Regulatory compliance
Regulatory Compliance Overview by Country:
- Australia: Major financial regulators include RBA, APRA, ASIC, and ACCC. APRA focuses on superannuation regulations. Other regulators cover broadcasting, energy, and healthcare.
- Canada: OSFI and FINTRAC regulate deposits and superannuation. Provincial laws and agencies govern at a local level. Key regulators oversee food safety, public health, and environment.
- The Netherlands: Dutch Central Bank and AFM regulate the financial sector. Compliance involves observing laws and internal norms to prevent risks and damage to the organization.
- India: Compliance regulations exist at Central, State, and Local levels, with central regulation being prominent, especially for financial organizations. Reports indicate around 65% of companies in India are fully compliant.
- United States: Corporate scandals like Enron led to statutory changes such as the Sarbanes–Oxley Act and Dodd-Frank Wall Street Reform Act. Compliance involves adherence to laws with criminal or civil penalties.
Regulatory Compliance Challenges:
- Data retention poses challenges in regulatory compliance, especially with laws like CAN-SPAM Act and Fair Credit Reporting Act.
- Money laundering and terrorist financing threaten financial system integrity and national security.
- EU adopts a risk-based approach to Anti-Money Laundering and Combating the Financing of Terrorism, which can create legal implications with shared enforcement powers between EU and national authorities.
Regulatory Compliance Standards and Publications:
- ISO 37301:2021 is a primary international standard for regulatory compliance, with other standards like ISO/IEC 27002 for security management compliance.
- Various publications address regulatory compliance, such as ‘The Evolution of Regulatory Policy in OECD Countries’ and ‘The Regulatory Structure’ in Financial Services Law and Compliance in Australia.
Regulatory Compliance Reports and Organizations:
- The IMF, FATF, and OECD have reports on compliance standards in different countries.
- Organizations like ACMA, Clean Energy Regulator, and OSHA play roles in regulatory compliance oversight and enforcement.
Regulatory Compliance Focus Areas:
- Specific focus areas include privacy vs. security challenges, regional capital market integration, regulation of genetically modified crops, and IT governance related to data security and ISO standards.
- Various publications and chapters address these focus areas, such as ‘Privacy: What Everyone Needs to Know’ and ‘IT Governance: An International Guide to Data Security and ISO 27001/ISO 27002’.
In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Compliance has traditionally been explained by reference to the deterrence theory, according to which punishing a behavior will decrease the violations both by the wrongdoer (specific deterrence) and by others (general deterrence). This view has been supported by economic theory, which has framed punishment in terms of costs and has explained compliance in terms of a cost-benefit equilibrium (Becker 1968). However, psychological research on motivation provides an alternative view: granting rewards (Deci, Koestner and Ryan, 1999) or imposing fines (Gneezy Rustichini 2000) for a certain behavior is a form of extrinsic motivation that weakens intrinsic motivation and ultimately undermines compliance.
Regulatory compliance describes the goal that organizations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws, policies, and regulations. Due to the increasing number of regulations and need for operational transparency, organizations are increasingly adopting the use of consolidated and harmonized sets of compliance controls. This approach is used to ensure that all necessary governance requirements can be met without the unnecessary duplication of effort and activity from resources.
Regulations and accrediting organizations vary among fields, with examples such as PCI-DSS and GLBA in the financial industry, FISMA for U.S. federal agencies, HACCP for the food and beverage industry, and the Joint Commission and HIPAA in healthcare. In some cases other compliance frameworks (such as COBIT) or even standards (NIST) inform on how to comply with regulations.
Some organizations keep compliance data—all data belonging or pertaining to the enterprise or included in the law, which can be used for the purpose of implementing or validating compliance—in a separate store for meeting reporting requirements. Compliance software is increasingly being implemented to help companies manage their compliance data more efficiently. This store may include calculations, data transfers, and audit trails.
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