Travis Schwab, CEO, Eventus
Rapid ideological, geopolitical and technological changes are creating a noisy and uncertain world, challenging traditional approaches and conventional wisdom across all sectors of the global economy. In such times, it becomes more important than ever to start from first principles when running a compliance program. For compliance teams, a fundamental function is to build systems and processes that can find the right signals in the noise, unique to facts and circumstances.
Yet growing complexity across marketplaces threatens to overwhelm firms with interference. By exploring emerging trends – namely the potential for lighter-touch regulation, increasing demand for clarity across digital asset markets, and the growing power of artificial intelligence (AI) – it is clear that finding the signal demands a fresh capacity for flexibility and innovation across the surveillance function.
Responding to shifting enforcement environments
As governments across the world look to promote growth and competitiveness, the regulation of various industries is coming under scrutiny – especially financial services. The new Trump Administration is widely predicted to prioritize a broad agenda of deregulation amid leadership changes across federal agencies. The United Kingdom (UK) is eyeing the relaxation of financial crisis-era demands. Even the European Union (EU) is embarking on a process of “simplification.”
While this would suggest that existing efforts can ease, experience shows that deregulation often manifests as compliance “whack-a-mole” – where decreased enforcement in one area diverts attention and energy to other (often unanticipated) avenues.
Similarly, enforcement priorities can change very quickly amid the shifting sands of political expediency and public opinion. Issues at individual firms or market-wide black swan events can also trigger swift course corrections if there are perceived regulatory gaps. Longer-term, history has consistently demonstrated that periods of deregulation are often followed by renewed, more intensive scrutiny.
Put simply, the need for compliance teams to prioritize robust and proactive surveillance programs to guard against regulatory and reputational risk both now and in the future remains as important as ever. However, firms must also now navigate the prospect of doing more with less to cover an array of potential scenarios.
Increasing regulatory clarity for digital assets
It is also important to recognize that deregulation is in no way a universal trend. This is perhaps most evident across digital asset markets, where increasing consumer and institutional adoption has created strong momentum and support for clearer regulatory approaches and guidelines.
The introduction of the EU’s Markets in Crypto-Assets (MiCA) regulation – which came into force in December – is widely viewed as providing a regulatory framework that stands to be replicated across other jurisdictions. In the United States, new policy ambitions for digital assets seem to be ultimately aimed at bringing increased clarity after several years of flip-flopping and uneven enforcement. Ongoing consultations in the UK and Asia-Pacific also point towards more robust oversight
It is unclear at this stage exactly how evolving regulatory approaches across the globe will impact competitiveness and enforcement at the jurisdictional level. What we do know is that firms will need flexibility to address the complexity and risks of meeting emerging rules and obligations across their multi-jurisdictional operations.
Harnessing the potential of AI
Faced with growing complexity and ongoing resource constraints, many firms are now actively exploring the use of AI to improve performance, unlock efficiencies and reduce costs.
When deployed effectively, the upside is transformative. AI tools allow firms to cast a wider net and capture more data, enabling them to accurately detect problematic behavior and patterns across markets and products – without overloading teams with alerts. AI also promises to automate labor-intensive manual and repetitive processes, freeing up resources to focus on higher-value activities.
Yet uncertainty around the potential downsides lingers. Despite the potential, hype and investment have far outpaced adoption and utility to date – with an estimated 80% of all AI projects failing. The reasons are varied, but inadequate risk controls and accountability are common challenges. Deployments are also being hamstrung by poor underlying data quality, which raises the risks of hidden biases and false and misleading information resulting in outright bad decision-making.
Given the recent shift in regulatory focus toward internal processes and controls, it is imperative that appropriate safeguards are in place to ensure that decisions are fully explainable and auditable. For example, if an alert is closed, firms must be able to demonstrate to regulators the considerations informing the calibration, the data used and the reason for closure.
Firms must also continue to ensure they are on top of their data. Over the past year, the threat of massive fines for lapses in data governance has served as strong motivation for firms to ensure complete, accurate data from all their trading systems finds its way into surveillance programs. While good progress has been made, the opportunity to realize maximum value from AI is a compelling reason to redouble efforts.
Finding signal in the noise
As we look ahead to 2025 and beyond, the only thing that seems certain is that uncertainty will remain.
Amid such instability and volatility, it is easy for the noise to drown out what is important. Challenges are compounded by the limitations of legacy surveillance solutions, which are increasingly overwhelmed by the highly complex and rapidly evolving nature of marketplaces around the world.
The good news is that modern surveillance platforms are helping firms find the signals in the noise and tune in to what really matters to them. The flexibility to deploy solutions quickly and cost-effectively to address specific, evolving needs – combined with complete coverage, comprehensive data ingestion and intelligent automation – is empowering firms with the clarity and focus to meet the moment.