Compliance and regulatory lessons learned in 2024, and challenges to overcome in 2025
CIRCLE Event: Compliance and Regulatory Horizon Scanning
Our compliance and investigations professional network – CIRCLE – recently gathered to look back on 2024 and consider the key regulatory and compliance challenges faced. We asked the group, how can we ensure that we take the lessons learnt into 2025, and what are the key challenges that this year will bring?
On December 4 2024, DLA Piper hosted the final CIRCLE event of the year in London, this time focusing on compliance and regulatory horizon scanning. The event featured insightful sessions led by three expert speakers followed by festive drinks and canapés. Additionally, attendees took part in an interactive workshop led by DLA Piper's award-winning design thinking team, aimed at helping attendees reflect on 2024 and prepare for 2025.
Reflecting on 2024 and preparing for 2025
In an interactive session, attendees from our professional network worked together to pinpoint the key regulatory and compliance challenges, lessons learned, and future issues in each of their respective fields. The discussions revealed that challenges from 2024 included issues such as:
- increased regulation
- volume of compliance questions from the business
- risk exposure presented by third parties
- Basel 3.1
- DORA deadline
- ESG reporting
- sanctions enforcement
- use of AI
Lessons learned by compliance and investigations professionals in 2024, emphasised the importance of:
- upfront project management
- educating stakeholders
- engaging proactively with regulators
- horizon scanning for key legal changes
- crisis communication
Looking ahead to 2025, compliance and investigations professionals are planning to focus on:
- ESG reporting
- AI and net zero
- operational resilience and proactive planning
- the Trump administration and the impact on global operations particularly from a tariffs, sanctions and export control perspective
- China and the potential for new trade regulation
- monitoring of enforcement sanctions and what lessons can be learned
- communicating within the industry to encourage knowledge sharing
Financial Crime Regulation: What’s New and What We’re Tracking
Financial crime regulation has emerged as the top concern within our professional network, particularly with the rollout of the highly anticipated Economic Crime and Corporate Transparency Act 2024 (ECCTA) at the start of this year. Harriet Campbell provided a comprehensive overview of ECCTA, highlighting its introduction of a new senior manager test, which imposes corporate liability on senior managers. She offered practical advice to attendees, emphasising the broad and context-dependent definition of a senior manager. This makes it crucial for companies to identify individuals who fall under this category and implement appropriate risk measures, such as training.
ECCTA also introduced the ‘failure to prevent fraud’ offence, aiming to hold organisations accountable if they benefit from fraud committed by their employees, agents, or other associated persons and fail to have reasonable fraud prevention procedures in place. Harriet shared practical examples of how this offence could be committed and guided attendees through the recently published guidance. She advised companies to conduct risk assessments, due diligence, training, and maintain effective whistleblowing and speak-up policies and procedures.
In addition to the new liabilities introduced by ECCTA, the Act also incentivises compliance by empowering the Registrar of Companies to impose financial penalties for certain offences through the Financial Penalty Regulations 2024, instead of pursuing criminal prosecution. Emphasis was placed on ensuring implications of these regulatory changes are understood, as the removal of the need for criminal prosecution means quicker enforcement and less reliance on lengthy court processes.
Looking ahead to 2025, the group considered the EU Anti-Corruption Directive, which is still in the legislative stage but aims to introduce significant changes to the Anti-Corruption legislation landscape, and the Economic Crime Manifesto, reflecting the Labour government’s increased focus on financial crime.
ESG: Developments and Expectations
Regulation in the field of ESG has been developing at a rapid pace, especially in the EU, with attendees raising concerns over the sheer amount of regulation coming in and potential wasted costs on over-compliance.
Over the past year, the most sought-after advice from our clients has revolved around the new mandatory sustainability reporting requirements. Many of our network may have previously been exempt from such requirements which initially targeted only publicly listed entities and very large companies. However, new obligations established under the Corporate Sustainability Reporting Directive (CSRD), have much lower thresholds, meaning that many will now need to comply with these requirements for the first time by early 2025.
This legislation amendment casts a wide net, encompassing a broad range of companies. Annie O’Connor broke down the CSRD for our attendees, along with the EU Taxonomy, highlighting the detailed disclosures required to meet these regulations. She emphasises the importance of ensuring reporting processes are robust and compliant.
Annie also raised the global implementation of the International Sustainability Standards Board (ISSB) standards in 2024, which raised the bar for sustainability reporting and compliance worldwide. Looking ahead to 2025, our network should keep an eye out for the anticipated omnibus legislation announced by the EU Commission President in November. Although the specifics are still unknown, this legislation is expected to consolidate existing EU ESG reporting requirements to streamline compliance.
These developments underscore the importance of staying ahead of the curve in ESG compliance. Companies must proactively adapt to these changes to meet the high standards set for sustainability reporting. This includes conducting thorough risk assessments, enhancing transparency, and integrating sustainable practices into their core operations.
By staying informed and prepared, companies can not only ensure compliance but also leverage these regulations to enhance their sustainability credentials and build trust with stakeholders.
Sanction Enforcement: Lessons and Future Outlook
Katie Palms delivered an insightful talk on sanctions enforcement, focusing on the evolving approach taken by regulators in 2024 and what to expect in 2025.
She highlighted six key enforcement trends from 2024: a cross-border focus on preventing and deterring dual-use and military goods from reaching Russia, a levelling-up of expectations from financial regulatory authorities for sanctions screening and systems and controls, a clustering of enforcement cases around sector- and geography-specific priorities (such as luxury vehicles and timber), efforts by enforcement authorities to redefine enforcement to include broader deterrence and asset freezing, attention being paid to parent accountability for group sanctions compliance, and a decision to focus criminal investigation and prosecution on particularly egregious cases of sanctions circumvention and evasion.
Looking ahead, Katie highlighted that regulators are working together more closely than ever, particularly the US and UK regulators, and the long lead time for investigations means we expect more of the same in the immediate future as regulators finish what’s in the pipeline. At the same time, geopolitical changes across the globe will start to affect regulatory and enforcement priorities, with a potential increased focus on China and Iran following Trump’s election as president, a potential expansion of the enforcement toolkit as a range of other trade and restrictive measures are deployed to shift global corporate behaviour and trade, and potentially new sector- and geography-specific clusters of enforcement cases emerging, potentially including art, professional services and crypto.
Next session
We thoroughly enjoyed engaging with all attendees' insights and reflections and look forward to seeing you all again in the new year.
If you are a compliance and investigations professional and you are interested in attending future CIRCLE events, please contact Amy Bajwa.