Compliance refers to the process of abiding by or conforming with a set of laws, rules, and regulations. In the European Union, for example, each member state will ensure compliance with a European Directive by passing laws that will implement its contents within each member state.
Large companies usually employ one or more compliance officers who ensure that the company operates in accordance with the laws and the rules that govern its trade. Banks and financial companies are subject to complex regulations.
In the United States, the most well-known compliance act is the Sarbanes–Oxley Act that has redefined and made more stringent the need to comply and accurately report financial statements by the top managers of large companies. In the United Kingdom, the Combined Code has a similar role in the accuracy and transparency of the statements made by listed companies on the London Stock Exchange.
Noncompliance can bring not only fines and civil penalties to those who disregard and disrespect the rules, but also criminal liabilities for breaking the law. In the current economic climate, when certain banks needed to be nationalized, an emphasis upon compliance is more acute than ever. Western governments are revising their banking laws in the hope that in the future the consumer will be protected and that financial speculation will not influence so acutely the lives of so many.Best Practice
- Risk Management: Beyond Compliance
- Incorporating Operational and Performance Auditing into Compliance and Financial Auditing
- The EU Regulatory Regime
- Middle East: Regulatory Structure and Powers
- Sarbanes–Oxley: Its Development and Aims
- United Kingdom: Regulatory Structure and Powers