🔹 Definition
Electronic Funds Transfer (EFT) refers to the digital movement of money from one bank account to another without the need for paper-based documentation or physical cash. EFTs are processed through computerized systems and cover a wide range of payment types, including direct deposits, ATM transfers, wire transfers, online bill payments, and real-time payment systems.
EFT is a foundational element of modern banking infrastructure and plays a critical role in supporting compliance, transaction monitoring, and cashless financial ecosystems.
🔹 Frequently Asked Questions (FAQs)
Q1: What are common types of EFTs?
- ACH Transfers: Automated Clearing House (used for payroll, utility payments)
- Wire Transfers: Often used for high-value or urgent payments
- RTGS: Real-Time Gross Settlement systems for large-value settlements
- Card Transactions: Debit or credit card purchases
- Online and Mobile Transfers: Via digital banking platforms (e.g., FAST, PayNow, Zelle)
Q2: Are EFTs subject to AML compliance requirements?
Yes. Financial institutions must:
- Conduct Customer Due Diligence (CDD) before processing EFTs
- Monitor transactions for suspicious patterns, structuring, or fraud
- Report cross-border transfers above defined thresholds under FATF, MAS, or local regulations
- Maintain records of senders, recipients, and payment metadata (e.g., SWIFT, ISO 20022)
Q3: What are the benefits of EFT in financial systems?
- Speed: Transactions can be processed within seconds or hours
- Security: Encrypted and traceable through institutional networks
- Cost-efficiency: Reduces the need for manual intervention or paper processing
- Auditability: Each transaction creates a digital trail for internal and external oversight
Q4: What are the compliance challenges with EFTs?
- Anonymized or incomplete sender/receiver information in cross-border payments
- Use of third-party intermediaries or correspondent banks that obscure origin
- Risk of fraud, phishing, or unauthorized access if security controls are weak
- Misuse for money laundering layering stages in complex schemes
