Factors Beyond Commission's Notice Impacting the Matter at Hand
In the ever-evolving landscape of the European financial industry, institutions face a myriad of challenges in the coming years. According to the "The State of European Financial Services: 2025 Report" by Sumsub, these challenges revolve around regulatory demands and fraud prevention.
Ilya Brovin, the Chief Growth Officer at Sumsub, emphasises that the solution lies not just in risk management but also in regaining efficiency, improving user experience, and ensuring sustainable growth.
One of the key challenges is regulatory fragmentation and complexity. Institutions must navigate differing and sometimes contradictory rules in multiple jurisdictions, complicating compliance and slowing market expansions.
Another significant issue is tougher AML/CFT controls. The European Banking Authority (EBA) highlights gaps between regulatory expectations and actual AML/Counter-Terrorism Financing (CFT) practices, with many firms lacking adequate policies, especially regarding sanctions screening and SEPA instant credit transfer monitoring.
Operational risk and reporting also pose a challenge. New European regulations require more detailed and standardized operational risk capital calculations and supervisory reporting, increasing institutions' administrative burden but improving regulatory oversight.
Fraud prevention and consumer protection are equally crucial. Updated EU payment services rules mandate sharing fraud-related information, verifying IBAN-account name matches before transfers, and higher transparency of fees and charges. This demands enhanced systems and processes from banks and payment providers.
Cybersecurity requirements are another area of focus, with stricter rules pushing for advanced threat detection, penetration testing, and data protection aligned with evolving privacy laws.
Solutions to these challenges include implementing robust, integrated compliance systems encompassing AML, KYC, sanctions screening, and fraud detection. Adopting standardized operational risk reporting frameworks is also crucial to comply efficiently with new EBA rules. Sharing fraud-related information across institutions and authorities can improve detection and response without compromising customer experience. Enhancing cybersecurity defenses through continuous monitoring, testing, and updates is essential to prevent breaches that could lead to fraud or compliance failures.
The European financial industry is preparing for an increasingly regulated environment. Over half (50%) expect tougher regulation in transaction monitoring, while 38% anticipate stricter KYC/KYB requirements. 76% of all fraud cases occur post-onboarding, highlighting the need for ongoing vigilance.
New fraud forms like AI-generated deepfakes and synthetic ID documents underscore the limitations of manual checks and isolated tools. Despite increasing fraud risks, many compliance processes remain fragmented. Over 20% of companies cannot detect new, innovative fraud methods, and 29% struggle with the effectiveness of transaction monitoring.
The complete Sumsub study is available for free download, offering insights into the evolving landscape of the European financial industry and potential solutions to the challenges it faces.
- The finance business in the European industry must contend with regulatory fragmentation and complexity, as the solution for compliance challenges involves implementing robust, integrated compliance systems.
- In the race to prevent fraud and protect consumers, technology plays a significant role, as institutions must adopt standardized operational risk reporting frameworks and enhance their cybersecurity defenses to cope with emerging threats like deepfakes and synthetic ID documents.
