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Compliance

Updated Jan 30, 2024 ·

Overview​

Compliance refers to adherence to laws, regulations, standards, and policies that apply to the operations of the organizations.

Compliance Reporting​

Systematic process of collecting and presenting data to demonstrate adherence to compliance requirements.

  • Regular submission of compliance status to regulatory bodies.
  • Internal reports to management and the board on compliance matters.
  • Documentation of compliance activities and findings.
  • Ensures transparency and accountability through detailed reports.

Types of Compliance Reporting​

  • Internal compliance reporting

    • Ensures organization follows its internal policies.
    • Conducted by internal audit team or compliance team.

  • External compliance reporting

    • Demonstrating compliance to external entities, such as customers.
    • Often mandated by law or contract.

Compliance Monitoring​

The process of regularly reviewing and assessing organizational practices to ensure compliance with laws, regulations, and internal policies.

  • Use of tools and systems to track compliance with regulations
  • Regular audits and inspections to identify non-compliance issues
  • Implementation of corrective actions to address compliance gaps

Components of Compliance Monitoring​

  • Due Diligence

    • Thorough assessments of regulatory requirements and organizational risks.

  • Due Care

    • Steps taken to mitigate the risks idnetified through due diligence.
    • Implementing controls and measures to ensure ongoing compliance.
    • For more information, please see Due Care

  • Attestation

    • Formal declarations confirming compliance with regulations or standards.
    • For more information, please see Attestations of Findings

  • Acknowledgement

    • Recognition and acceptance of compliance requirements by all relevant parties.

  • Internal Monitoring

    • Internally monitoring adherence to policies, procedures, and regulations
    • Achieved through audits, reviews, and assessments.

  • External Monitoring

    • Monitoring compliance through third-party audits
    • Includes regulatory inspections and industry certifications.

Automation in Compliance​

Automated compliance systems can streamline data collection, improve accuracy, and provide real-time compliance monitoring.

  • Healthcare providers, for monitoring patient data privacy compliance.
  • Banks can monitor transactions for potential money laundering activities.

Consequences of Non-Compliance​

  • Fines

    • Financial penalties imposed by regulatory authorities.
    • Can significantly impact an organization’s financial health.

  • Sanctions

    • Legal restrictions or prohibitions affecting business operations.
    • May include operational bans or trade restrictions.

  • Reputational Damage

    • Erosion of public trust and confidence.
    • Potential loss of customers, partners, and investors.

  • Loss of License

    • Revocation or suspension of critical operating licenses.
    • Can halt business operations and lead to significant revenue loss.

  • Contractual Impacts

    • Breach of contractual obligations leading to penalties.
    • Potential termination of business agreements and partnerships.

Reporting of Breaches​

Organizations are often legally required to report data breaches to authorities, protecting affected individuals and maintaining compliance.

  • Breach

    • Unauthorized access that could lead to disclosure of confidential data
    • Triggers notification requirements under laws like GDPR, HIPAA, or state regulations

  • Data Disclosure

    • Data was exposed and actively disclosed to unauthorized parties
    • Organizations must inform impacted individuals and authorities promptly

Compliance with legal and regulatory standards ensures organizations operate within US laws while protecting sensitive information.

  • Sarbanes-Oxley (SOX)

    • Mandates accurate financial reporting for public companies
    • Requires internal controls for financial data integrity
    • Holds executives personally accountable for fraud

  • Gramm-Leach-Bliley Act(GLBA)

    • Protects personal financial information
    • Requires financial institutions to implement safeguards
    • Involves consumer privacy notices and data protection measures

  • Basel II

    • Regulates international banking standards
    • Focuses on risk management for financial institutions
    • Ensures capital adequacy and effective risk controls

  • Payment Card Industry Data Security Standard (PCI DSS)

    • Applies to all businesses that handle credit card transactions

    • Requires strong security measures like encryption and access control

    • Non-compliance can result in fines or losing the ability to process payments

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      Failing an internal PCI DSS compliance assessment typically results in audit findings, which are documented issues that need to be addressed to achieve compliance. These findings highlight areas where the bank's security practices do not meet the required standards and must be remediated.