Navigating regulatory complexity: Building societies and the evolving compliance landscape
Insightful advice from Paragon on how building societies can adapt to emerging compliance challenges while maintaining operational efficiency and member trust.
By Peter Toole, Head of Financial Services and Insurance, Paragon
Compliance officers, risk managers and operations leaders in the UK’s financial services sector faced a breathtaking volume of regulations in 2024 and must navigate more in 2025. The 27 items on the Q1 2025 Financial Conduct Authority Regulatory Initiatives Grid are a mere snapshot of the increasingly complex regulatory environment.
This evolving compliance landscape, concurrent with rapid new developments, such as AI, open banking and open finance, could hamper operations, affect resilience and hinder innovation if UK building societies do not keep pace.
What should the building societies do to ensure compliance and member engagement? Being agile, adaptable and innovative are ways to meet the many challenges of managing regulatory change.
Emerging compliance challenges
Rules and regulations are emerging around environmental, social and governance (ESG), financial resilience and customer vulnerability frameworks. These are the principal emerging compliance challenges affecting building societies’ operations and member engagement in 2025.
The FCA has made it clear it intends to enforce ESG-related compliance, writing to CEOs in 2024 to say it expects building societies to “be clear, fair, and not misleading in relation to any sustainability-related claims made about their products and services”. In other words, maintaining trust and transparency is its focus.
Meanwhile, many of the FCA’s priorities overlap with those of the former Financial Services Authority (FSA), which also focuses on ESG, improved customer outcomes, addressing the needs of vulnerable customers, and strengthening resilience through business continuity plan.
It also specified other developments facing financial services operations in 2025. Examples include how they treat borrowers facing economic hardship and customers with vulnerability characteristics and the business impact tolerance framework for operational resilience.
Using technology to simplify compliance
No one-size-fits-all solution exists, but using technology effectively as part of an innovative digital transformation strategy will help to simplify and enhance compliance, meet members’ needs and build resilience.
As Accenture points out, “data is the key to understanding intent”, with opportunities to increase your understanding of members and provide services that meet their needs.
Tailored data-driven tools and analytics can help building societies to streamline and monitor compliance processes. For example, automated Know Your Customer (KYC) uses technology to verify customers’ identities and identify potential fraud. It can check for risk in real-time, whether it’s high-risk individuals, detecting unusual activity, automating regulatory reporting or flagging potential compliance breaches.6
Process automation can also reduce manual workload, remove delays and minimise errors. It can help you to get a grip on repetitive processes like compliance checks, which AI will increasingly manage
Creating a culture of compliance
One imperative in navigating the increasingly complex regulatory environment is creating a culture of compliance.
It’s vital to provide tailored employee training on the latest regulatory topics so that staff understand the regulatory, legal, and reputational risks of non-compliance and mitigate reputational damage, fines, and potential operational disruption.
Leaders must lead from the top, prioritising a proactive compliance culture where you engage employees so they give an excellent service, enhancing members’ trust and improving the building society’s reputation.
In conclusion, building societies must adapt to the evolving and increasingly complex regulatory landscape through technology, transparency, and a culture of compliance. One of the first steps is to consider how you use technology and strategy to navigate compliance challenges effectively.
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