What banks and fintechs should expect in terms of compliance and regulation this year.
2024 was a pivotal year for banks and fintechs. High profile events like the collapse of Synapse, numerous enforcement actions, and reduced fintech funding underscored the importance of robust compliance frameworks. These developments forced banks and fintechs to reassess third-party partnerships and risk management strategies.
Starting 2025 with a new Trump administration brings significant changes. Trump has announced a number of proposed policy changes, from looser bank regulations, to a new crypto taskforce, to launching his own fintech brand.
These actions signal an administration that supports financial innovation, and, as a result, fintech investment is indeed expected to rebound. That being said, investors will likely shift focus from hyper-growth, to sustainable and compliance-first business models that demonstrate long-term viability.
AI is already being used to a significant degree in compliance-related work. Now, we’re seeing AI plus automation making the biggest splash in overhauling the traditional 3LOD framework into the more efficient – and effective – 2LOD model.
AI advancements like Claude can now perform tasks under the first line of defense that were typically handled by employees. The dispositioning of alerts across first line tasks such as screening and transaction monitoring can now in part be handled by AI. This change can significantly reduce the time spent on repetitive tasks and free up resources for higher-value work.
With AI handling more and more first line work, the importance of compliance testing in the second line increases, and this is where automation comes in. Instead of compliance teams relying on manual sampling to test their fincrime controls, automation tools like Cable can provide 24/7 100% testing coverage, without the additional manpower it would normally require.
Want to learn more about AI, automation, and 2LOD? Click here.
Even with a potentially deregulated environment, experts agree that bipartisan support for consumer protection will make data privacy and cybersecurity top concerns.
The CFPB’s rule under the Dodd-Frank Section 1033 gives consumers more control over their personal financial data.
Why is this important? Because consumers now have more power to share their data with authorized third parties and compare products and services, fostering a more transparent marketplace.
Regulators are likely to double down on fair lending and financial inclusion, especially as it pertains to fintech.
Recent CFPB proposals, such as removing medical debt from credit reports, signal increased scrutiny of financial practices impacting underserved communities.
As digitization accelerates, so do fraud and scams. This year, the OCC has already issued two cease and desist orders to Bank of America and USAA Federal Savings Bank for AML/BSA deficiencies, which indicates that this remains an area of regulatory concern.
Financial institutions need to adopt robust measures to combat sophisticated fraud schemes and address heightened sanctions oversight.
Cryptocurrencies are once again on the up, supported by a pro-crypto administration. While this opens the door for financial institutions to bank crypto companies, it also brings regulatory challenges.
Coindesk has framed three potential paths forward, in terms of crypto compliance:
The reality is, option three is, if not impossible, then highly unlikely. Thanks to their speed and ease of transaction, cryptocurrencies have been increasingly used for money laundering. Even a pro-crypto, deregulatory environment won’t accept the risks associated with fully decentralized crypto systems.
More likely, crypto companies and financial institutions will adopt one of the first two options – which means they need to prioritize compliance and risk management, especially in BSA and AML. Otherwise, they run the risk of being fined hundreds of millions of dollars.
During Trump’s first term, a lighter-weight fintech license was proposed, requiring fintechs to be directly regulated and therefore subject to their own compliance standards. While it didn’t materialize, there could be renewed interest in it during Trump’s second term – though it's far from guaranteed and unlikely it would come to fruition in 2025.
A fintech license could place a heavier burden on smaller fintechs, potentially stifling innovation. However, requiring fintechs to strengthen compliance programs promotes sustainability, safety, and trust – all things that make partnerships with banks easier to justify to regulators.
We’re entering another era of financial innovation, bolstered by the trends outlined above.
However, despite Trump’s deregulation mandate, areas like the BSA, cybersecurity, and consumer protection will continue to be thoroughly regulated because of a bipartisan desire to protect consumers. Emerging technologies like generative AI could also prompt new regulations and scrutiny in those areas.
After years of strict regulatory scrutiny, 2025 probably feels like it’s giving banks and fintechs free rein. But there’s one lesson that financial companies should remember, regardless of the regulatory environment: to grow confidently in 2025 and beyond, banks and fintechs still need to prioritize a compliance-first approach.
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2024 was a pivotal year for banks and fintechs. High profile events like the collapse of Synapse, numerous enforcement actions, and reduced fintech funding underscored the importance of robust compliance frameworks. These developments forced banks and fintechs to reassess third-party partnerships and risk management strategies.
Starting 2025 with a new Trump administration brings significant changes. Trump has announced a number of proposed policy changes, from looser bank regulations, to a new crypto taskforce, to launching his own fintech brand.
These actions signal an administration that supports financial innovation, and, as a result, fintech investment is indeed expected to rebound. That being said, investors will likely shift focus from hyper-growth, to sustainable and compliance-first business models that demonstrate long-term viability.
AI is already being used to a significant degree in compliance-related work. Now, we’re seeing AI plus automation making the biggest splash in overhauling the traditional 3LOD framework into the more efficient – and effective – 2LOD model.
AI advancements like Claude can now perform tasks under the first line of defense that were typically handled by employees. The dispositioning of alerts across first line tasks such as screening and transaction monitoring can now in part be handled by AI. This change can significantly reduce the time spent on repetitive tasks and free up resources for higher-value work.
With AI handling more and more first line work, the importance of compliance testing in the second line increases, and this is where automation comes in. Instead of compliance teams relying on manual sampling to test their fincrime controls, automation tools like Cable can provide 24/7 100% testing coverage, without the additional manpower it would normally require.
Want to learn more about AI, automation, and 2LOD? Click here.
Even with a potentially deregulated environment, experts agree that bipartisan support for consumer protection will make data privacy and cybersecurity top concerns.
The CFPB’s rule under the Dodd-Frank Section 1033 gives consumers more control over their personal financial data.
Why is this important? Because consumers now have more power to share their data with authorized third parties and compare products and services, fostering a more transparent marketplace.
Regulators are likely to double down on fair lending and financial inclusion, especially as it pertains to fintech.
Recent CFPB proposals, such as removing medical debt from credit reports, signal increased scrutiny of financial practices impacting underserved communities.
As digitization accelerates, so do fraud and scams. This year, the OCC has already issued two cease and desist orders to Bank of America and USAA Federal Savings Bank for AML/BSA deficiencies, which indicates that this remains an area of regulatory concern.
Financial institutions need to adopt robust measures to combat sophisticated fraud schemes and address heightened sanctions oversight.
Cryptocurrencies are once again on the up, supported by a pro-crypto administration. While this opens the door for financial institutions to bank crypto companies, it also brings regulatory challenges.
Coindesk has framed three potential paths forward, in terms of crypto compliance:
The reality is, option three is, if not impossible, then highly unlikely. Thanks to their speed and ease of transaction, cryptocurrencies have been increasingly used for money laundering. Even a pro-crypto, deregulatory environment won’t accept the risks associated with fully decentralized crypto systems.
More likely, crypto companies and financial institutions will adopt one of the first two options – which means they need to prioritize compliance and risk management, especially in BSA and AML. Otherwise, they run the risk of being fined hundreds of millions of dollars.
During Trump’s first term, a lighter-weight fintech license was proposed, requiring fintechs to be directly regulated and therefore subject to their own compliance standards. While it didn’t materialize, there could be renewed interest in it during Trump’s second term – though it's far from guaranteed and unlikely it would come to fruition in 2025.
A fintech license could place a heavier burden on smaller fintechs, potentially stifling innovation. However, requiring fintechs to strengthen compliance programs promotes sustainability, safety, and trust – all things that make partnerships with banks easier to justify to regulators.
We’re entering another era of financial innovation, bolstered by the trends outlined above.
However, despite Trump’s deregulation mandate, areas like the BSA, cybersecurity, and consumer protection will continue to be thoroughly regulated because of a bipartisan desire to protect consumers. Emerging technologies like generative AI could also prompt new regulations and scrutiny in those areas.
After years of strict regulatory scrutiny, 2025 probably feels like it’s giving banks and fintechs free rein. But there’s one lesson that financial companies should remember, regardless of the regulatory environment: to grow confidently in 2025 and beyond, banks and fintechs still need to prioritize a compliance-first approach.
