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A new report by Sumsub has found that compliance fatigue is now the dominant challenge facing financial institutions in Europe. As regulatory frameworks tighten and fraud threats grow more sophisticated, many firms are struggling with outdated processes, rising costs, and ineffective controls.
The State of European Financial Services: 2025 Report, based on responses from 225 fintech and financial services professionals across the continent, shows that over half of respondents (51 percent) see “keeping up with changing regulations” as their top operational burden. High costs (44 percent), limited transaction monitoring effectiveness (29 percent), and excessive false positives (25 percent) were also frequently cited.
The report highlights the financial consequences of these gaps. More than half of companies reported annual fraud losses ranging from €100,000 to €1 million, and nearly one in five said they lose over €1 million each year due to fraud-related incidents.
Fragmentation and Outdated Tools Undermining Compliance
Despite facing an expanding range of fraud threats, the report shows that financial institutions remain heavily reliant on fragmented and manual compliance systems. Over 53 percent of respondents said they still use fully or partially manual processes to report suspicious activity. Only 17 percent said their transaction monitoring was fully outsourced or automated.
The findings point to the rapid evolution of fraud tactics, which are increasingly bypassing legacy compliance frameworks. In the first quarter of 2025 alone, Europe saw a 900 percent increase in AI-generated deepfakes and a 378 percent surge in synthetic identity document fraud. At the same time, 20 percent of institutions admitted they are currently unable to detect newer forms of fraud, indicating a widening gap between threat sophistication and institutional preparedness.
The top fraud types affecting European financial services in 2025 include payment fraud (52 percent), money laundering (48 percent), and fake document submissions (43 percent). The report notes that the lack of real-time detection and cross-channel monitoring is leaving compliance teams unable to respond proactively to such threats, resulting in reactive strategies and rising costs.
Firms Expect Regulatory Pressure to Intensify
In addition to current operational pressures, financial institutions are preparing for stricter regulations over the next 12 months. Nearly half (47 percent) of professionals surveyed expect higher penalties for non-compliance, while 38 percent anticipate stricter Know Your Customer (KYC) and Know Your Business (KYB) requirements. Half expect increased regulation surrounding transaction monitoring obligations.
The report argues that current compliance setups are no longer sufficient to meet these demands. Manual tools and siloed systems are slowing down operations and failing to keep pace with the scale and complexity of fraud.
Ilya Brovin, Chief Growth Officer at Sumsub, said, “Financial institutions across Europe are at an inflection point. They face a compliance environment that’s not only growing more complex, but also more costly to navigate, especially with outdated, manual systems still in place. Meanwhile, the premium on speedy solutions is rising. 76 percent of fraud occurs after onboarding, which means that compliance can no longer stop at identity verification. Solving this goes beyond risk management: it’s about restoring efficiency, improving user experience, and safeguarding sustainable growth.”
The report concludes that institutions must modernize their compliance infrastructure to stay resilient and competitive. Without integrated, automated systems capable of real-time threat detection, firms risk both financial loss and regulatory penalties. The call to action emphasizes scalable solutions that streamline workflows while addressing current and emerging risks in financial crime.
