Potential Influencing Factors Identified by the Commission Beyond the Initial Ones
In the ever-evolving landscape of European financial services, compliance has become a significant challenge for industry experts. According to the "State of European Financial Services: 2025 Report" by Sumsub, compliance fatigue is a widespread issue, with 51% of FinTech experts citing keeping up with changing regulations as the biggest challenge.
The report highlights the fragmented nature of many compliance processes, which often results in teams reacting to threats instead of preventing them. This reactive approach increases both risk and operational costs. The complex regulatory landscape, marked by rapidly evolving data privacy rules, tougher Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, stricter cybersecurity mandates, and diverse national regulations that complicate cross-border operations, further contributes to this challenge.
The emergence of the EU Anti-Money Laundering Authority (AMLA) aims to harmonize AML supervision and create a single rulebook by 2028. However, until then, compliance teams face fragmentation and inconsistent enforcement.
Operational costs are rising as financial firms must invest heavily in compliance technology, advanced risk assessment tools, real-time monitoring, and frequent regulatory reporting to meet faster and more detailed obligations without incurring penalties. Balancing these investments against business priorities remains a core challenge.
Fraud prevention strategies emphasize enhanced financial crime detection with advanced analytics and AI, alongside improved screening systems for restrictive measures such as sanctions compliance. However, current standard screening tools and fragmented payment infrastructure data can lead to potential breaches. Firms must minimize false positives to avoid customer friction while maintaining effective detection.
The report also highlights the prevalence of various types of fraud. The most common are payment fraud (52%), money laundering (48%), and fake documents (43%). Over half of the respondents incur annual fraud losses between €100,000 and €1 million, with 25% losing between €500,000 and €1 million. Almost one in five (18%) incur annual losses of over €1 million.
Additional emerging trends include the EU’s rethinking of sustainability disclosure regulations (SFDR), requiring fund managers to prepare for new, more coherent and usable frameworks with machine-readable reporting templates. This reflects broader compliance expansion beyond traditional financial crime into ESG-related transparency.
In light of these challenges, the report also highlights operational burdens such as high operational costs (44%) and the ineffectiveness of transaction monitoring (29%). Furthermore, the rise of AI-generated deepfakes globally by 900% in the first quarter and the increase in synthetic identity fraud by 378% in the first quarter of 2025 underscore the need for more robust fraud prevention measures.
The report is based on the responses of 225 experts from FinTechs and financial service providers in Europe. Despite these challenges, the European financial industry continues to adapt and innovate, striving to meet the complex demands of the modern regulatory landscape.
- The report from Sumsub's "State of European Financial Services: 2025" discusses the inclusion of a business section focused on finance, highlighting that operational costs are escalating due to investments in compliance technology, advanced risk assessment tools, real-time monitoring, and frequent regulatory reporting.
- As technology continues to evolve, the importance of implementing advanced analytics, AI, and improved screening systems in fraud prevention strategies has become increasingly significant, especially in countering threats such as payment fraud, money laundering, and fake documents.
