Over the last few decades, compliance has transformed from a regulatory necessity into an industry worth hundreds of billions of pounds. Whilst its role in risk mitigation and legal adherence is undisputed, compliance is frequently perceived by some politicians and business leaders as a burdensome overhead that hampers operational agility. As a result, compliance functions face the persistent risk of marginalisation, reduction, or reform. In response, senior compliance professionals must adopt a strategic approach to demonstrate the indispensable value that compliance adds to the businesses we serve. 

 Compliance is often viewed as an overhead cost that organisations must bear to meet regulatory requirements, mitigate risks, and avoid legal penalties. Unlike revenue-generating activities, compliance does not directly contribute to profitability, making it a financial and operational burden, particularly for smaller firms with limited resources. The costs associated with compliance include hiring specialised personnel, investing in technology for monitoring and reporting, conducting regular audits, and training employees on regulatory standards. For example, under the General Data Protection Regulation (GDPR), companies handling EU citizens' data must invest in data protection officers, legal consultations, and system upgrades to ensure compliance, or face fines of up to €20 million or 4% of global annual turnover. 

 Similarly, financial institutions must comply with AML regulations such as the Bank Secrecy Act (BSA) in the US, requiring the implementation of costly transaction monitoring systems and Know Your Customer (KYC) checks. In 2020, Goldman Sachs paid $2.9 billion in penalties for violations related to the 1MDB scandal, underscoring the high cost of non-compliance. Additionally, Deutsche Bank has spent over $18 billion on compliance and litigation costs since 2008, demonstrating how regulatory obligations can significantly impact financial institutions. 

Whilst compliance may seem like a costly obligation, failing to adhere to regulations can result in severe financial penalties, reputational damage, and even legal consequences, ultimately making the investment in compliance a necessary safeguard for long-term business sustainability.

There has been a notable global shift in compliance efforts in recent years driven by a combination of geopolitical, economic, technological, and regulatory factors. Several key trends have contributed to changes in how governments and financial institutions approach compliance:

• Geopolitical Tensions & Sanctions Enforcement
  Increased geopolitical conflicts, such as the Russia-Ukraine war, have led to stricter sanctions regimes, particularly from the US, EU, and UK. However, enforcement has been inconsistent, with some jurisdictions deprioritising compliance to maintain economic ties with sanctioned nations. Some countries, such as Turkey and the UAE, have been accused of serving as financial hubs for Russia, prompting a shift in global compliance expectations.
  
  
• Economic Pressures & Deregulation
  Economic downturns and inflationary pressures have led some governments to relax compliance measures to attract investment and ease financial sector burdens. For example, under the Trump administration, the US reduced enforcement of the Foreign Corrupt Practices Act 1977 (FCPA) to encourage global competitiveness. Similarly, the UK has faced criticism for lax enforcement of financial crime laws, particularly in its approach to unexplained wealth orders (UWOs) and enforcement against Russian oligarchs.
  
  
• Regulatory Harmonisation & Divergence
  Whilst global organisations like the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision (BCBS) push for standardisation, compliance frameworks remain fragmented. The EU, for example, abandoned its independent AML watchlist, instead aligning with FATF’s grey list, delaying action against non-compliant jurisdictions. Meanwhile, some regions, like the US and Singapore, are tightening AML rules, creating a divide in global compliance strategies.
  
  
• Advancements in Financial Crime Tactics
  Criminals are leveraging decentralised finance (DeFi), cryptocurrency mixers, and digital assets to bypass traditional compliance frameworks. The rise of "pig butchering" scams and ransomware attacks has outpaced regulatory responses, particularly in jurisdictions with underdeveloped cybercrime enforcement. Some governments, such as China, have focused on protecting their own citizens from scams rather than dismantling global financial crime networks.
  
  
• Technology-Driven Compliance Evolution
  Many compliance functions are being automated through AI and machine learning, reducing reliance on manual processes. While this enhances efficiency, it also creates gaps in human oversight, leading some regulators to scrutinize AI-driven compliance efforts more closely. At the same time, firms in less regulated markets may delay investment in advanced compliance tools, widening the enforcement gap between developed and developing markets.
  
  
• Pushback Against Overregulation
  Some industries, particularly crypto and fintech, have argued that excessive regulatory requirements stifle innovation and investment. In response, some countries have weakened compliance frameworks to attract businesses. For example, El Salvador’s decision to adopt Bitcoin as legal tender has raised concerns about its ability to monitor financial crime risks, while Dubai has positioned itself as a crypto-friendly hub with relatively lenient AML measures.

Although compliance is often seen as a regulatory obligation, in reality, it is a key driver of profitability, risk management, and business growth. Banks, FinTech firms, and asset management companies that invest in strong compliance frameworks enhance customer trust, prevent financial crime, and unlock new market opportunities, while those that neglect compliance risk hefty fines, reputational damage, and regulatory sanctions.

A prime example is JPMorgan Chase, which leveraged compliance automation to streamline its KYC (Know Your Customer) and AML processes. By implementing advanced compliance technology, the bank reduced onboarding times, cut operational costs, and improved customer experience leading to increased revenue and market share. On the other hand, HSBC’s failure to enforce strong AML controls led to a $1.9 billion fine, severely impacting its profitability and forcing a long-term overhaul of its compliance operations. Similarly, in the FinTech and crypto space, compliance determines market access. Coinbase’s adherence to SEC and FATF regulations allowed it to secure licenses in multiple jurisdictions, expanding its global customer base and increasing investor confidence. Meanwhile, Binance’s regulatory struggles have led to market restrictions, legal challenges, and financial losses, illustrating how non-compliance can hinder growth and profitability.

Beyond avoiding fines, compliance also enhances operational efficiency and fraud prevention. Financial institutions that integrate AI-driven transaction monitoring systems can detect and prevent fraudulent activities in real-time, protecting their assets and customer funds. Fraud and money laundering losses can be devastating for profitability, as seen in cases like Wirecard’s collapse due to financial misconduct. By contrast, firms that proactively enforce AML and fraud prevention measures strengthen their financial stability and avoid regulatory crackdowns.

Another major benefit of compliance is access to capital and strategic expansion. Investors, regulators, and institutional clients favour financial institutions with strong governance and risk management practices. Banks and asset managers that demonstrate compliance with ESG (Environmental, Social, and Governance) standards attract institutional investors and impact funds, increasing their market value. Furthermore, regulatory compliance enables smooth cross-border operations, allowing banks and FinTechs to expand into new markets without restrictions.

Ultimately, compliance is not just a cost of doing business; it is a strategic advantage. Financial institutions that prioritise compliance gain regulatory trust, mitigate financial crime risks, and build a strong reputation that attracts customers and investors. By integrating compliance into their core business strategies, financial services firms can ensure long-term profitability, sustainable growth, and competitive resilience in an increasingly regulated industry.