FCA, SEC, AI – Rules in 2025 are Changing (Is Your Bank Compliance Ready?)

Times of change 

Throughout its history, the financial service industry has gone through cycles of rapid regulatory change followed by periods of quiet adaptation and industry. Right now, the market is in the former state.  

While in the past some of these cycles have been driven by major world events such as  war or a global depression, the current restructuring is a response to rapid technological innovation, complex cybersecurity challenges, operational resilience, and evolving societal expectations.  

Failure to adapt to these regulatory changes can be both financially costly and erode client trust. Financial institutions that are too reactive in their compliance outlook risk lagging behind regulatory shifts. The sheer volume and intricacy of modern regulations can mean that manual, siloed efforts are unsustainable and at greater risk of error.    

This environment demands a transition from a reactive approach to a proactive and flexible compliance framework. This involves having a system that either anticipates regulatory trends or has the agility to pivot with them, embedding compliance awareness organization-wide, and leveraging technology.  

The outcome of this goal is to transform compliance from a burden into a strategic asset. Regulators emphasize principles-based regulation, operational resilience, and governance of new technologies like AI and cybersecurity. Outdated, rigid models risk compliance failures and strategic disadvantage.    

Changing attitudes at the FCA and SEC 

Recent actions from the UK's Financial Conduct Authority (FCA) and the U.S. Securities and Exchange Commission (SEC) strongly suggest a trend towards greater pragmatism and rewarding targeted enforcement, but also an expectation of far more sophisticated compliance. 

Pragmatism in the FCA 

The FCA has recently been signaling an increased willingness to adapt. A key recent indicator was withdrawing its controversial enforcement transparency proposal (popularly referred to as name-and-shame) where it would publish the names of firms that came under investigation.  

After significant industry and government criticism, the FCA acknowledged a "lack of consensus" and reverted to its prior exceptional-circumstances-only policy. This suggests a preference for considering things on a case-by-case basis and encouraging compliance through industry dialogue.    

In the same letter to the Treasury Select Committee (TSC) that retracted name-and-shame, the FCA also announced that it had improved its enforcement efficiency, with recent investigations closing much faster, with the average now being under 16 months versus 42 months previously. This, too, was well received by the financial service industry, as any institution that does come under investigation would much rather get it over and done with in a timely manner, rather than having to plan around the uncertainty.  

The FCA even acknowledged that it would not be continuing its 2023 proposals with the Prudential Regulation Authority (PRA) to improve diversity and inclusion. Whether this direction is for better or worse, it still indicates that the FCA is paying attention to the international political climate and is keen not to put firms in the awkward position of having to defy the explicit or implicit policies of transatlantic clients.  

Pivoting at the SEC  

The SEC is also making adjustments and has new leadership under Commissioner Mark Atkins, who used his opening statement before the Senate & Banking Committee to call existing regulations "unclear, overly politicized, complicated, and burdensome," advocating for "common sense" rather than aggressive enforcement.    

While the previous Commissioner Gary Gensler's policy was characterized as being uncompromising on both enforcement and rulemaking, Atkins has directed the Commission to pursue a more targeted “fewer, bigger cases" strategy. This is supported by the SEC’s own reports from the last financial year, which showed a 26% decrease in enforcement actions, 46% fewer Accounting & Auditing actions, and yet an increase of 44% in total value of fines issued at €667+ million.  

While there’s a new Cyber & Emerging Technologies taskforce focused on digital fraud and standards for cybersecurity and AI misuse, there’s also strong indications that there’ll be less priority on enforcement where there’s no clear deception.  

What has remained consistent is the SEC’s focus on off-channel communications, which has cost firms over €1.5 billion in penalties since 2021. 

What this means for financial service providers 

Radical regulatory policy changes by bodies like the FCA and SEC means firms either need to be able to predict the changes or be flexible enough to pivot when it happens.   

The "fewer and bigger" enforcement trend, with claims of increased individual executive liability, demands robust corporate programs and rigorous top-down oversight. Technology and telco are now the main focus of regulatory scrutiny, especially around new tools like AI, both in terms of enforcement and expectations on businesses to leverage this tech for stronger compliance and record keeping.  

A proactive approach doesn’t mean guessing what the next regulatory direction is, but maintaining flexibility to swiftly adjust corporate controls, training, and technology.    

Risks & resilience 

Proactive compliance involves continuously identifying, assessing, and mitigating potential risks by category before they materialize – even if predicting the exact instance of that risk isn’t realistic. It’s characterized by continuous learning, ‘horizon scanning’ for trends, and nurturing a compliance-aware culture among staff.    

Key features of effective and proactive compliance policies for financial service providers include:  

• Robust risk assessment frameworks 
  Regular, comprehensive assessments to identify and prioritize issues.

• Compliance culture 
  Driven by leadership’s own example and priorities, and reinforced by comprehensive, ongoing training.

• Effective internal controls 
  Documented, tested, and risk-aligned controls that are proactive and preventative rather than just reactive and after-the-fact.

• Continuous monitoring & testing 
  Ongoing evaluation of the compliance program's effectiveness, often leveraging new tech to identify equally new vulnerabilities.

• Smart partnership  
  Financial service providers cannot realistically be expected to sustain standards of client service while also becoming technologists. Forming trusted partnerships with tech and compliance innovators like 1GLOBAL is an essential part of a workable strategy.  

• Scheduled intelligence briefings 
  Continuously monitor the global regulatory landscape, interpreting potential impacts rapidly, and produce a regular digest for all relevant stakeholders.

• Adaptive procedures 
  Rather than simple how-to guides modeled after an ideal scenario, create principle-based policies with concise, easily updated directives that can be applied to emergent situations. 

• Cross-functional collaboration 
  The developing compliance landscape blurs the responsibility between executive, strategic, legal, risk, IT, and business units – so break down operational silos when developing policy. 

• Engage with regulators 
  It’s a major advantage if the first contact you have with regulatory authorities is not when the auditors turn up. As characterized by the changing FCA policies, smart service providers seek dialogue to understand evolving expectations.  

Future proofing compliance 

Embracing a proactive, flexible, and strategically integrated compliance model is essential for future proofing. Mastering proactive and flexible compliance builds not only resilient systems but also makes for a resilient reputation, attracting clients, partners, and talent. It signals stability, integrity, and sound governance, enabling institutions to navigate regulatory changes and market disruptions more effectively.    

As the regulatory landscape continues to evolve, the most dynamic financial service providers will implement their compliance not as a static burden but as an integrated, strategic capability essential for operating with confidence and integrity.  

To best equip your business with the tools to adapt to regulatory shocks and emerging risks without compromising integrity or core objectives, contact 1GLOBAL today.