Global election results mean the coming years are going to be full of change for compliance. This article, from our 2025 Top 10 Trends in Risk & Compliance explores how you can prepare.
2024 was the year of the election worldwide. Hundreds of millions of people chose their new leaders in the U.S., UK, EU, India, Pakistan, and many other countries. How will these new administrations relate to each other when it comes to business, regulation, politics, and enforcement priorities? While it’s impossible to know for sure, the past is precedent, as the saying goes.
In the United States, a new chapter in American enforcement will begin with the inauguration of the next President of the United States. With him will come a different direction for the major agencies that affect the compliance landscape. From the DOJ to the SEC, new leaders will diverge from the old priorities, shifting from the previous administration’s focuses.
Here are the predictions for compliance officers, and what to focus on now to be prepared.
Artificial Intelligence
Artificial Intelligence has been front-of-mind for compliance officers, company leadership, and boards of directors for the past several years. As generative AI-driven solutions flood the market, companies and countries are responding.
Where we are now
The EU has debuted the first comprehensive AI Act, which is groundbreaking.
The United States has not been able to respond on a federal level, and states have taken up the slack. According to the National Conference of State Legislatures, in the 2024 legislative session, at least 45 states introduced AI bills, and 31 states adopted resolutions or enacted legislation.
What’s likely next
The Republican party will control both houses of Congress and the presidency. This unified government will allow them to legislate more easily than if there were a split government. It may be that the Congress takes up a federal AI bill as a preemptive measure against more state’s actions, or to provide a national standard when they are in the position to do so.
Outside the United States, more countries will pass AI-related legislation. Many may adopt the European framework, but others will not.
What to do now
Create an inventory of all the uses and applications of AI at your company. Separate them into three categories:
- Use of AI by the compliance department
- Use of AI by the company/employees internally
- Creation of commercial products being created by your company using AI
Perform a risk assessment on the highest risk uses, remembering that using AI isn’t a risk in and of itself. The risk being evaluated is how it can go wrong. That may include hallucination, bias leading to litigation, leaking of confidential information or trade secrets, etc.
Review the EU AI Act framework to see if any of the applications you’ve identified qualify as high-risk under the EU law. If they are, consider putting greater safeguards around them or stop their use.
Tariffs
A hallmark of the new administration’s campaign was the imposition of substantial tariffs on imports into the United States.
Where we are now
The Biden administration maintained some of the Trump administration’s $300 billion-worth of China tariffs, and even increased some. China has tariffs on U.S. imports, as do many other countries.
Where we’re likely going
Should the new administration decide to impose its large universal tariffs on all imported goods, other countries are likely to follow suit in imposing tariffs on U.S.-produced exports. Many economists believe that could cause economic instability throughout the world.
Companies with supply chains reliant on imports from China or elsewhere may face higher prices and might experience difficulty in obtaining everything they need to produce their products.
What to do now
Work with Procurement to understand where your company’s supply chain is vulnerable, especially in China. Be sure to keep tabs on suppliers, many of which may move production outside of China if a trade war ensures. Be ready to perform modern slavery audits and to put new suppliers through due diligence.
Sanctions
Sanctions have become an increasingly popular way to impose financial and political pressure on individuals and countries acting contrary to the desires of the sanctioning country.
Where we are now
The U.S., EU, United Nations, and others have sanctions against Russia over its aggression against Ukraine. Sanctions regimes exist against many countries, governments, and groups, including in the Middle East and Africa. They are particularly strong against Iran.
Where we’re likely going
The new administration has proclaimed confidence in its ability to broker an end to the Russia/Ukraine war. Should this happen, the sanctions would likely be lifted.
The situation in the Middle East continues to worsen. Should aggression escalate, more sanctions may be imposed against various groups or countries.
The first Trump administration imposed heavy sanctions on Iran. It is likely that sanctions against Iran would increase once again after January.
What to do now
Review all the countries in which you do business or have suppliers. Perform a risk assessment to determine where you have high-risk for sanctions violations.
If you don’t yet have automated sanctions-reviewing software, consider obtaining it. Third-party risk in this area is particularly high and may be expanding again soon.
ESG
For the past few years, the business and regulatory world has grappled with how to manage environmental, social and governance (ESG) challenges.
Where we are now
Several major players came to the forefront. First, Germany passed the Supply Chain Due Diligence Act (LkSG), which has been in place for some time. The EU passed the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD) will be in force shortly.
Meanwhile, California passed two environmental disclosure laws, and the SEC put forth rules requiring public companies to disclose environmentally related information. These are currently in litigation.
What’s likely next
The new administration has previously been hostile to ESG-related laws, and it is likely that the new head of the SEC will not move to implement the climate-related disclosure laws.
Nevertheless, for multi-national companies, the CSRD will continue to be in force, and will expand to a new band of in-scope companies in 2025. The CSDDD will continue on its path from implementation to enforcement.
Despite the legal challenges, most experts expect the California disclosure laws to come into force, even if they are somewhat amended.
What to do now
Most companies sell into or interact with companies in the European Union and/or California (the world’s largest trading bloc and a state with the world’s fifth largest economy). These companies, either themselves or through their supply chain/sales channels, will likely be subject to some sort of environmental and/or social disclosure requirements.
Prepare now by obtaining baseline information about your company’s carbon emissions data, water usage, recycling, and any other crucial data points. Review your third-party program in anticipation of the CSDDD and other anticipated disclosure rules. Study the California laws to see if they will be applicable to your company and prepare accordingly.
Anti-Modern Slavery Enforcement
The world’s regulators are paying more and more attention to modern slavery.
Where we are now
There are many modern slavery transparency and disclosure laws in force. The United Kingdom, Canada, Australia, and the state of California all have active disclosure laws.
Traditionally, these laws have lacked strong penalties. That changed in 2024, with the Canadian law attracting fines of up to $250,000 CAD for certain violations.
As of this writing, two of the three EU bodies needed to pass the EU Forced Labor Ban have signed off on it. The legislation will establish a structured framework for prohibiting the use of forced labor in the production of goods made in the EU or goods sold into the bloc. It will empower the EU to prohibit and remove a product from EU countries’ shelves if it is shown to involve forced labor at any point during production (including outside the EU).
The U.S. Uyghur Forced Labor Prevention Act (UFLPA) has been a powerful force in stopping certain goods made in the Xinjiang region of China from coming into the country. The U.S. has been putting pressure on the EU, UK, Canada, and Mexico to stop shipments from the region, largely without success.
Where we’re likely going
The EU Forced Labor Ban will almost certainly be passed into law. It won’t come into force immediately, but will be by approximately 2028.
More and more countries will have modern slavery disclosure and transparency laws, and they’ll have higher penalties and fines.
If the U.S. tariffs ratchet up against China, there will likely be more political pressure on other countries from the U.S. to stop imports from the Xinjiang region.
What to do now
Focus on your supply chain to understand where materials come from. Update your due diligence questionnaires to focus on modern slavery concerns and ensure your supplier code of conduct has strong anti-slavery terms.
Don’t forget statutes of limitations
While new administrations bring change for at least four years, statutes of limitations don’t typically shift much. OFAC recently extended their statute of limitations to 10 years for most violations, and many corporate crimes can be charged years after they occurred.
All of that leads to the conclusion that compliance can’t stop because regimes and people in power change. We in compliance have an obligation to champion ethical corporate culture no matter who is in office.
2025 prediction
Prosecutorial and regulatory priorities will shift in the United States with the new administration, while Europe, the UK, and California will continue in their current directions. Companies will be exposed to greater supply chain and third-party risk than ever before and need to respond accordingly.
Ready to learn more? Register for the Top 10 Trends in Risk & Compliance webinar on January 29, 2025 to receive the full eBook upon registration. This highly anticipated webinar features Carrie Penman, chief risk and compliance officer at NAVEX, Vera Cherepanova, executive director at New Boards and Rebecca Walker, partner at Kaplan and Walker who will unpack the 10 trends and predictions and equip you for 2025 and beyond.
