The Global Regulatory Environment: Key Issues for Compliance Teams
Jinfo Blog

By Matthew Baker, Victoria Brocklehurst

Abstract

Ensuring compliance with the rules of a home regulator alone has become increasingly challenging, but add to this enhanced regulation in all markets in which a global financial services institution operates, then firms have an unenviable task to ensure compliance. Matthew Baker and Victoria Brocklehurst examine the key issues for compliance teams, from differences of approach between jurisdictions to conflicting approaches between initiatives and planning for the impact of new controls.

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Regulation, regulation, regulation: the mantra for today’s financial services industry.

Following the seismic events of the past decade, regulators around the world have tightened their grip on the regulation of financial services, introducing raft after raft of new rules and regulations. Ensuring compliance with the rules of a home regulator alone has become increasingly challenging, but add to this enhanced regulation in all markets in which a global financial services institution operates, then firms have an unenviable task to ensure compliance.

Key Issues for Compliance Teams 

Differences of approach: the approach to regulation obviously differs from jurisdiction to jurisdiction and across regions. Even in regions where some commonality of approach should be expected, such as across the common market of the EU, this is not always the case.

Extra-territoriality: certain jurisdictions have laws which exert influence far beyond their borders. For example, FATCA (United States Foreign Account Tax Compliance Act) and the AIFMD (Alternative Investment Fund Managers Directive) have extra-territorial impact and can cause serious problems for the unsuspecting compliance team.

Conflicting initiatives: even where regulatory initiatives have similar proposed outcomes based on common political will, such as the so-called Volker, Vickers and Likkanen proposals surrounding reforms of the business structures of banking institutions, conflicting approaches between initiatives can result in a huge compliance burden.

Competitiveness: new entrants to particular markets may find the sheer volume of regulation daunting. The costs of compliance may be too restrictive for some. Other jurisdictions may try and attract business through light touch regulation, though this may contradict the global, political and public pressures for more regulation.

Systems and controls: key to dealing with the regulatory burden is ensuring that a financial institution has the appropriate systems and controls in place. This can include: ensuring that appropriate legal advice has been sought in the relevant jurisdictions; horizon scanning to ensure that the impact new legislation is planned for well in advance; and the centralisation of compliance to maximise efficiency.

Next Steps:

• Seek local advice on key jurisdictions;
• Undertake horizon scanning projects to identify upcoming issues
• Take an active interest in regulatory developments and lobby on points of law that affect your business.

FreePint Subscribers can log in now to read Matthew and Victoria's full article: The Global Regulatory Environment - Regulatory Risks for Businesses

Editor's Note: Compliance in Context

This article is part of the FreePint Topic Series: Compliance in Context, which runs from September to October 2013. Register your interest, and you'll get pre-notification of when registration opens for any webinars in this series, as well as a free copy of the FreePint Report: Buyer's Guide on Regulatory Compliance when we publish in October.

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