The Evolving Landscape of Financial Services Compliance
Over the past 15 years, the UK financial services industry has experienced significant transformation. This shift has been driven by the rapid adoption of new technologies, evolving regulatory frameworks, and changing client expectations. At the core of this evolution is a critical need for maintaining truth and transparency in all communications. In an industry where trust is paramount, ensuring that firms communicate accurately, openly, and in compliance with regulations is essential. However, the growing complexity of modern communication channels presents unique challenges for organizations striving to uphold these standards.
One company that has played a key role in navigating these changes is Smarsh. As a leading provider of digital communications governance and archiving solutions, Smarsh serves over 6,500 clients globally, including 80% of the top global banks. With more than two decades of experience in the industry, Smarsh has witnessed and adapted to the seismic shifts taking place in financial services.
Compliance in the Digital Age
Compliance has evolved from a reactive function to a proactive strategy aimed at mitigating risks before they escalate. Today, financial institutions face a new frontier: the widespread use of informal communication tools such as emojis, voice notes, and messaging apps. These tools have become integral to everyday workflows, yet they pose significant compliance challenges. Additionally, non-financial misconduct (NFM), including issues like bullying and harassment, is now a major focus for regulators.
The Financial Conduct Authority (FCA) has highlighted the importance of addressing NFM through its recent recommendations, such as the “Sexism in the City” initiative. At the same time, regulatory bodies in the UK and Europe are intensifying their efforts to penalize non-compliance in communications. For example, the General Data Protection Regulation (GDPR) has already resulted in over €5.65 billion in penalties, underscoring the high stakes involved.
The Role of Technology in Compliance
Traditional compliance tools are increasingly inadequate for managing the complexities of modern communication. The rise of generative AI tools, such as Microsoft 365 Copilot and OpenAI’s ChatGPT, has further complicated the landscape. These tools allow employees to generate content at unprecedented speeds, increasing the volume of data that must be monitored and archived for compliance purposes. According to Gartner, more than 80% of enterprises will use generative AI APIs or deploy AI-enabled applications by next year. Similarly, the Bank of England and FCA found that 75% of financial services firms already utilize AI.
To address these challenges, Smarsh has integrated its solutions with Microsoft, enabling customers to securely govern Microsoft 365 Copilot while ensuring compliance with regulatory guidelines. This integration enhances productivity and allows organizations to use AI safely and responsibly.
In addition to AI, informal communication methods such as emojis and voice notes are becoming more prevalent. Research from Smarsh revealed that 57% of employees use emojis in client communications, and 56% frequently send voice notes for work purposes. Capturing and monitoring these forms of communication for potential misconduct remains a challenge. To address this, Smarsh acquired CallCabinet in February 2025, adding advanced voice capture and analytics capabilities to its offerings. Smarsh’s models analyze language and context to identify and act on instances of misconduct.
Addressing Non-Financial Misconduct
Non-financial misconduct, including bullying, harassment, and discrimination, is now a top regulatory priority. The FCA is expected to introduce new rules requiring firms to identify and mitigate these risks. Communication channels are central to this effort. However, research from Smarsh in 2024 found that 63% of UK financial services employees lack confidence in their organization’s current monitoring systems. Despite this, 66% of employees support using AI to detect NFM, indicating a strong appetite for technology-driven solutions.
Failure to address these challenges can have severe consequences. Beyond regulatory penalties, firms risk reputational damage, loss of talent, and erosion of trust. However, innovative technology tools offer a way forward.
The Power of AI in Compliance
AI is becoming a powerful tool in the compliance arsenal. By analyzing vast volumes of content generated by regulated staff, AI can identify potential risks early. Tools like Smarsh Enterprise ConducT are designed to monitor non-financial risks such as inappropriate employee behavior and cultural issues. These tools can analyze the tone of voice notes or the context of emoji usage to flag potential issues.
This capability not only helps preserve organizational culture but also enables smarter business decisions. By identifying patterns indicative of misconduct, AI can help firms address issues before they escalate.
Compliance as a Growth Enabler
Modern compliance tools can serve as catalysts for growth and innovation. Advanced systems allow employees to communicate freely across various platforms without fear of breaching regulations. This fosters a culture of innovation where ideas can flow unimpeded. Addressing NFM also builds trust and transparency within teams, which is crucial for retaining talent.
Research shows that 78% of employees consider knowing that NFM is being identified and addressed as a factor in their decision to stay with an organization. Modern compliance tools provide senior leaders with a comprehensive view of risks, enabling proactive decision-making and reducing the likelihood of regulatory breaches.
While AI-driven compliance tools offer significant benefits, it is important to have realistic expectations. Sophisticated systems can generate false positives, and human judgment remains essential. Successful firms view compliance technology as an enabler of good governance, not a replacement for it.
The Employee Perspective
Younger professionals, in particular, are drawn to organizations that prioritize ethical behavior and cultural integrity. Firms that fail to address NFM risk losing top talent. The discussions at Smarsh Connect UK highlighted how the shifting communications landscape presents both challenges and opportunities. While informal communication tools and generative AI have made compliance more complex, innovative technologies are empowering firms to turn compliance into a strategic advantage.
By modernizing their compliance strategies, firms can meet regulatory demands, unlock new avenues for growth, and most importantly, preserve the truth. In a world where trust is the ultimate currency, the ability to capture, analyze, and act on communications data is a business imperative. The truth, after all, is worth protecting.