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The Future of Compliance: Technology Risks Take Center Stage in 2025

According to a recent survey, 63% of U.S. regulatory compliance professionals foresee technology-driven risks as the major factor likely to instigate compliance issues in 2025. Conducted by eflow Global, the survey highlights pressing challenges compliance executives face within the financial services industry. This extensive study involved 300 decision-makers across multiple continents and is part of eflow's second annual report on market abuse and trade surveillance trends.

As compliance teams strive to navigate the rapidly evolving regulatory landscape, a significant number of professionals identified several market forces contributing to their concerns. Following technological risks, 58% cited global economic instability, and 48% pointed towards increasing regulatory complexity. Additionally, the emergence of digital assets and cryptocurrency markets registered high on the list, with 37% signaling this as a concern, along with the geopolitical instability affecting many regions, noted by 20% of those surveyed.

When discussing which issues keep them awake at night, the executives ranked the ability to keep up with regulatory changes (43%), thoroughly assessing risk profiles across various asset classes (42%), and efficiently capturing evidence of insider trading and market manipulation (40%) as their top three worries. These findings suggest a complex interrelationship between technological advancements, evolving market structures, and regulatory demands, all of which necessitate comprehensive and adaptive compliance strategies.

The statistics on enforcement actions highlight the gravity of the compliance landscape. In 2024, U.S. regulators issued $1.67 billion in fines to financial institutions, comprising a substantial portion of the global penalties amounting to $1.84 billion. This signifies a shift in regulatory focus, with authorities targeting a broader spectrum of firms than in previous years. Notably, $740.7 million of these fines were connected to eComms record-keeping violations, making it the focal area of compliance enforcement for the year.

Ben Parker, CEO of eflow Global, voiced concerns regarding the integration of trade and eComms data in firms. With only 52% expressing confidence in their systems to effectively amalgamate these aspects as part of an holistic compliance framework, it is evident that regulatory expectations necessitate enhanced clarity. Many compliance professionals believe that increased transparency from regulators and closer collaborations between regulatory bodies and compliance teams would significantly bolster their efforts.

In response to how regulators could better support firms, over 60% stressed the importance of clear communication in expectations and enforcement procedures. Additionally, 45% called for harmonization of international regulatory standards, while 37% underscored the need for concrete guidelines on core technological requirements.

Looking ahead, the financial industry, particularly small to mid-sized firms, must prioritize compliance operations geared towards an increasingly demanding regulatory environment. With a staggering 260% rise in global enforcement actions year-over-year, compliance teams must adapt swiftly to avoid substantial penalties.

As we move into 2025, upcoming events like the 2025 FINRA Annual Conference will showcase technologies designed to address these pressing regulatory challenges. eflow, which specializes in providing compliance and trade surveillance solutions, will be presenting its innovative offerings specifically designed for smaller financial entities.

This crucial dialogue regarding the future of compliance isn't merely about adhering to regulations; it's equally about fostering a culture of proactiveness amongst financial institutions. With technological advancements redefining market landscapes and regulatory expectations, those who adapt swiftly and effectively will be best positioned to maintain compliance and drive sustainable performance.

In conclusion, as technologic transformations continue to reshape the financial sector, the spotlight on compliance will only grow more intense. Regulatory compliance professionals must brace for an era where understanding and integrating technology-driven risks is not just another task but a fundamental aspect of their operational ethos. The landscape is evolving, and those who respect this will inevitably lead the charge in compliance and risk management within the financial services realm.