EY Examines Role of Tech in Regulatory Compliance

In a detailed report examining UK financial services regulation, EY has set out four regulatory priorities that will impact the sector in 2026. 

Technology is a significant theme throughout the report, which is called: What to Expect: UK Financial Services Regulation in 2026.

Priority one: Financial crime

EY reports on the growing sophistication of financial crime, and cites UK Finance’s Annual Fraud Report 2025, which stated that fraud cases surged by 19% over the past year, with £1.7bn (US$2.3bn) lost to fraudsters. 

The company says that with anti-money laundering (AML) and fraud enforcement intensifying, firms should expect increased regulatory scrutiny of systems and controls. 

Priority two: Operational resilience

EY notes that the Prudential Regulation Authority (PRA)’s cyber stress test in the second half of 2025 revealed weaknesses in systemic impact awareness and contingency planning for transaction processing. 

This followed the EY/Institute of International Finance (IIF) global bank risk management survey of global chief risk officers, which found that cyber risks were the most prevalent major concern for 2025.

Priority three: AI and compliance

It will come as no surprise that AI is a major part of the priority list. It noted that as long ago as late 2024, a Bank of England survey found that 85% of financial services firms were using AI. 

EY warns that agentic AI poses questions regarding accountability, transparency and ethics.

Priority four: Navigating volatility 

EY notes fears of future turbulence in the financial system. Factors, it says, include the legacy of the March 2023 banking turmoil, when interest rate rises exposed fragilities in risk-management models, concerns about countries competing to lessen regulation and record-breaking market valuations spurred by the potential of AI.

Managing change to ensure compliance

EY urges firms operating in the UK to take a number of steps in 2026 to maintain regulatory compliance: 

• Plan for multiple scenarios to remain resilient and compliant. Take the opportunity to engage with both government and regulators on growth-linked policy priorities. A proactive approach can help improve understanding, shape reforms and prevent unintended consequences, EY argues. 
• Identify key areas where regulatory rollback is unlikely, to help maintain focus. 
• Prepare to navigate volatility. It is important to invest now in proactive and agile stress-testing capabilities, EY says, with a focus on scenario depth and contingency planning.
• Plan for international fragmentation. The trend towards greater national regulation seems set to continue, it argues. 
• Combat external threats. This includes harnessing data analytics and cybersecurity solutions to proactively detect, prevent and respond to both cybersecurity and financial crime threats. Embedding operational resilience into change and third-party management programmes is also vital, EY says. 
• Explore digital transformation, such as using AI and automation to drive new efficiencies in operational processes and the management of customer interactions, while maintaining emphasis on regulatory fundamentals, such as robust controls. 
• Balance technology innovation with ensuring compliance oversight and using AI to boost compliance capabilities. 
• Strengthen governance.

Pressure from UK Government to regulate for growth

Christopher Woolard, Partner, Financial Services at EY says: “The UK financial services regulation is at a crossroads. Regulators face growing pressure to deliver on the government’s ‘regulate for growth’ agenda whilst maintaining market stability and consumer protection. 

“They must also grapple with four ongoing priorities: financial crime, operational resilience, AI and compliance, and navigating volatility.” 

“Firms operating in the UK should focus on these, alongside sector-specific issues, with all activity underpinned by robust internal governance and controls to help maintain regulatory compliance,” Christopher adds. 

“At the same time, they should engage proactively with policymakers to shape outcomes and deepen their understanding of the landscape as it evolves.”

EY’s research previously showed that while firms planned to increase their use of generative AI, their workforce lacked experience with the technology.

It has also highlighted divergent approaches to AI governance across major financial centres.