Regulation and technology in 2025

By Collette Smith, Chief Transformation Officer, SmartSearch

As 2025 begins, the world of digital compliance is preparing for significant challenges and changes throughout the year. The past year has been defined by technological advancements, heightened regulatory scrutiny, and the ongoing balancing act between transparency and privacy.

Looking ahead, firms operating in regulated industries will need to prepare for four key compliance trends that are set to shape the future of anti-money laundering (AML), fraud prevention, and data privacy.

AI as both a threat and a tool

The rapid rise of artificial intelligence (AI) continues to be a double-edged sword for compliance. On one side, AI is being harnessed to streamline customer verification, accelerate due diligence, and strengthen anti-fraud measures. On the other, it is being used by fraudsters to conduct financial crime in an increasingly sophisticated and convincing way.

One of the most notable risks of AI comes from deepfake technology, which is becoming progressively more difficult to detect. Earlier this year, an employee of a multinational company was duped into thinking he was in a virtual meeting with his CFO and colleagues. Unbeknownst to him, the participants were AI-generated deepfake recreations. This sophisticated scam resulted in the fraudulent transfer of $25 million to criminal-controlled bank accounts.

Deepfakes aren’t only impacting corporations. In the UK, fraudsters have used deepfake videos of well-known figures like Martin Lewis and Elon Musk to promote fraudulent cryptocurrency schemes. As the sophistication of this technology increases, compliance teams will need to deploy equally advanced tools to stay ahead of cybercriminals.

On a positive note, AI-driven compliance technology can help prevent fraud in ways that traditional systems cannot. For instance, while a deepfake may fool human perception, AI-enabled identity verification can flag discrepancies by cross-referencing data across multiple trusted sources, like electoral rolls or credit systems. Growing adoption of this type of cross-checking will make it far more difficult for fraudsters to insert fake identities into the system.

Balancing privacy and transparency

Another critical challenge for compliance teams is finding the right balance between privacy and transparency. AML regulations require firms to collect and analyse personal and financial data to identify potential fraud risks. However, privacy laws, particularly the General Data Protection Regulation (GDPR), restrict the collection and processing of personal data unless explicit consent is obtained.

This tension came to a head recently when an earlier draft of the European Union’s Anti-Money Laundering Directive (AMLD), which requires the establishment of a central register of ultimate beneficial owners, was found to violate EU privacy rights. This landmark decision prompted debates on how firms can balance AML requirements with data protection obligations.

In the UK, the Data Protection Act allows for data sharing for anti-money laundering purposes, but firms often tread carefully to avoid penalties for data misuse. To manage this complexity in the next 12 months and beyond, regulators, firms, and users will need to work together to develop a more unified approach. Solutions such as third-party verification, secure data hosting, and clear privacy policies will be essential for organisations to navigate this complex landscape.

New corporate liability for fraud

One of the most significant regulatory changes on the horizon is the introduction of the “failure to prevent fraud” offence, which will come into force on 1 September 2025. This new regulation extends corporate liability for fraud committed by “employees, agents, and other associated persons” if the fraud benefits the organisation and has a UK connection.

The key difference with this legislation is that liability arises if a company does not have reasonable measures in place to prevent fraud. This means firms will need to strengthen their internal controls, enhance employee training, and conduct more robust due diligence on third-party relationships.

This shift is expected to have a profound impact on organisational culture. Companies that fail to meet their compliance obligations could face criminal prosecution, substantial fines, and severe reputational damage. The regulation will push firms to be more proactive, making continuous compliance monitoring a non-negotiable part of everyday operations.

Technology as a compliance enabler

As compliance demands continue to increase, many firms are turning to technology to bridge the gap. Third-party compliance platforms that leverage AI, behavioural analytics, biometric verification, and secure data hosting are becoming essential for regulated firms. These platforms can process large datasets in real time, enhancing the speed and accuracy of identity checks and reducing the risk of human error.

AI-powered compliance tools can also detect anomalies that might be missed by traditional methods. For example, biometric verification can detect fraudulent attempts to use synthetic identities, while AI can spot patterns of suspicious behaviour in transaction data. By incorporating these technologies, firms can create a more agile and effective compliance framework.

Throughout 2025, firms should not view compliance as a burden but as an opportunity to future-proof their operations and protect their business. Proactively addressing issues related to AI, privacy, cryptocurrency, and corporate liability will enable them to stay ahead of evolving regulatory requirements. Those that fail to act may find themselves exposed to heightened risks and regulatory penalties.

The future of digital compliance is undoubtedly complex, but with the right tools, processes, and a forward-thinking approach, firms can turn these challenges into strategic advantages.

About the author

Collette Smith is Chief Transformation Officer at digital compliance and AML provider,  SmartSearch.

Article Topics

AML  |  biometrics  |  data privacy  |  digital identity  |  fraud prevention  |  generative AI  |  identity verification  |  KYB  |  SmartSearch