Knowing the rules is a must. The relevant regulators regulate all organizations, companies, or businesses and must identify and comply with the applicable regulatory requirements issued and enforced by the regulators. It is essential for the Board of Directors and Management to ensure that the corporate compliance requirements and related policies and procedures are disseminated to all the employees in the organization so that they know and apply the rules set for corporate compliance. Knowing the corporate compliance rules is a continuous process, and it requires understanding all applicable laws, regulations, rules, and standards that apply to the company.
The regulators set compliance rules and must comply with the industry and the organizations operating within that industry. Rules are set for transparent business activities and better customer service. Around these broader rules, different other rules are introduced by the regulators for compliance purposes.
Knowing the Rules: Employees and Staff
Employees and staff are required to know the rules and translate them into the form of policies, processes, and procedures. The management develops policies, processes, and procedures to ensure that all applicable laws, rules, regulations, and standards are complied with in letter and spirit by all the employees. For example, in the case of the money exchange business, it is mandatory to identify the person coming to exchange or transfer the amounts from one place to another. Therefore, the money exchange business shall incorporate the requirement to identify and verify the persons in its policy and procedures.
Without knowing the regulatory requirements and the principles of compliance, the employees may not be aware of the key corporate compliance requirements such as those related to insider trading practices, unfair dealing with customers, gaining personal financial benefits by employees, investments restrictions, product restrictions, investments in banned jurisdictions, etc.
Without knowing the rules, the employees may not understand the importance of good corporate governance and ethics. They misappropriate the funds and do not follow the internal policies and procedures that cover the applicable regulatory requirements, which leads to reputational, financial, and operational losses. The significant losses may cause the shutdown of business operations or a particular business segment.
Although the management of compliance risk is the first and foremost responsibility of all the employees, the primary responsibility of establishing an independent and effective compliance culture rests with the company’s Board of Directors. To ensure that employees know the rules, the companies put corporate compliance-related policies, procedures, and programs and minimize legal and regulatory risks. The employees are not permitted to work against the Board and management’s approved policies, rules, and processes to avoid regulatory breaches or non-compliance with applicable laws and regulations.
The companies and businesses have attracted great attention from the regulators due to various factors, including global financial crises, frauds, customer complaints, technological advancements, etc. Many companies have faced a significant decline in market performance, and various have been levied massive penalties for non-compliance with applicable laws and regulations. The regulatory environment is undergoing a major shift towards compliance risk and its proactive management wherein more quality resources are being required to be deployed by the companies, businesses, and organizations.
Knowing the Rules: Penalties
The penalties imposed by the regulators may vary, and the relevant government bodies or agencies may revise them. Therefore, the penalties may not be specifically mentioned for future periods, which are subject to change by the authorities.
The Compliance Officer is appointed to ensure that all applicable laws and regulations are identified, understood, and complied with by the employees to ensure compliance.
Knowing the rules is also essential to fairly deal with clients and management to refrain from adopting wrong practices whereby financial information is artificially inflated. Employees and staff must show their deposits, investment transactions, assets, provisioning, operating and net profits, or any other method to artificially inflate the financial position to attract potential clients or investors. The company defines and disseminates rules for the investments and avenues regarding the funds’ investment.
Corporate compliance rules and their dissemination require that a solid oversight mechanism is established within the organization that periodically monitors the corporate compliance practices are established and disseminated for compliance purposes. Corporate compliance aims to promote the compliance culture and ensure compliance controls and processes are implemented to avoid the financial, reputational, and operational losses arising from legal and regulatory non-compliance.
Final Thoughts
Rules help to establish expectations and provide guidelines for daily business activities. They also ensure compliance with the local, state, and federal agencies that govern your specific type of business operation. The significance of knowing the rules is that it keeps everyone safe; build social behaviour such as respect and protection of other people and the environment; equality and fairness as laws apply to everyone; and. Outlines the ramifications of breaking the law.
