Regulatory compliance in Europe, the Middle East, and Asia

Regulatory compliance indicates an organisation's commitment to conforming to the laws, regulations, standards, guidelines, and specifications established by agencies, trade associations, standards, and governmental and non-governmental entities. Typically, the implementation of regulations dictating compliance stems from the overarching goal of safeguarding individuals or entities, such as employees, consumers, the general public, or the environment.

The objective of regulatory compliance is to ascertain that organisations adhere to established standards of acceptable practices, thereby safeguarding the safety and security of individuals or entities associated with them.

This imperative extends across diverse organisations and industries on a global scale. Data privacy stands out as one of the pervasive regulations enforced internationally across various industries and by the majority of nations.

Note: This article focuses on regulatory compliance in Europe, the Middle East, and Asia. Click here for an article on regulatory compliance in the United States.

Why is regulatory compliance important?

Updated regulatory compliance requirements are enacted as an increasing number of governments and other entities refine existing regulations while introducing new ones to address burgeoning threats, many of which are precipitated by technological advancements and magnified by issues such as data privacy. The methodologies and tactics derived from compliance procedures enable organisations to conduct affairs in accordance with all pertinent laws and regulations.

A consequential outcome of regulatory compliance is its contribution to elevating organisational operations. Audit reports serve as tangible evidence of an organisation's dedication to adherence, illustrating its commitment to abiding by regulations and ensuring the welfare of those with whom it engages. Regulatory compliance fortifies the reputation of organisations, fostering confidence and trust through their commitment.

Moreover, regulatory compliance plays a pivotal role in fostering safety and diminishing risk across various sectors.

Regulations that address sector-specific hazards to individuals and the environment have substantively impacted outcomes; safeguards benefit workers, consumers, and the public by mitigating the likelihood of workplace accidents, injuries, and fatalities, while shielding people from deleterious or fraudulent products and practices.

In certain instances, the significance of regulatory compliance is as fundamental as enabling the continuity of organisational operations. Some regulations are imperative for legal operation, and the failure to comply can lead to substantial penalties or, in extreme cases, the complete cessation of an organisation's activities.

Regulatory compliance in the European Union (EU)

In the EU, regulatory compliance is essential to operating within legal and ethical guidelines. This means adherence to the laws, standards, and guidelines governing many business sectors.

These regulations are enforced by government agencies including:

1. European Securities and Markets Authority (ESMA)
2. European Banking Authority (EBA)
3. European Insurance and Occupational Pensions Authority (EIOPA)
4. European Data Protection Supervisor (EDPS)
5. European Environmental Agency (EEA)
6. European Medicines Agency (EMA)
7. European Aviation Safety Agency (EASA)
8. European Chemicals Agency (ECHA)
9. European Food Safety Authority (EFSA)
10. European Maritime Safety Agency (EMSA)

Non-governmental entities that maintain and enforce regulatory compliance in the EU include:

1. European Institute of Innovation and Technology (EIT)
2. European Union Agency for Cybersecurity (ENISA)
3. European Corporate Governance Institute (ECGI)
4. European Economic and Social Committee (EESC)
5. European Institute for Gender Equality (EIGE)

Standards that guide regulatory compliance in the EU include:

1. General Data Protection Regulation (GDPR)
2. Payment Services Directive (PSD2)
3. Markets in Financial Instruments Directive (MiFID II)
4. Regulation on Wholesale Energy Market Integrity and Transparency (REMIT)
5. Environmental Impact Assessment Directive
6. Employment Equality Directive

Tens of thousands of laws and regulations set regulatory compliance requirements for organisations. Examples of mandates in several key industries are as follows.

Privacy and data security

1. General Data Protection Regulation (GDPR, 2016)
2. ePrivacy Directive (2002)
3. Data Protection Directive (1995)
4. Cybersecurity Act (2019)
5. Network and Information Security Directive (2016)
6. Electronic Identification Authentication and Trust Services Regulation (eIDAS, 2014)
7. Payment Services Directive (PSD2, 2015)
8. Children's Online Privacy Protection Directive (COPPA, 1998)
9. Right to be Forgotten Rule (2014)
10. EU-US Privacy Shield (2016)

Health and safety

1. Framework Directive on Health and Safety at Work (1989)
2. Chemical Agents Directive (1998)
3. Manual Handling of Loads Directive (1990)
4. Workplace Directive (1989)
5. Personal Protective Equipment Directive (1989)
6. Display Screen Equipment Directive (1990)
7. Noise Directive (2003)
8. Vibration Directive (2002)
9. Asbestos Directive (2009)
10. Biological Agents Directive (2000)

Financial

1. Markets in Financial Instruments Directive (MiFID II, 2014)
2. Payment Services Directive (PSD2, 2015)
3. Solvency II Directive (2009)
4. European Market Infrastructure Regulation (EMIR, 2012)
5. General Data Protection Regulation (GDPR, 2016)
6. Anti-Money Laundering Directive (AMLD, 2015)
7. Capital Requirements Regulation (CRR, 2013)
8. Bank Recovery and Resolution Directive (BRRD, 2014)
9. Insurance Distribution Directive (IDD, 2016)
10. Funds Transfer Regulation (FTR, 2015)

Employment and workplace

1. Working Time Directive (2003)
2. Part-Time Work Directive (1997)
3. Fixed-Term Work Directive (1999)
4. Temporary Agency Work Directive (2008)
5. European Works Council Directive (2009)
6. Collective Redundancies Directive (1998)
7. Transfer of Undertakings Directive (2001)
8. Parental Leave Directive (2010)
9. Equal Pay Directive (2006)
10. European Social Charter (revised 1996)

Civil rights

1. Equality Act (2010)
2. EU Race Equality Directive (2000)
3. EU Employment Equality Directive (2000)
4. Gender Recognition Act (2004)
5. Equal Treatment Directive (2006)
6. Racial and Ethnic Origin Directive (2000)
7. Social Security Regulation (EC No 883/2004)
8. Victims' Rights Directive (2012)
9. EU Disability Strategy (2010-2020)
10. European Equality Law Review

Environmental

1. Waste Framework Directive (2008)
2. Water Framework Directive (2000)
3. End-of-Life Vehicles Directive (2000)
4. Industrial Emissions Directive (2010)
5. Birds Directive (2009)
6. Habitats Directive (1992)
7. European Green Deal (2019)
8. Air Quality Directive (2008)
9. Chemicals Regulation (REACH 2006)
10. Climate Law (2020)

Regulatory compliance in the United Kingdom (UK)

Some compliance regulations in the UK are derived from European Union legislation. Since the UK is no longer part of the EU, operating within the legal and ethical confines of the United Kingdom requires adherence to UK laws, standards, and guidelines across different business sectors.

Regulations in the UK are enforced by numerous government bodies, including:

1. Financial Conduct Authority (FCA)
2. Health and Safety Executive (HSE)
3. Information Commissioner's Office (ICO)
4. Environment Agency (EA)
5. Food Standards Agency (FSA)
6. Office of Communications (Ofcom)
7. Office of Gas and Electricity Markets (Ofgem)
8. Gambling Commission
9. Medicines and Healthcare products Regulatory Agency (MHRA)
10. Equality and Human Rights Commission (EHRC)

Non-governmental bodies that maintain and enforce regulatory compliance in the UK are:

1. British Standards Institution (BSI)
2. Financial Conduct Authority (FCA)
3. UK Accreditation Service (UKAS)
4. The Advertising Standards Authority (ASA)
5. The Internet Watch Foundation (IWF)
6. Financial Ombudsman Service

Standards that guide regulatory compliance in the UK include:

1. ISO 9001 - Quality Management
2. ISO 27001 - Information Security Management
3. ISO 14001 - Environmental Management
4. BS OHSAS 18001 - Occupational Health and Safety Management
5. ISO 22301 - Business Continuity Management
6. ISO 20000 - IT Service Management

As in the EU, many laws and regulations set UK regulatory compliance requirements for organisations. Examples of mandates in several key industries include the following.

Privacy and data security

1. General Data Protection Regulation (2018)
2. Data Protection Act (2018)
3. Privacy and Electronic Communications Regulations (2003)
4. Network and Information Systems Regulations (2018)
5. Payment Card Industry Data Security Standard (2006)
6. Cyber Essentials Scheme (2014)
7. Investigatory Powers Act (2016)

Health and safety

1. Health and Safety at Work Act (1974)
2. Control of Substances Hazardous to Health Regulations (2002)
3. Manual Handling Operations Regulations (1992)
4. Workplace (Health, Safety, and Welfare) Regulations (1992)
5. Personal Protective Equipment (PPE) Regulations (2002)
6. Provision and Use of Work Equipment Regulations (1998)
7. Display Screen Equipment Regulations (1992)
8. Electricity at Work Regulations (1989)
9. Noise at Work Regulations (2005)
10. Reporting of Injuries, Diseases, and Dangerous Occurrences Regulations (2013)

Financial

1. Financial Services and Markets Act (2023)
2. Bank of England Prudential Regulation Authority (2013)
3. Markets in Financial Instruments Directive II (2018)
4. Payment Services Regulations (2017)
5. Electronic Money Regulations (2011)
6. Anti-Money Laundering Regulations (1994)
7. Consumer Credit Act (1974)
8. Insurance Distribution Directive (2016)
9. Financial Conduct Authority (FCA) Data Security Standards (2013)

Employment and workplace

1. Health and Safety at Work etc Act (1974)
2. Equality Act (2010)
3. Employment Rights Act (1996)
4. National Minimum Wage Act (1998)
5. Working Time Regulations (1998)
6. Trade Union and Labour Relations (Consolidation) Act (1992)
7. Employment Tribunals Act (1996)
8. Pensions Act (2008)
9. Maternity and Parental Leave Regulations (1999)

Civil rights

1. Equality Act (2010)
2. Human Rights Act (1998)
3. Freedom of Information Act (2000)
4. Rehabilitation of Offenders Act (1974)
5. Modern Slavery Act (2015)
6. Employment Rights Act (1996)
7. Public Sector Equality Duty (2011)
8. Work and Families Act (2006)
9. Mental Health Discrimination Act (2013)

Environmental

1. Environmental Permitting (England and Wales) Regulations (2016)
2. Hazardous Waste (England and Wales) Regulations (2005)
3. Waste (England and Wales) Regulations (2011)
4. Control of Major Accident Hazards Regulations (2015)
5. Water Environment (Water Framework Directive) (England and Wales) Regulations (2017)
6. Conservation of Habitats and Species Regulations (2017)
7. Packaging Waste Regulations (2007)
8. Air Quality Standards Regulations (2010)
9. Climate Change Levy (General) Regulations (2001)
10. End-of-Life Vehicles Regulations (2003)

Regulatory compliance benefits

Organisations obtain numerous advantages from demonstrating compliance. Here are several benefits frequently associated with regulatory compliance.

Avoiding needless and expensive legal problems

Regulatory compliance programs support organisations in circumventing onerous and time-consuming legal complications associated with non-compliance. Compliance policies establish frameworks designed to fulfill organisational obligations.

Improved operational productivity, enhanced innovation, and lower costs

Operational efficiency stands out as an advantage of compliance management. The implementation of robust and transparent processes and systems becomes imperative, leading to streamlined procedures that optimise operations, enhance productivity and innovation, and reduce expenses.

Increased resilience and business continuity

Organisations adhering to compliance are inherently more resilient in the face of evolving regulations, given their pre-established systems designed to meet regulatory requirements. This enhanced readiness facilitates improved planning for future changes, fostering heightened business continuity.

Better worker productivity and lower turnover

Through its role in prioritising workplace safety and equity, regulatory compliance positively impacts employee satisfaction and contributes to heightened productivity and improved retention rates.

Enhanced market health

Another advantage of regulatory compliance lies in eradicating monopolies that may impede competition and give rise to unhealthy markets. Regulations frequently promote equitable practices, affording all organisations an opportunity to thrive and fostering a climate conducive to innovation.

Greater equity and improved safety in the workplace

Some regulatory compliance mandates focus on eradicating discrimination and harassment within the workplace. Furthermore, compliance mandates enforcement of stringent safety standards and protocols to avert accidents and mitigate harm to individuals and infrastructure. So, compliance can cultivate a work environment that enhances overall job satisfaction.

Positive brand value

Conforming to compliance can augment trust in organisations among workers, clients and customers, and the public. Illustrating compliance reflects a dedication to elevated professional and ethical standards, ultimately improving the organisation’s reputation and fostering confidence amongst stakeholders.

Non-compliance consequences

Non-compliance with regulatory requirements exposes organisations to the risk of penalties, including sanctions and fines. The exact nature of these consequences varies depending on the regulations involved, but the below general categories offer a comprehensive overview of the potential penalties when violations occur.

Financial consequences

Failing to meet compliance obligations can result in heavy fines. For example, in the European Union (E.U.), GDPR has two tiers of penalties, each with significant financial obligations for non-compliant organisations.

In the UK, failure to comply with the Health and Safety Executive (HSE) regulations can lead to severe financial penalties, often in the tens of thousands of pounds.

Adverse effect on organisational operations

Compliance violations can precipitate a decline in productivity as organisations struggle with fines and other associated consequences. In severe instances, organisations may face the risk of losing contracts, licenses, or authorisation.

For instance, industry regulations such as the Payment Card Industry Data Security Standard (PCI DSS) may prohibit the utilisation of credit card payment networks for non-compliant entities. Failure to comply with the European Union's General Data Protection Regulation (GDPR) can result in substantial fines and the termination of contracts, causing considerable operational disruption. This may trigger a regulatory review and could even lead to the suspension of the company's license to operate within the EU.

Legal culpability

When failure to meet regulatory compliance requirements leads to significant harm to individuals or an organisation, there may be legal repercussions. The General Data Protection Regulation (GDPR) serves as an illustrative example of the substantial legal liabilities involved. Violations of such regulations may even subject leaders to the possibility of imprisonment. As might be expected, the legal fees incurred for defence in such cases are very costly.

Reputational repercussions

While fines are indeed burdensome, the more formidable challenge posed by non-compliance lies in the harm inflicted upon brands and reputations. When non-compliance culminates in an incident, particularly when the law is broken, the public is often unsympathetic. Organisations run the risk of relinquishing market share and revenue when the trust of the public is compromised.

Regulatory compliance policies

A compliance policy offers a comprehensive framework for fulfilling regulatory obligations, meticulously outlining the systems, processes, and procedures essential for implementation, maintenance, and reporting. The policy should encompass the following elements:

1. Principles that govern regulatory compliance decisions and actions
2. Methodologies, structures, strategies, and tasks needed
3. Information about when and where audits will be performed, as well as who will be conducting them
4. Clarity about resources and functional roles for observing and maintaining compliance
5. Documentation and communication requirements
6. Outlines of relevant regulatory compliance specifications

While particulars may differ among organisations, the following queries warrant consideration when crafting a regulatory compliance policy:

1. In what manner will the regulatory compliance policy be implemented to alleviate risk, enhance communication, and educate stakeholders?
2. Who must understand and implement the policy, and in what manner?
3. Are there any exceptions or constraints on the application of the policy?
4. What is the organisational impact of compliance?
5. How will the allocation of compliance responsibilities be managed among various teams, such as legal, accounting, human resources, and finance?
6. How will the policy cultivate compliance across diverse teams and locations?
7. Which systems will be utilised to oversee, administer, and report on regulatory compliance?
8. In what ways can the policy contribute to assessing the value of compliance, including its incorporation into assessments of team member productivity?

The implementation of regulatory compliance policies is crucial for organisations as they facilitate transparent communication with workers, regulators, and other stakeholders regarding the methods employed. Individuals falling within the purview of compliance requirements are often required to formally acknowledge that they have reviewed and comprehend the policies.

Regulatory compliance roles

Positions dedicated to regulatory compliance play a pivotal role in assisting organisations in implementing rigorous and intricate rules and regulations. Unfortunately, those responsible for enforcing compliance often face unwarranted criticism from others within the organisation.

It is imperative for leaders to educate everyone in the organisation about the crucial role played by individuals responsible for maintaining compliance; portraying them as collaborative partners positively repositions them.

As the landscape of compliance requirements expands, numerous organisations have established roles specifically dedicated to ensuring adherence to rules, such as:

1. Head of compliance
2. Group or corporate compliance officer
3. Compliance officers, analysts, and/or specialists

These managerial functions encompass several areas, including the following.

Consultive

Individuals in roles dedicated to regulatory compliance assist organisations in adhering to laws and mandates by offering direction and advising on essential updates to policies and procedures and the systems and people that support them. Furthermore, members of the compliance team apply their expertise to ensure prompt remediation when issues do occur, as well as offer counsel on preparing for audits and submitting documentation.

Data classification

A crucial responsibility of compliance teams involves aiding in data governance, particularly in the realm of classification. Precisely categorising stored data not only facilitates the smoother fulfilment of compliance requirements but also expedites and streamlines the auditing process.

Monitoring

Compliance teams play a pivotal role in enabling organisations to stay abreast of emerging and evolving rules. Given the ongoing issuance of new regulatory requirements, organisations derive significant advantages from team members who focus on understanding their implications and proactively takes measures to implement any necessary updates.

Mitigation

Steering clear of compliance missteps is instrumental in averting penalties and operational disruptions. Compliance teams formulate and execute programs designed to shield organisations from jeopardy arising from non-compliance with myriad rules, thereby mitigating overall risk.

Finding solutions

A prompt response is imperative if a breach in compliance controls occurs in spite of the organisation’s best efforts. Swift resolution serves to minimise damage and can effectively mitigate disruption, harm, and associated penalties.

Accountability

Designating roles with a focus on regulatory compliance assigns responsibility to a team or individual. This enables them to dedicate the necessary time to cultivate a profound understanding of pertinent rules and their impact on the organisation. This involves assisting other groups in ensuring compliance and keeping them abreast of new rules or revisions to existing ones.

Best practices in regulatory compliance

To fulfill regulatory compliance requirements, organisations must assess the rules and regulations pertinent to them and gain a complete understanding, as regulatory requirements often extend broadly depending on where business is conducted. Consider the following best practices:

1. Designate roles to people on the appropriate teams to enable compliance implementation, reporting, and auditing.
2. Identify applicable mandates and ascertain which rules are relevant to the organisation based on its location(s), industry, and operations.
3. Determine requirements across rules and regulations and formulate a program to facilitate compliance.
4. Create and regularly update a compliance conduct code to instil a culture of compliance.
5. Document processes with clear directions to secure compliance with all mandates and readiness for audits.
6. Regularly monitor compliance requirements and make any necessary updates.
7. Organise consistent training and development to keep personnel and others informed about requirements and the actions needed for compliance.

Regulatory compliance creates a level playing field

As regulatory requirements continue to proliferate globally, there is an endeavour to standardise them when possible. While compliance is occasionally perceived as burdensome, it serves the greater good of the population.

The outcome of compliance requirements is in favour of individuals, as minimum acceptable practices compel organisations to adhere to certain standards, and in some cases to improve upon them. This yields benefits ranging from more dependable products and improved environmental regulations to heightened data privacy and fraud protection.

For organisations, regulatory compliance offers a uniform set of regulations applicable to all, creating a level playing field that allows them to select from a variety of solutions and implement processes that best suit their needs.

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