Understanding global regulatory compliance

Never before has there been a time when so many businesses  are operating on a global scale, spanning multiple  borders and having to navigate a regulatory environment with an ever-growing list of regulations and standards to consider. This makes global regulatory compliance an essential part of business operations. But what exactly is global compliance, why do companies have to implement it, what kinds of compliance are there , and what are the consequences of non-compliance?

WHAT IS GLOBAL REGULATORY COMPLIANCE?
Global regulatory compliance involves ensuring that an organisation adheres to laws, regulations, and guidelines across multiple jurisdictions. This entails understanding diverse regulatory frameworks, implementing tailored compliance programs, managing the risks of non-compliance, and regularly auditing practices. Facilitating effective coordination and communication within the organisation, maintaining relationships with regulatory bodies,   upholding ethical norms and corporate governance standards are essential. This approach helps organisations avoid legal penalties, mitigate operational risks, and maintain a positive international reputation.

WHY DO WE NEED GLOBAL REGULATORY COMPLIANCE?
Global regulatory compliance is crucial for the financial services sector as it not only supports the stability and integrity of financial markets but also protects consumers and fosters a fair and transparent business environment.
Key areas where this is particularly important include:

• Regulatory risk mitigation
• Avoidance of legal penalties and fines, as companies have legal obligations and must comply with the laws and regulations of every jurisdiction they operate.
• Reputational risk, when compliance helps maintain a positive reputation avoiding legal action etc. which is crucial for customer trust and business relationships.
• Operational efficiency with standardised processes to reduce operational risks and enhance efficiency.
• Adhering to local regulations may be essential for local market access.

KEY AREAS OF GLOBAL REGULATORY COMPLIANCE FOR GLOBAL FINANCIAL SERVICES FIRMS INCLUDE:

1. Anti-Money Laundering (AML) Compliance – to include Customer Due Diligence (CDD): and Suspicious Activity Reporting (SAR)
2. Know Your Customer (KYC) Compliance
3. Data Protection Compliance. Vital regulations include the General Data Protection Regulation (GDPR), and the California Consumer Privacy Act (CCPA)
4. Financial Reporting and Accounting Compliance. Key standards include the International Financial Reporting Standards (IFRS), the Generally Accepted Accounting Principles (GAAP) and the Sarbanes-Oxley Act (SOX).
5. Market Conduct and Consumer Protection Compliance. We could include essential regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act and MiFID II (Markets in Financial Instruments Directive) in this category of regulation.
6. Basel III Compliance, an international regulatory framework for banks, developed by the Basel Committee on Banking Supervision, with the goal of enhancing oversight, supervision, and risk management in the banking sector.
7. Sanctions Compliance. Critical regulations include those enforced by the Office of Foreign Assets Control (OFAC), the European Union (EU) Sanctions, and the United Nations (UN) Sanctions.
8. Cybersecurity Compliance. Included here would be Gramm-Leach-Bliley Act (GLBA), the Payment Card Industry Data Security Standard (PCI DSS) and frameworks such as the National Institute of Standards and Technology (NIST).

THE CHALLENGES OF GLOBAL REGULATORY COMPLIANCE
Navigating the global regulatory landscape presents several challenges for organisations. Several significant challenges include:

• The sheer complexity and diversity of regulatory requirements across different jurisdictions
• Each country may have its own set of laws and regulations governing various aspects of business operations, making compliance a daunting task
• Keeping up with the constant changes and updates to regulations is another challenge, as regulations evolve in response to emerging risks, technological advancements, and shifting geopolitical dynamics.
• Cultural and language barriers can further complicate compliance efforts, especially for organisations operating in multiple regions.

WHAT IS THE IMPACT OF FAILURE TO COMPLY WITH REGULATIONS?
There can have severe repercussions including :

• Financial Penalties that reach multi-million and multi billion 9-digit figures. Enforcement fines and sanctions can be substantial and damaging.
• Non-compliance can lead to lawsuits and legal disputes further escalating costs
• Reputational Damage. Its significance cannot be underestimated: it can erode customer trust and harm business relationships, which are crucial for long-term success.
• Regulatory actions can halt operations, leading to significant business disruption.

SO, HOW CAN FIRMS MAINTAIN REGULATORY COMPLIANCE?

• Regularly update your knowledge of the relevant laws and regulations in all jurisdictions where you operate or are impacted.
• Develop, implement and enforce robust compliance policies and procedures.
• Provide regular training for employees to ensure they understand and follow regulatory compliance requirements.
• Use a regulatory compliance management solution. Regulatory technology or RegTech can work with you, providing horizon scanning through to regulatory policy management helping you with your regulatory change management challenges.

Global regulatory compliance is not just about avoiding penalties but also about fostering a culture of compliance and responsibility. By understanding and implementing effective compliance measures, companies can protect themselves from regulatory risk. Embracing compliance can transform compliance from a mere obligation into a strategic competitive advantage, enhancing your company’s reputation, building trust with customers and regulators, and fostering long-term success.

Read our other blogs>