The financial services and fintech sectors are evolving at a rapid pace, and with that evolution comes heightened regulatory scrutiny and new compliance challenges. As we look ahead to 2025, internal auditors face a landscape shaped by emerging risks, technological advancements, and shifting priorities from regulators. Staying ahead of these changes isn’t just a best practice – it’s essential for maintaining compliance, building stakeholder confidence, and driving operational efficiency.
From the growing emphasis on Environmental, Social, and Governance (ESG) reporting to the increased focus on cybersecurity and third-party risk management, the expectations for internal audit functions are more demanding than ever. At the same time, advancements in technology, such as data analytics and automation, are transforming the way audits are conducted, offering opportunities to enhance efficiency and accuracy.
This blog explores the top audit trends for 2025 that every financial institution and fintech company should be aware of. We’ll dive into the drivers behind these trends, their implications for internal audits, and actionable strategies to ensure your institution is prepared to meet evolving regulatory expectations. Let’s get started and equip your organization to navigate these changes with confidence.
The Rise of Environmental, Social, and Governance (ESG) Reporting
Several factors are driving the rise of ESG reporting. Regulatory bodies, such as the SEC in the United States, are implementing enhanced disclosure requirements for climate-related risks and ESG initiatives. Globally, frameworks like the EU Taxonomy are pushing institutions to standardize their reporting on environmental impact. Additionally, there is growing pressure from investors and consumers who prioritize sustainability and ethical governance when choosing financial products and services.
For internal auditors, the implications are significant. ESG audits require a comprehensive understanding of how an institution’s operations, governance practices, and strategies align with its ESG commitments. This includes assessing whether ESG-related data is accurate, consistent, and aligned with regulatory standards. Auditors must also evaluate the effectiveness of ESG-related policies, risk management frameworks, and performance metrics.
To stay ahead of this trend, institutions should integrate ESG metrics into their audit processes now. Begin by ensuring that internal audit plans include ESG considerations, such as evaluating the impact of climate risks on financial performance or reviewing the effectiveness of diversity and inclusion initiatives. Collaborating with cross-functional teams to align operational practices with ESG goals is also crucial.
Strengthening Cybersecurity and IT Audits
In today’s digital-first world, cybersecurity has become one of the most pressing concerns for financial institutions and fintech companies. With the rise of sophisticated cyberattacks, data breaches, and ransomware incidents, regulators are placing increased scrutiny on IT risk management and cybersecurity preparedness. In 2025, internal audits will play an even greater role in ensuring institutions can defend against these threats and maintain the trust of their customers and stakeholders.
The surge in cybersecurity risks is driven by the expanding digital footprint of financial institutions, including cloud-based solutions, fintech integrations, and remote work environments. Regulators such as the SEC, OCC, and global governing bodies have introduced stricter guidelines for cybersecurity, including requirements for incident reporting, data protection, and vendor oversight. Non-compliance in these areas can lead to hefty fines, reputational damage, and loss of stakeholder confidence.
For internal auditors, cybersecurity audits must go beyond the basics of IT infrastructure assessments. Auditors need to evaluate whether the institution’s cybersecurity policies, procedures, and controls align with regulatory expectations and industry best practices. This includes reviewing data protection measures, such as encryption protocols and access controls, as well as incident response plans to ensure they are robust and tested regularly. Additionally, auditors must assess third-party vendor risks, as many cybersecurity vulnerabilities stem from external partnerships.
To stay ahead of this trend, institutions should integrate comprehensive IT risk assessments into their audit plans. Regular penetration testing and vulnerability scans can help identify weaknesses before they are exploited. Institutions should also ensure their audits cover the effectiveness of cybersecurity training programs, as human error remains one of the leading causes of data breaches.
Advanced technologies such as real-time monitoring tools and automated threat detection systems should also be a focus for audits. Auditors can assess whether these tools are properly configured and capable of detecting and mitigating potential threats in a timely manner. Collaboration between internal auditors and IT teams is essential to creating a proactive and effective cybersecurity posture.
In 2025, institutions that prioritize cybersecurity audits will not only ensure regulatory compliance but also protect their customers, data, and reputation from evolving threats. A strong focus on IT risk management and cybersecurity readiness positions financial institutions and fintechs to navigate the complexities of the digital landscape with confidence.
Expanded Focus on Third-Party Vendor Risk Management
As financial institutions and fintech companies increasingly rely on third-party vendors to deliver critical services, the risks associated with these partnerships have come under greater regulatory scrutiny. In 2025, internal audits will need to place a stronger emphasis on third-party and vendor risk management, ensuring these relationships are not only efficient but also compliant with evolving standards.
This trend is driven by the growing complexity of vendor ecosystems, which often involve cloud-based providers, fintech partners, and outsourced service providers. Regulators such as the OCC and European Central Bank (ECB) have introduced stricter requirements for managing third-party risks, with particular focus on data security, compliance with anti-money laundering (AML) regulations, and operational resilience. A failure to properly manage vendor relationships can expose institutions to compliance violations, data breaches, and reputational damage.
Internal auditors must take a comprehensive approach to assessing vendor risk. This begins with reviewing the due diligence process used to select and onboard vendors. Audits should evaluate whether the institution has properly vetted vendors for financial stability, compliance history, and cybersecurity measures. Additionally, auditors should assess whether contracts clearly define service-level agreements (SLAs) and outline compliance obligations.
Ongoing monitoring of vendor performance is equally critical. Internal audits should include a review of how the institution tracks and evaluates vendor compliance over time. This includes ensuring that vendors meet contractual obligations, adhere to regulatory standards, and maintain adequate cybersecurity practices. Vendor audits can also assess the institution’s response to identified risks, such as requiring corrective actions or renegotiating terms.
To stay ahead of this trend, institutions should incorporate vendor risk management into their broader audit plans. Regularly updating risk assessments to reflect changes in vendor relationships or regulatory requirements is key. Leveraging technology, such as vendor management platforms, can help streamline the process of tracking compliance and performance metrics.
As third-party relationships become more integral to operations, institutions that prioritize robust vendor risk management audits will reduce their exposure to operational and regulatory risks. By ensuring third-party partnerships are secure and compliant, internal audits play a crucial role in safeguarding institutions’ reputations and ensuring their long-term success.
Increasing Regular Scrutiny of Fintechs and Digital Banking
As fintech companies and digital banking platforms continue to reshape the financial landscape, regulators are intensifying their focus on the compliance and risk management practices of these institutions. In 2025, internal audits will need to address the unique challenges posed by these rapidly evolving sectors, ensuring institutions remain compliant while adapting to technological advancements.
This heightened scrutiny is driven by the explosive growth of fintech products and digital banking services, which have introduced new complexities into the regulatory framework. From digital wallets and peer-to-peer payment platforms to blockchain-based solutions, these innovations often operate in regulatory gray areas. As a result, regulators like the CFPB, FinCEN, and global bodies are ramping up oversight to ensure consumer protection, data security, and compliance with anti-money laundering (AML) and know-your-customer (KYC) standards.
For internal auditors, this means expanding the scope of audits to include the unique risks associated with fintech and digital banking operations. Audits should evaluate whether institutions have implemented adequate controls to address AML/KYC compliance, data privacy, and cybersecurity for digital platforms. Additionally, auditors must assess whether digital products align with traditional regulatory requirements, such as fair lending practices and transparent disclosures.
Another key area of focus is the use of emerging technologies like blockchain and artificial intelligence (AI). Auditors must understand how these technologies are integrated into operations and whether they create new risks or compliance challenges. For example, blockchain’s decentralized nature can complicate transaction monitoring and AML compliance, while AI-driven decision-making tools may raise concerns about bias and fairness.
To stay ahead of these challenges, institutions should proactively align their internal audit plans with the latest regulatory guidance on fintech and digital banking. This includes regularly reviewing the compliance framework for new products and services, as well as monitoring industry trends and best practices. Collaboration between internal auditors, compliance teams, and technology specialists is essential to ensure a comprehensive approach.
In 2025, the institutions that succeed will be those that adapt to the evolving regulatory landscape while leveraging audits to identify and mitigate risks. By focusing on fintech-specific challenges and maintaining robust internal controls, financial institutions can not only ensure compliance but also position themselves as leaders in innovation and consumer trust.
The Growing Importance of Internal Audit’s Role in Governance
Internal auditors are increasingly viewed as key contributors to corporate governance, playing a critical role in helping financial institutions and fintech companies navigate complex regulatory and operational landscapes. In 2025, the focus on governance will continue to grow as stakeholders demand greater accountability, transparency, and strategic oversight. For internal auditors, this shift presents an opportunity to move beyond traditional compliance checks and take on a more influential role in shaping organizational success.
This trend is driven by heightened scrutiny from regulators, investors, and customers who expect institutions to demonstrate strong governance practices. For example, the rise of ESG (Environmental, Social, and Governance) reporting has underscored the need for institutions to integrate governance into every aspect of their operations. Additionally, the increasing complexity of global regulatory requirements necessitates a governance structure that can respond quickly and effectively to emerging risks.
Internal auditors can support corporate governance by providing actionable insights that inform decision-making at the highest levels. By conducting risk-based audits, auditors help boards and leadership teams identify vulnerabilities and prioritize strategic initiatives. This includes assessing the adequacy of risk management frameworks, evaluating the effectiveness of governance policies, and ensuring alignment with regulatory and ethical standards.
Another critical role for auditors is ensuring that governance structures are both effective and adaptable. This involves reviewing the roles and responsibilities of key committees, such as audit and risk committees, to ensure they have the expertise and resources needed to oversee critical functions. Auditors should also evaluate the flow of information between management and the board, ensuring transparency and enabling informed decision-making.
To maximize their impact, internal auditors must embrace a collaborative approach. By working closely with governance teams, they can help institutions identify gaps, improve accountability, and create a culture of continuous improvement. Auditors should also stay informed about emerging trends and best practices in corporate governance to provide relevant, forward-looking recommendations.
As internal auditors take on a more strategic role in corporate governance, they help institutions not only meet regulatory expectations but also enhance their resilience, reputation, and long-term success. In 2025, the ability to integrate governance into audit processes will be a defining characteristic of high-performing financial institutions and fintech companies.
Conclusion: Top Audit Trends For 2025
As we look ahead to 2025, the internal audit landscape is set to be shaped by emerging trends that demand agility, innovation, and a forward-thinking approach. From the increasing emphasis on ESG reporting and cybersecurity to the expanded focus on third-party risk management and fintech-specific challenges, financial institutions and fintech companies must stay proactive to remain compliant and competitive. Internal auditors play a pivotal role in addressing these trends, providing the insights and strategies needed to navigate evolving regulatory expectations and strengthen governance practices.
By embracing these trends, institutions can turn audits into opportunities for improvement, operational efficiency, and long-term resilience. Staying ahead of these developments ensures compliance, mitigates risk and builds trust with regulators, stakeholders, and customers.
Is your institution ready for the challenges of 2025? RADD LLC specializes in helping financial institutions and fintech companies prepare for audits with tailored strategies and expert guidance.
Contact us today to schedule a consultation and ensure your organization is audit-ready and equipped for success in the year ahead. Let’s make 2025 your most compliant and efficient year yet!