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Best Practices Employee Conflicts of Interest Regulations

What Drives Regulatory Change? And How Can Corporate Markets Prepare?

As legislation expands and resources contract, corporate compliance officers find themselves under growing pressure to achieve more with less. But what drives regulatory change? What’s at the top of the regulatory agenda? And how can compliance teams stay ahead of the game?


The introduction of new regulations and updates to existing legislation is often event-driven: given the full political agenda of parliaments around the world, it often takes something bad or negative to happen to prompt politicians to act to prevent a recurrence.

The global financial crisis over a decade ago spawned a raft of new regulations in financial services, such as the Dodd-Frank Act, designed to increase transparency and stability in financial markets. This was quickly followed by waves of legislation around Anti-Bribery and Corruption, Anti-Money Laundering and Counter-Terrorism Financing, all of which continue to evolve today alongside new legislation in Data Privacy and Data Protection (of course) and whistle-blowing.  More recently, digital assets have been under the spotlight globally, with regulatory scrutiny likely to intensify following the collapse last November of FTX, a major cryptocurrency exchange, following a liquidity crisis and possible hack in which hundreds of millions worth of tokens were stolen.

This shook the volatile crypto market, which lost billions of dollars as a result, and rattled consumer confidence in the stability, security and resilience of digital assets. While the broader consequences of the FTX debacle remain to be seen, it may prompt the SEC and other regulators to increase regulatory scrutiny of the cryptosphere, as they seek to create predictable market conditions and order in the highly fragmented digital asset landscape.

Germany has moved itself to the forefront of the future legal framework for crypto and security tokens, showing their willingness to become more proactive rather than reactive. While it looks to provide more stability to security tokens, it also provides better access to them and prepares for future expansion of their existing legislature.

In March, the US Federal Reserve announced that it is putting a specialist team together to monitor the cryptosphere, “to create guardrails while making room for innovation that can benefit consumers and the financial system more broadly”. The Fed is collaborating with other bank regulatory agencies to determine if and how crypto activities can be carried out in a manner that is “consistent with safe and sound banking” to ensure banks that are exposed to crypto asset volatility are able to mitigate liquidity risks.

The recent collapse of Silicon Valley Bank (SVB) may spark tougher oversight of regional banks, with reforms including the expansion of deposit insurance coverage likely to be at the top of the regulatory agenda. FDIC data showed that over 90% of SVB’s deposits were uninsured, compared to the industry average of 40% – if regulators decide that the $250,000 cap on deposit insurance should be increased, approval will need to be sought from Congress. While this might reduce the probability of future bank runs, there could be unintended consequences, as bankers may have less incentive to properly manage their balance sheet risk.


It is virtually impossible to ignore the growing media attention artificial intelligence (AI) is receiving, and regulators are interested in how AI can help them identify infractions. But they also have concerns about the inherent bias built into many solutions and how it is applied, such as for sifting through job applications and in facial recognition – misuse of which has resulted in prosecutions. In May last year, for example, the UK Information Commissioner’s Office (ICO) fined Clearview AI Inc over £7.5 million for collecting over 20 billion images of people in the UK and elsewhere from the internet and social media to create a global online database that could be used for facial recognition.

Regulators are, by nature, cautious but are not alone when it comes to AI. Last month, a group of AI experts and tech leaders, including Elon Musk, issued an open letter in which they urged AI labs to pause work on their most advanced systems, warning that they present “profound risks to society and humanity”. They called for a six-month moratorium on the development of the most powerful systems to allow for shared safety protocols to be implemented.

The UK government recently laid out plans to regulate AI to ensure responsible use. Instead of giving responsibility for AI governance to a new, single regulator, it wants existing regulators to develop their own approaches that best suit how AI is being used in individual sectors, using existing laws rather than being granted new powers. However, critics believe that the UK’s light-touch approach puts it at odds with global trends around AI regulation.

While there are few prescriptive rules around which strict AI compliance policies and processes can be developed, given the pace at which AI is progressing, we can expect to hear much more about regulatory initiatives globally.


Technology is the key to managing regulatory change and is critical to ensuring the business is prepared for any future developments – whether anticipated or unforeseen. Automation in the form of compliance software platforms that not only collect their own data but connect to other systems to integrate the firm’s data with the dedicated compliance data is at the heart of this.

Many have moved in this forward direction, with well over a third of firms surveyed now having an employee crypto-trading policy in place. While many compliance teams are still waiting to see exactly what regulations will be applied, those that do have policies in place are likely to be better prepared.

Compliance technology with enhanced data analytics capabilities that deliver actionable insights to corporate compliance teams is now more essential than ever – and will become even more important as new technologies come under the gaze of regulators.