In the current regulatory environment, where enforcement is becoming more and more intense, and expectations are changing from reactive to proactive compliance, businesses can no longer afford to treat compliance as a checklist exercise. Instead, firms must
evolve continuously, embracing new mindful approaches to compliance.
One such approach is traceability, the ability to understand not only what has been done, but also how, when and why, in order to meet the requirements. At the heart of this shift lies the need for connected, well-structured controls that move organisations
beyond box-ticking toward demonstrable, data-driven compliance.
What is traceability, and why does it matter?
Traceability in compliance refers to the ability to document and track adherence to regulations from initial implementation through ongoing change. It underpins regulatory trust and is critical in enabling firms to assess the impact of evolving rules, demonstrate
accountability during audits and ensure the continuous alignment of operations with regulatory expectations. Achieving the level when each control is linked to regulatory obligation that it supports is possible with intelligent mapping, real-time regulatory
updates and structured workflows that help firms build a dynamic auditable compliance architecture that evolves with regulatory change.
When traceability is embedded in the control environment, it becomes much easier to answer key audit questions:
- What control was in place?
- What was the type of the control? (preventive vs. detective or manual vs. automated controls etc.)
- Who is accountable?
- Was it updated in relation to the latest regulation?
Without this clarity, firms risk falling short of compliance obligations and losing valuable operational insight.
The audit trail challenge: documentation gaps and manual processes
Despite best intentions, many front office teams struggle to establish clear audit trails largely due to insufficient documentation and poorly implemented controls. Manual processes often depend on the tacit knowledge of long-serving employees, knowledge
that may never be formally recorded. This creates audit blind spots, where the rationale behind decisions and the sequence of actions are unclear or missing altogether.
The absence of structured, well-documented procedures not only weakens the firm’s ability to respond to audits but also hampers its resilience in the face of staff turnover, regulatory inspections or system migrations.
Regulators such as, for instance, the Securities and Exchange Commission (SEC), the Department of Justice (DOJ) in the US, expect more than basic tick-box compliance. They expect robust and adaptive programmes that evolve dynamically with regulatory change.
Moving beyond box-ticking starts with recognising that controls are viewed not just ‘safeguards’ – they serve as frameworks for transparency, operational integrity and long-term resilience. This focus on strong responsive control environments is echoed across
different domains: from financial crime and cybersecurity to AI governance and ESG. Regulators and various standard-setting bodies are aligning around the need for comprehensive frameworks, drawing greater attention to interconnectedness and traceability.
Each control, whether it is a risk assessment, policy attestation, escalation trigger and so on, should connect logically within a broader compliance framework/ architecture.
In order to become traceable, controls must be clearly mapped to the specific regulatory obligation that they address. They should be implemented using repeatable workflows, standardised throughout the organisation and connected with monitoring tools that
record decisions in real time, making it possible to operationalise regulations into internal actionable documents. This also brings into focus the important, often underexplored relationship between controls and policies. Policies lay the foundation for controls
by articulating high-level statements of intent, which are then enacted through specific controls; for example, a policy stating, “All data must be encrypted” is implemented with controls such as “Data-at-rest encryption” and “Data-in-transit encryption.”
A disconnected approach to controls, characterised by siloing, redundancy, or conflict, diminishes the effectiveness of a compliance programme, necessitating streamlining through the elimination of unnecessary controls and optimisation of the remaining ones
to address multiple requirements where feasible.
Controls are the operational backbone of a traceable compliance framework. When structured effectively, they enable firms to reconstruct the decision-making process, respond confidently to regulatory queries, and demonstrate a culture of accountability.
Take, for example, a firm that deploys a connected control environment using automated workflows, real-time alerts and centralised data. Not only can such a system flag potential compliance violations as they occur, it can also reduce the cost and time of
audit preparation, improve operational efficiency, ensuring a clear and verifiable chain of compliance actions.
A traceable compliance framework must be dynamic. Controls should not be “set and forget”, they need regular validation to remain up to date, active and aligned with fast changing regulatory expectations. Best practices include routine testing of control
effectiveness, real-time performance monitoring, timely updates in response to new regulations and risk scenarios.
Risks of inadequate controls
Regulators are sharpening their focus on accountability and transparency when it comes to data protection, and other areas, and those who fall short, are facing increasingly harsh consequences. As we can see from latest enforcement actions, they are also
sharply focused on controls, and they speak in the language of controls and how well they are designed and implemented.
For instance, late last year the Irish Data Protection Commission (DPC) fined Meta Platforms Ireland Limited €251 million ($271 million) for violating GDPR provisions that affected approximately 29 million Facebook accounts globally, including 3 million
in the EU/EEA.
The risks of weak or disconnected control environments are especially significant, particularly when it comes to financial crime and money laundering. Inadequate oversight can lead to regulatory breaches, substantial fines and lasting reputational damage.
In January 2025, Block. Inc., the operator of Cash App, was fined $175 million by the CFBP for failing to protect users from fraud. As investigation showed, the failure was due to deficiencies in Cash App’s prior compliance programme, and the company did not
invest enough resource in compliance and risk management, and the financial crime controls were not framed efficiently.
Another notable example came in November 2024, when the Financial Conduct Authority (FCA) fined Metro Bank £16.68 million ($21.4 million) for serious deficiencies in its anti-money laundering controls which exposed it to heightened fincrime risks. The bank
has since taken action to enhance its AML controls framework as previously it consistently failed to properly monitor the transactions, and even despite warnings coming from members of staff that technology around controls was not implemented in the right
way, for years nobody was checking and making essential corrections.
A bit earlier, in September 2024, Starling Bank faced a £28.96 million ($37.15 million) penalty from the FCA for breaches related to financial crime controls and failing to meet the conditions of a Voluntary Requirement (VREQ). The bank’s lapses showed the
necessity for continuous monitoring and enhancement of compliance measures. And most recently, in March 2025, the FCA imposed a £9.24 million ($11.85 million) fine on the London Metal Exchange for failing to manage extreme volatility in the nickel market effectively.
This marked the FCA’s first enforcement action against a Recognised Investment Exchange (RIE), bringing to the forefront the critical need for robust systems and controls in financial exchanges.
The value of tech is oftentimes undermined by poor governance, ineffective deployment and a disconnect between control design and operational risk.
At Pay360 conference in London, European and UK regulators were drawing attention to gaps in governance, deployment and the performance of control frameworks, and warned of growing disconnect between control design and operational risk. Technology, or automation,
on its own, is not delivering better financial crime controls consistently, and solutions are also falling short.
And as Carolin Gardner, Head of the AML/CFT unit at the European Banking Authority (EBA), recently noted, while the EU is actively encouraging the use of technology in the fight against financial crime, the presence of technology alone does not equate to
having effective systems and controls. The emphasis remains on ensuring that any tools deployed are part of a coherent, well-governed control framework that actually delivers meaningful outcomes.
A well-designed connected control combines automated safeguards like system-configured access limits, with manual oversight such as administrator reviews, to create a robust, auditable framework that prevents errors and enforces consistency. If implemented
in the right way and interconnected, traceability is maintained throughout the control’s environment framework. This ensures that every control, process or decision point is clearly linked and auditable.
It’s people + business + technology, not just technology
It’s no longer enough to have controls in place, nor is it enough to implement a technology solution. The framework must be connected, contextualised, demonstrably robust, and it is a combination of people, business processes and technology, well integrated
systems, that brings traceability to life. The firms that will stand apart are those that think proactively, implement technology treating controls not as back-office formalities, but as critical infrastructure. In today’s regulatory climate, credibility is
earned exactly this way – through control environments that are transparent, structured, clearly mapped and adaptive. This is what enables the traceable approach that both regulator and internal stakeholders can trust.
