Most Compliance Professionals View Technology-Driven Risks as Top Threat, eflow Global Finds
(Illustration courtesy of eflow Global)
Nearly two-thirds of regulatory compliance professionals say technology-driven risk is the most significant market force likely to cause compliance issues for financial services firms, according to eflow Global, Boston.
Other market forces cited in the report, U.S. Trends in Market Abuse and Trade Surveillance 2025, include global economic instability (58%), increasing regulatory complexity (48%), digital assets and crypto markets (37% each) and geopolitical instability (20%).
When asked to rank market abuse and what regulatory challenges keep them up at night, the regulatory compliance professionals cited keeping abreast of regulatory changes (43%), assessing risk profiles across multiple asset classes (42%) and accurately identifying insider trading and market manipulation (40%) as their top three choices. This was followed by integrating trade and electronic communications surveillance as part of a holistic strategy and being able to fully understand and explain the output of trade surveillance reports – each at 38%.
Last year, U.S. regulators levied $1.67 billion in fines against financial firms, representing a majority of the $1.84 billion in fines imposed by regulators globally, the report said. This figure is slightly below the five-year peak of $1.9 billion in fines levied globally in 2022, however, the penalties are spread across a significantly higher number of enforcement actions, highlighting that regulators are targeting a wider cross-section of firm types and sizes.
Of the total fines imposed against U.S. firms, the largest amount was for electronic communications surveillance record-keeping violations ($740.7 million), followed by trade surveillance systems and controls ($562.4 million), insider trading ($305.8 million), market manipulation ($51.3 million), short selling violations ($6.7 million) and trade reporting ($4.7 million), eflow said.
“With the volume of global enforcement actions surging by 260% year-over-year in 2024, and regulators increasingly targeting small- and mid-market firms, this should serve as a wake-up call for the thousands of smaller financial institutions and trading firms seeking to proactively enhance their compliance operations,” eflow Global CEO Ben Parker said.
When asked how regulators could better support firms in their efforts to ensure regulatory compliance, more than six out of 10 (62%) cited the need for greater transparency around regulator expectations and enforcement action. Forty-eight percent said closer collaboration between regulators and compliance teams followed by greater standardization of international regulatory requirements (45%), clear guidance on minimum core technology standards (37%) and increased use of data and technology to enhance market oversight and greater credit for proactive self-reporting (30% each).
