The Collapse of the Line Between Regulation and Politics

As 2025 draws to a close, it is clear that the year did not simply reshape UK financial regulation, it fundamentally redefined the relationship between regulators, politicians and the industry. What began in January as a seemingly routine strategic refresh from the Financial Conduct Authority (FCA) (FCA “Regulatory Perspective & Priorities 2025”, Jan 2025) rapidly evolved into the most politically charged regulatory year since the post-2008 era. The intensity was unexpected, the scope unprecedented, and the consequences profound.

The industry anticipated refinement and incremental evolution. Instead, it found itself pulled into a political project driven by a new government committed to consumer fairness and market integrity (HMT Policy Agenda, 2025), a regulator newly emboldened by clear ministerial expectations, and a financial sector facing technological disruption and public scepticism. Regulation became a tool of political expression, a forum for parliamentary scrutiny and a battleground for competing visions of the UK’s economic future.

For Chief Risk and Compliance Officers, the distinction between “technical” and “political” regulation collapsed entirely. That boundary, already weakened by public-interest intervention in recent years, vanished. Understanding regulatory supervision in 2025 required understanding the politics underpinning it. This shift became visible as early as January when the FCA’s priority statement, although framed as neutral, carried unmistakable alignment with the government’s mandate to restore trust, tackle predatory lending and increase oversight of market integrity (Labour Party Manifesto Commitments, 2024).

The influence of HM Treasury intensified this dynamic. Quarterly policy-direction papers, more forceful and detailed than in previous years, urged regulators to move “faster, firmer and more assertively” in areas touching vulnerability, data governance or systemic risk (HMT Direction Paper, Q1 2025; Q2 2025). These documents accelerated the regulator’s strategic ambition beyond what firms had anticipated.

The clearest manifestation was the FCA’s dramatic simplification of the Handbook. Approximately 70% of legacy banking text was removed within months (FCA Handbook Simplification Programme, 2025). Officially, this was about clarity. Unofficially, many interpreted the shift as political, moving away from prescriptive, rules-based detail toward discretion-led, outcome-focused oversight. Whether this represented modernisation or politicisation became one of the most divisive debates of the year (City Compliance Forum Survey, June 2025).

This dynamic, political intent shaping regulatory acceleration, reached a turning point in July when a major payments institution suffered a 36-hour outage (Incident Report on National Payment Disruption, July 2025). Thousands were unable to access wages or complete essential transactions. The incident crossed the threshold from operational failure to national scandal, with social media amplifying the disruption in real time.

Parliament responded immediately. The Treasury Committee summoned the FCA, the Bank of England and senior executives for hearings (Treasury Committee Hearings, July 2025). MPs questioned whether regulators had failed to supervise critical suppliers adequately and whether operational continuity should now be considered national infrastructure.

Supervisory behaviour hardened overnight. Firms received urgent requests for resilience mapping, third-party assurance documentation and incident escalation logs (FCA Post-Incident Supervisory Requests, Aug 2025). Operational resilience, which had previously been treated by some firms as a technical exercise aligned to PS21/3, became a politically sensitive obligation directly linked to public trust.

AI governance triggered an even deeper ideological divide. The FCA’s AI Review (FCA “AI in Financial Services Review”, Apr 2025) provided concrete examples of demographic bias, model drift and opaque decisioning, ammunition that Parliament seldom receives in technical debates. The timing coincided with consideration of the AI Governance Bill (AI Governance Bill, House of Lords Debates, June-Oct 2025), turning AI into a national political controversy.

Two visions emerged. One argued for strict oversight akin to pharmaceuticals or aviation. The other warned that excessive regulation would damage the UK’s fintech competitiveness. Firms immediately felt the impact: lenders paused or recalibrated models, insurers were challenged on behavioural pricing, and wealth managers faced scrutiny over automated suitability engines. Boards demanded new explainability frameworks capable of withstanding both supervisory and political challenge.

By late summer, AI governance had moved from a technical risk domain to an intense political and reputational liability.

Digital Assets, Payments Reform and the Resurgence of Market-Structure Politics

Digital assets, stablecoins and payments reform added another politically volatile layer to 2025. The Treasury’s consultation on systemic stablecoins (HMT Stablecoin Consultation, Apr 2025) triggered one of the fiercest debates of the year. Advocates hailed it as essential to maintaining the UK’s digital finance leadership. Critics called the proposals dangerously optimistic and warned they risked legitimising fragile token economics.

Events quickly validated both sides. A mid-sized stablecoin issuer experienced a liquidity shock in August (Market Stability Note, Aug 2025), raising questions about prudential standards. Yet days later, the Bank of England announced a successful pilot of tokenised settlement infrastructure with major banks (BoE Technical Pilot Report, Oct 2025), demonstrating genuine efficiency potential.

Payment’s governance became even more politically sensitive when the Payments Reform Roadmap proposed integrating the Payment Systems Regulator into the FCA (Payments Reform Roadmap, Sep 2025). Supporters argued consolidation would streamline oversight. Critics argued it risked weakening scrutiny of dominant payment schemes and diminishing competition (PSR Stakeholder Response Summary, Oct 2025). By year-end the dispute remained unresolved.

Market transparency reforms fuelled additional tension. The FCA’s consolidated tape proposals (FCA CP25/7, 2025) were applauded by buy-side firms but aggressively opposed by market-data providers. Competition regulators highlighted concerns about data monopolies (CMA Data Market Study, 2025). Simultaneously, the PRA’s tightening of internal-model approvals (PRA SS4/25, 2025) reignited long-standing disputes between banks and regulators about transparency versus competitive advantage.

At Treasury accountability hearings in November, senior bank executives warned that the UK risked “regulatory over-correction” (Treasury Accountability Hearings, Nov 2025). Former regulators countered that the sector had been “marking its own homework for too long.” The debate exposed deeper philosophical divisions about the UK’s post-Brexit financial identity.

Amid these louder battles, the Data (Use and Access) Act quietly reshaped the foundations of digital governance (DUAA, 2025). DUAA required firms to rewrite AI decisioning explanations, renegotiate data-sharing contracts, revalidate pricing datasets and overhaul suitability logic. Privacy groups praised the Act; fintech firms warned it risked stifling innovation. Regardless, DUAA became the regulatory spine connecting AI, consumer outcomes, data fairness and operational resilience (FCA FG25/1, 2025).

The cultural reform agenda was equally charged. The FCA’s proposal to embed bullying, discrimination and psychological harm into fitness-and-propriety assessments (FCA Non-Financial Misconduct Consultation, Jan 2025) provoked strong industry resistance. But high-profile cultural failures increased political momentum (Public Accounts Committee Briefing on Cultural Failures, 2025). By year-end, non-financial misconduct had become both a regulatory obligation and a cultural litmus test.

The Path to 2026: Enforcement, Consolidation and the Demand for Clarity

As 2025 ends, attention turns to 2026, a year expected to shift from policy ambition to supervisory enforcement. AI governance will move from principles to audits (FCA Supervisory Roadmap, Dec 2025). Stablecoin frameworks will enter an operational stage. Payments reform will undergo intense political negotiation. Operational resilience scenario-testing will deepen. DUAA will become an embedded supervisory lens.

But the critical requirement for 2026 is clarity. The pace of change in 2025 was relentless; the messaging sometimes fragmented; the politics inescapable. The UK cannot champion global competitiveness while generating domestic regulatory uncertainty. Treasury committees, industry bodies and consumer advocates all delivered the same message: the system must consolidate and stabilise (Treasury Committee End-Year Report, Dec 2025).

2025 was the year the regulatory blueprint was drawn. 2026 will determine whether the UK builds a coherent supervisory framework or drifts toward a fragmented, politicised model that weakens its strategic ambitions.

For senior leaders in risk, compliance and governance, the lesson is unequivocal. Technocratic skill alone is no longer sufficient. Modern supervision demands political intelligence, cultural fluency, technological literacy and anticipatory strategic judgement. Regulation has moved from background process to foreground narrative, an arena of public pressure, parliamentary influence and shifting expectations.

In 2025, regulation became a battlefield. And the forces shaping it will not retreat in 2026, they will intensify.

How do we give fraud and money laundering investigators the confidence to confront suspects, customers and others who are often bold, assertive, aggressive and deceptive?

Fraudsters are sometimes known as ‘con men’, which is an abbreviation for men who are confidence trickers. Both money launderers and fraudsters seek to deceive others and ordinarily operate with confidence in order to convince their victims and others to believe in them and fall for their deceit.

Investigators within firms frequently find themselves in dialogue and confrontation with fraudsters and money launderers. In the event the investigators lack confidence, the fraudsters are more likely to prevail by exploiting this weakness. Thus, how do we help investigators to develop their confidence? I believe this is an area where a former law enforcement officer will commonly have an advantage because he/she has previously been accustomed to dealing with confident and aggressive con men.

Knowledge equals power.

This being so, does it follow that the lack of knowledge presents a weakness? And what knowledge is relevant here? Well, knowledge of the applicable laws is beyond necessary, it is vital, whereas knowledge of how money launderers and fraudsters think and operate is helpful and most welcome. Which leads on to the next question, where do young money laundering and fraud investigators obtain knowledge about how fraudsters and money launderers think?

I was an experienced police detective, but I did not learn all I know through practice and operational work alone. No, I attended multiple courses, including a three-week, residential company fraud course, where the instructors were seasoned fraud investigators. OK, I was a trained law enforcement officer, but nowadays fraud appears to be coming less and less of a priority for law enforcement agencies, even more so during these Covid-19 times, notwithstanding, fraud is on the increase.

Some authorities are suggesting the UK government may have lost as much as £26 billion to fraudsters abusing the Covid-19 business continuity loans. I have looked at some of these frauds and determined they were easy to identify and prevent, but they were not prevented. Simultaneously, AML and fraud controls failed, albeit the banks have a 100% guarantee for the loans from the UK government. Armed robbers of yesteryear never stole so much money from banks or governments, so how and why are we now losing so much money to organised fraud gangs?

The answer is very simple, crime has changed, indeed it constantly changes, and we do not keep pace with the fraudsters. In America armed guards stand within bank premises, but there are no armed guards online. Criminals have learned, there is more money to be made with fingers on a computer keyboard than there is to be made with a finger upon the trigger of a gun. In addition, on the rare occasion a criminal does point a gun and demand money, his/her actions are clear to see, there is no ambiguity, no doubt and consequently an intervening party, such as the armed guard or a police officer, can confidently engage the suspect.

Fraud is different because the fraudster seeks sew doubt and in so doing, he/she challenges the confidence of the investigator. Thus, please allow me this opportunity to share some investigative tips with you.

• Fraudsters do like to deal with people who say they don’t know what is being spoken about; those who seek explanations; those who seek more information.
• Do not be intimidated by them; they may seek to make you feel stupid because you do not know something, take it from me the really stupid ones are not strong enough to admit they do not know, and the fraudsters play upon this.
• Just like in the movie The Sting, fraudsters are looking for a mark and the easy marks are the stupid and weak marks.
• Treat the encounter as a learning experience, retain an open mind, do not ignore the gaps and do not allow the fraudster to fill them with nonsense, which obviously means something makes no sense.
• Fraudsters do not like to be asked to provide reference points, which an investigator can use to research or corroborate the fraudster’s story. Thus, in the event they previously worked for bank X or firm B, ask them who they worked with; the address of their office/branch; their manager’s name; their old work email address. Importantly, ask who you can verify this with?
• Challenge generic email addresses – in 2020, businesses people do not run their operations and customer relations through Gmail, Hotmail or me.com.
• Always seek a website address, businesses in 2020 do not operate without one.
• Ask for a copy of their CV/resume – this should be full of reference points and therefore they are likely to refuse to provide it.
• Then go behind the webpage, when was it set up, how and where is it hosted etc.
• Challenge bad spelling and bad grammar, ask yourself, would the CEO of your bank/firm want his/her staff sending out emails or letters with ban spelling and grammar? The answer will be no, so why does a fraudster think bad spelling is OK?
• Do not be intimidated by aggression, as this is often a sign that your instincts are right. Pursuant to this, trust your instincts, do not supress them and do not allow others to belittle them.
• For supervisors, support your staff and tell them, they are not to tolerate abusive or aggressive behaviour from anyone, including customers. Give them the confidence in you, that you support them, this way they act more positively, with reduced anxiety.
• During these restrictive Covid-19 times identify ways in which you provide mentoring to young investigators who are currently missing chats with senior colleagues; not overhearing interesting conversations and consequently, their ‘on the job’ learning is suffering.
• In the event a fraudster threatens to take his/her business somewhere else, let them go, because no single customer is bigger than your bank/firm and when investigating suspicions of money laundering or fraud, you are your firm. Remember that, you are your firm, you stand against the fraudsters and the money launderers, you protect legitimate customers, colleagues, shareholders and executives. Your actions can make your bank/firm a hostile environment for money launderers and fraudsters.

Legitimate customers can always be persuaded to be appreciative of your fraud/money laundering prevention endeavours because next week you may use the same approach to stop someone stealing from their account.

If you act with confidence, you will immediately present an obstacle to the fraudsters and many of them will walk away to seek another ‘mark’ elsewhere. Confidence is key to your success as an investigator, in contrast your weakness will be exploited by, and therefore help the fraudster/money launderer. Don’t be put off, do not give the benefit of the doubt and adhere to processes which have proven track records of success.

In conclusion, do not let the fraudster’s problems become yours. In the event he/she cannot or will not provide the data you seek; the problem is not yours. To reconcile this, put yourself in the shoes of the legitimate customer being asked to provide data, which is accessible to you and ask yourself, “is this reasonable?” In the event the answer is yes, the fraudster/money launderer should also act reasonably and provide the data.

Thus, take control and stay in charge. Fraudsters like to talk rather than listen, because they are constantly selling their version of ‘their truth’. They seek to dominate conversations and intimidate you, don’t let them bully you, act with confidence, because you and your bank/firm are bigger and stronger than the fraudster.