Growing regulatory divergence and fragmentation key trends to watch in second half of 2025: KPMG Mid Year Report

1. Regulatory Divergence - As of mid-year 2025, growing regulatory divergence and fragmentation have added complexity to establishing a clear path from strategy and operations to effective risk and compliance. For the remainder of the year, expect continued changes, including recissions, to existing rules alongside calls for preemption of state laws/regulations and public pressure for global deregulatory action. Also, expect enforcement activities to shift, including emphasis on clear legal violations, “direct” or “tangible” consumer/investor harm, and the competitiveness of domestic industries.  

2. Trusted AI & Systems – Artificial intelligence (AI) shifts are underway with federal initiatives aiming to reset the regulatory blueprint even as states continue to drive a patchwork of AI and AI-related bills and actions – increasing compliance challenges and risks. Moreover, expect AI regulatory policy to be interwoven with changes to data privacy laws and the underlying energy infrastructure. 

3. Cybersecurity & Information Protection – There is a general pullback of federal regulatory initiatives and more emphasis by the states, which has implications for state agencies and the role of public private partnerships. Expect to see an expansion in infrastructure security and data protection at the state level.  However, expect to see heightened attention to children’s online privacy protection at both federal and state levels, touching on data privacy, cybersecurity, and AI. 

4. Financial Crime – Expectations for the back half of 2025 include amended and tailored regulations and directives that focus on foreign individuals and ownership, especially as the investigation and enforcement focus narrows. This would include the unilateral use and recission of sanctions and secondary sanctions.

5. Fraud & Scams – The speed, scale and complexity of reported frauds and scams is driving historic volumes and costs as well as a need for regulators’ continued efforts to identify, enforce and report. The second half of the year is likely to produce a clear focus on frauds/scams where consumer/investor harm is “direct” and “tangible.”   

6. Fairness & Protection– Distinctions between what may be ‘deceptive’ versus ‘misleading’ continue to evolve, with the potential to lessen supervision and enforcement in certain areas. Overall regulations may be redefined in terms of enforcement focus but the regulations themselves will likely remain largely unchanged. 

7. Financial & Operational Resilience – In the second half of the year, further regulatory tailoring is expected as regulators adjust oversight frameworks and rules in line with the Administration’s focus on primary financial risks. Uncertainties related to third-party relationships are likely to persist amid ongoing trade, tariff, and sanctions policies.

8. Parties & Providers – Despite shifts in regulatory priorities and focus, increasing interconnectedness and rapid deployment of innovative technologies are expected to present continued risks in areas such as cyber, privacy, and operations. Ongoing attention to critical activities/risks with increased risk from uncertainties related to sanctions, tariffs, and global/jurisdictional divergences.

9. Governance & Controls – Continued expectation for sound risk management including detection, self-reporting, remediation and cooperation related to misconduct. Trend evolving toward the issuance of more ‘flexible’ regulatory frameworks in place of rules and guidance  though state laws and regulations are expected to continue to be more targeted.

10. Markets & Competition – In the second half, changes to regulatory requirements and processes are expected to promote and expand opportunities for companies and investors to access capital markets. Anti-trust enforcement and application of the existing merger guidelines is expected to continue, though signals suggest potentially more rapid approvals in bank M&A reviews. 

Regulatory Barometer Methodology:

The AI-enabled KPMG Regulatory Insights Barometer (*patent pending) uses a 10-point scale to assess upcoming regulatory pressure and direction of change. It assesses three attributes for each challenge area: volume, complexity, and impact, and combines them to arrive at a single weighted average indicator of regulatory intensity.

*Patents are pending for KPMG’s Regulatory Barometer Methodology as well as visuals in the 2025 Mid Year Report. The Barometer measures overall regulatory intensity (separate from tax and or economic policy).

About KPMG LLP 

KPMG LLP is the U.S. member firm of the KPMG global organization of independent member firms providing audit, tax and advisory services. The KPMG global organization operates in 142 countries and territories and has more than 275,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients. 

KPMG is widely recognized for being a great place to work and build a career. Our people share a sense of purpose in the work we do, and a strong commitment to increasing access to education and opportunity, advancing mental health, and supporting community vitality. Learn more at www.kpmg.com/us. 

About Regulatory Insights 

KPMG Regulatory Insights is the recognized thought leader for timely insight and perspective on risk and regulatory developments. Regulatory Insights provides real-time and emerging supervisory, regulatory, and enforcement trends—from alerts to in-depth analysis. Learn more at Regulatory Insights