In today’s hyper-connected financial ecosystem, compliance in financial services involves creating robust protections while maintaining the agility to drive innovation. With an increasingly complex regulatory landscape, the stakes are higher than ever, and the costs of making mistakes continue to rise.

Financial institutions now allocate up to 25% of their annual revenue to compliance — a rise of over 60% compared to pre-crisis levels. This surge reflects not just regulatory complexity but the evolution of modern threats that demand more sophisticated defenses.

The cost of modern compliance

When discussing compliance costs in financial services, we’re examining numbers that would make any CFO worry. Industry data indicates that global spending on financial crime compliance recently reached $206.1 billion. This represents a fundamental shift in how financial institutions allocate resources.

Banks currently allocate approximately 40% of their compliance budgets to technology investments, a strategy that reflects the need to address the growing complexity and volume of modern financial crimes. This technological approach is no accident; it emerges as a strategic response to the industry’s ever-increasing demands, enabling better detection and prevention of irregularities.

At the same time, human involvement has also increased significantly. Human involvement has also grown. Between 2016 and 2023, the time and investment in compliance functions increased sharply, particularly in IT and specialized teams. These figures represent thousands of professionals whose primary responsibility is to ensure that financial institutions comply with a complex and ever-expanding set of regulations.

Cybersecurity and compliance in financial services

If compliance is the fortress, cybersecurity is the active defense. Financial institutions face the highest average data breach costs of any industry, at $6.08 million per incident. AI-powered phishing, supply chain breaches, and ransomware-as-a-service now dominate the threat landscape. Financial institutions report facing an average of 700 cyberattacks per week, a 53% increase over previous years.

These threats require equally advanced responses. Banks now face attackers using generative AI, large-scale API exploits, and coordinated supply chain breaches that can disrupt entire networks.

Automation in compliance processes

As compliance costs rise, smart financial institutions are finding ways to do more with less through intelligent automation. Automated AML systems can reduce false positives by up to 80%, allowing compliance teams to focus on genuine threats instead of chasing irrelevant alerts.

Automation brings 30–40% efficiency gains across compliance functions. Tasks such as transaction monitoring, risk scoring, and reporting, once handled manually, are now managed in real-time.

The goal isn’t to replace people, but to augment expertise. Machines handle scale and speed, detecting patterns at levels no human could track alone. Meanwhile, human experts focus on investigation, decision-making, and detailed analysis that can only be provided by human judgment.

The regulatory technology

Instead of treating compliance as a burden, leading institutions are using RegTech to embed it into the core of their infrastructure. Here’s how this shift is reshaping compliance in financial services:

• Multi-jurisdiction readiness: A single institution may need to meet over 500 regulatory requirements across regions. Manual compliance can’t scale at this level.
• Real-time monitoring: RegTech enables ongoing supervision, instantly detecting issues and improving responsiveness.
• Adaptive frameworks: Intelligent systems adjust automatically to new regulations, reducing the lag between rule changes and enforcement.
• Faster product launches: With compliance built into systems from the outset, institutions accelerate their time-to-market without compromising quality.
• Strategic value: By turning compliance into a tech-driven capability, institutions gain agility, reduce risks, and create a competitive edge.

Designing scalable compliance frameworks

The most successful financial institutions are building adaptable frameworks that evolve in response to a constantly changing landscape. This means moving beyond point solutions to integrated platforms that meet multiple compliance requirements simultaneously.

The foundation is what experts refer to as compliance by design, incorporating regulatory requirements into systems and processes from the outset. This approach enables faster innovation and enhances the customer experience while maintaining compliance. It’s also necessary to invest in training and culture. Technology handles the volume, but human judgment is still essential for complex risk analysis and decision-making.

At Luby, we help financial institutions design compliance frameworks that adapt to their operations, combining automation, strategy, and regulatory expertise to support innovation with confidence. Talk to our team and discover how we can support your strategy.