Regulatory Roundup - July 2026: Record Settlements, Renewed Sanctions, and AI Oversight Takes Shape
- Becki LaPorte
- 5 hours ago
- 5 min read
Regulators worldwide continued to sharpen enforcement and raise supervisory expectations this month. July's developments include a $600 million DOJ settlement with Alibaba and AUS Merchant Services over transaction monitoring failures, a new FinCEN alert on cartel-linked fuel smuggling, FATF's addition of Bosnia and Herzegovina and Iraq to its grey list, and Australia's AML/CTF reforms taking effect for thousands of newly regulated businesses.
Sanctions activity remained active across multiple fronts, with OFAC reinstating Iran oil sanctions, targeting an IRGC weapons-procurement network, and sanctioning a CJNG fuel-theft scheme, while the EU renewed its Russia sanctions for a full year for the first time and joined the UK in their first-ever coordinated cyber sanctions package.
At the same time, the EU AI Act's August 2 enforcement deadline is pushing financial institutions to evaluate AI governance for AML and fraud-detection systems, while FATF, MAS, and the FCA each advanced separate initiatives addressing AI's growing role in financial crime compliance and virtual asset oversight. The throughline across this month's developments: regulators expect firms to demonstrate adaptive, well-governed controls as both threats and the tools used to fight them evolve.
ANTI-MONEY LAUNDERING
FinCEN Issues Supplemental Alert on Fuel Smuggling and Tax Evasion Schemes
FinCEN has issued a supplemental alert urging financial institutions to be vigilant for detecting, identifying, and reporting suspicious activity connected to Cartel de Jalisco Nueva Generacion (CJNG) and other Mexico-based transnational criminal organizations smuggling fuel from the United States to Mexico in schemes involving Mexican tax evasion known as fiscal fuel theft. FinCEN’s Alert includes methodologies, financial typologies and red flags affiliated with this activity. This is released in conjunction with a recent OFAC action against CJNG.
The FATF Releases Updates to Their Jurisdictions Under Increased Monitoring
On June 19, 2026, the FATF releases updates to its Jurisdictions under Increased Monitoring often referred to as the “grey list.” The FATF has added Bosnia, Herzegovina and Iraq to its grey list due to deficiencies regarding each country’s AML/CFT programs. Conversely, Algeria and Namibia have been removed from the grey list due to marked improvements in each country’s AML/CFT programs.
AMLA Consultation on Ongoing Monitoring of a Business Relationship
The European Union’s new Anti-Money Laundering Authority (AMLA) launched a consultation on June 3, 2026 on draft guidelines that would significantly reshape how financial and non-financial institutions conduct ongoing customer and transaction monitoring. The guidelines also call for more dynamic monitoring, mandatory periodic and event-driven customer reviews, linked transaction detection, and greater supervisory consistency across EU member states. The consultation deadline is September 3, 2026.
Australia’s AML Reforms Took Effect July 1: Newly Regulated Sectors Under Compliance Requirements
Australia’s long-awaited AML/CTF reforms officially took effect on July 1, 2026, bringing thousands of new businesses under the supervision of the Australian Transaction Reports and Analysis Centre (AUSTRAC). The expanded regime extends AML obligations to legal professionals, accountants, conveyancers, real estate professionals, and dealers in precious metals and stones, requiring them to implement AML/CTF programs, appoint compliance officers, train staff, conduct customer due diligence, and report suspicious activity. The reforms are designed to close longstanding gaps exploited by criminal networks and align Australia with international AML standards.
DOJ - Alibaba Group and AUS Merchant Services Agree to Pay USD $600 million
Alibaba Group Holding Limited (Alibaba) — one of China’s largest companies — and its U.S.-based payment processor, AUS Merchant Services Inc. (AUS, and formerly known as Alipay US), have entered a non-prosecution agreement to pay $600 million to resolve the Justice Department’s allegations that they violated the Federal Food, Drug, and Cosmetic Act (FDCA) by failing to prevent merchants from selling and importing illegal pharmaceuticals, controlled substances, listed chemicals, and pill presses into the United States through the Alibaba.com and AliExpress.com e‑commerce platforms. AUS admitted that, between January 2020 and December 2023, it accepted U.S. dollar-denominated payments through credit cards and wire transfers routed through U.S. bank accounts before transferring the funds offshore for settlement on behalf of its customers. Using their own transaction monitoring system, they repeatedly missed transactions to high-risk jurisdictions and multiple payors on a single invoice.
SANCTIONS
OFAC Issues Multiple Actions Against Cartel de Jalisco Nueva Generacion (CJNG) for Fuel Smuggling
OFAC has sanctioned two Mexican nationals and nine entities tied to a CJNG-lined fuel theft scheme—involving cross-border smuggling, falsified customs documents, and shell companies—to evade Mexican taxes while generating tens of millions of dollars annually for the cartel. This actions is in conjunction with an alert released by FinCEN alerting financial institutions to increase diligence in detecting this type of activity.
Iran Oil Sanctions Reinstated
OFAC revoked General License X (the temporary waiver on Iranian crude/petrochemical sales) and replaced it with General License XI, reinstating sanctions on Iranian-origin crude oil, petrochemicals, and petroleum products.
US Treasury Targets Global Network Procuring Weapons for the Iranian Regime
OFAC sanctioned seven individuals and entities involved in an international network supporting weapons procurement efforts on behalf of the Islamic Revolutionary Guard Corps (IRGC). This action continues to build on prior actions and likely others that will potentially arise as the conflict in Iran and the Strait of Hormuz continues.
EU imposes a 12-month Russia sanctions renewal
On June 25, 2026, the EU has renewed Russian sanctions for a full year. This extends those sanctions until July 31, 2027. This is a significant difference from the prior 6-month rollover cycle and points directly to an economic response to the ongoing conflict between Russia and Ukraine.
Joint EU and UK Cyber Sanctions Package
This marks the first joint cyber sanctions package between the EU and UK. The Russian state and its criminal networks responsible for orchestrating cyber-attacks, interfering in elections and spreading malicious anti-Ukraine narratives across Europe have today been sanctioned by the UK. The EU sanctioned nine individuals and four entities. The UK added 24, targeting Russia's FSB "Centre 16," GRU Unit 29155 figures, and Lumma Stealer malware operators, tied to attacks across nine EU countries including Poland's energy grid.
AI & CRYPTO
EU AI Act Deadline Approaches for AML and Fraud Detection Systems
The European Union’s AI Act reaches a major milestone on 2 August 2026, when most provisions become fully enforceable. While some high-risk AI systems have a longer implementation timeline, financial institutions using AI for AML, transaction monitoring, fraud detection, and customer risk assessment should already be evaluating governance, documentation, transparency, and oversight requirements. The approaching deadline signals growing regulatory scrutiny of AI-driven compliance tools and reinforces the need for institutions to establish clear AI risk management and accountability frameworks.
FATF Releases Seventh Targeted Update on Implementation of FATF Standards on Virtual Assets
This targeted update assesses progress and remaining gaps in the implementation of Recommendation 15 across the FATF Global Network, following the extension of the FATF’s AML/CFT Standards to virtual assets (VAs) and virtual asset service providers (VASPs). Findings are discussed across the virtual asset space. For example, terrorist groups prefer stablecoins over other forms of virtual assets because of its lack of volatility. It is also noted that unhosted wallets provide a great way for bad actors to avoid compliance.
Monetary Authority of Singapore (MAS) Continues to Develop AI Framework
Published with industry partners under MAS's BuildFin.ai initiative, this industry framework is known as Safeguard for Agentic Finance at Runtime (SAFR). It was created for letting AI agents perform financial tasks safely, securely, and reliably. This is notable as one of the first frameworks specifically addressing agentic AI in finance rather than generative AI broadly.
FCA Continues to Move Forward with Its Initiative for a Supercharged AI Sandbox:
A UK regulatory sandbox continues to move forward to provide an environment that encourages innovation. The Supercharged Sandbox is a cohort-based program designed to help firms experiment, test and develop AI use cases in financial services. Participants operate within a secure cloud environment, with access to graphics processing unit (GPU)-enabled infrastructure, high-quality datasets and expert support, helping them to develop and test AI solutions rapidly. The cohort was launched July 13, 2026 with an expected showcase demo day of November 26, 2026.
