restrict or condition certain actors’ access to markets, assets or networks. However, AML allows states to exercise the power through the embedded regulatory and governance power within the system through which financial participation takes place. To be more precise, sanctions demonstrate that financial networks can be weaponised while AML demonstrates that the governance of those networks can itself become a source of statecraft power.
In addition, the strategic importance of AML has become increasingly visible as geopolitical competition has intensified. AML compliance increasingly conditions access to and continued participation in international financial infrastructure, creating a regulatory chokepoint that operates through correspondent banking, customer due diligence, beneficial ownership disclosure, and financial intelligence. Measures imposed following Russia's invasion of Ukraine demonstrated how access to payment systems, reserve assets and international banking relationships could be restricted through existing financial infrastructure. Although these measures relied primarily on sanctions rather than AML regulations, they revealed the strategic value of the broader governance architecture surrounding global financial power. This trend also highlights for other governments that any regulatory framework embedded within these infrastructures could potentially become a channel through which geopolitical leverage is exercised.
This changing perception has influenced not only major powers but also middle powers and emerging economies. Financial centres such as Singapore and the United Arab Emirates have strengthened AML frameworks to preserve their reputation as trusted intermediaries within global finance. For many developing economies, the priority is maintaining access to correspondent banking relationships while avoiding regulatory exclusion. The most recently grey-listed in 2018 and lifted in 2022 by FATA, Pakistan’s lost GDP 38 billion dollars in total in the three grey list stints according to Tabadlab, a Pakistani think-tank. The case illustrates how FATF scrutiny can affect a state’s dedication and its regulatory alignment to the global AML framework next to substantially affecting a state’s capital flows and perceptions of financial-sector risk. The concern also coincided with IMF research findings that grey-listing is associated with roughly 7.6% decline in capital inflows and 8-11% interbank payment activity. Additionally, grey-listing can also trigger compliance responses by banks despite there being no formal restrictions according to the research by Inter-America Development Bank. As a result, the AML assessment has altered the risk calculations of financial institutions and thereby leveraged a country’s participation in global finance.
Nonetheless, China faces a different strategic calculation and seeks to actively participate in shaping international standards more than complying with them.
China’s response: shaping rules while reducing strategic vulnerability
China’s economic rise has fundamentally altered its position within global financial governance. According to the IMF and BIS statistics, China has become one of the world’s largest sources of outward foreign direct investment (USD 2.58 trillion in 2024) and cross‑border lending (USD 1.4 trillion in 2025), with Chinese banks now among the top global institutions by assets. This shift has increased China’s exposure to international compliance regimes. Chinese financial institutions require regulatory credibility to operate abroad, and Chinese firms also depend on access to global payment, settlement and correspondent banking networks. Strengthening AML governance therefore serves China’s motive to both external signalling and internal economic needs.
This dual logic explains Beijing’s sustained investment in AML reforms. China has expanded regulatory supervision, strengthened its Financial Intelligence Unit under the People’s Bank of China and participated actively in FATF. Beijing has sought recognition as a responsible actor within international financial governance where China’s AML upgrades reflect an effort to align domestic regulation with global norms while gaining influence over how those norms evolve.
At the same time, China has become increasingly aware of the vulnerabilities associated with reliance on financial infrastructures controlled by Western institutions. The freezing of Russia’s foreign reserves and its exclusion from major payment networks in 2022 demonstrated the coercive potential of financial chokepoints in the current system. BIS data show that over 40% of global cross‑border payments still rely on dollar‑based systems, underscoring China’s asymmetric exposure.
China’s response combines two complementary strategies. First, Beijing seeks greater influence within existing institutions. Active participation in FATF, the Basel Committee and other bodies allow China to shape debates over how standards are interpreted and implemented, shifting its role from rule‑taker to rule‑shaper. Second, China is building resilience against potential external pressure. Initiatives such as the Cross‑Border Interbank Payment System (CIPS), renminbi internationalisation and the digital yuan aim to diversify financial connectivity and reduce dependence on dollar‑centric infrastructures.
Given China’s deep integration into global trade and finance, systemic decoupling would impose significant economic costs. Beijing seeks strategic autonomy through remaining connected to global markets while reducing vulnerability to coercive financial pressure. This implication portrays a future of overlapping financial systems for multinational companies, diverging interpretations of risk and compliance and a more contested and interconnected global financial architecture.
Competing over who governs global financial infrastructure
The significance of AML therefore lies in its important role as a gatekeeper to global finance rather than a coercive characteristic As financial competition increasingly unfolds through existing regulatory and institutional infrastructures, influence over AML standards, their interpretation and their enforcement become a source of strategic advantage for both established and emerging powers in participating global financial governance in one of the main playground of geoeconomic competition.
