Regulatory Compliance

Understanding Regulatory Compliance

Regulatory compliance is the implementation and adherence to laws, regulations, and rules by companies. It is essential for companies to follow the rules and regulations established by state, federal, or international institutions. The specific requirements may vary depending on the industry or type of business. When a company operates in accordance with these mandates, it is considered to be in regulatory compliance.

Regulatory compliance includes both external legal mandates issued by governments at various levels and internal regulations set by the company itself. Following these regulations promotes increased workplace accountability.

In 2009, blockchain technology emerged as an innovative breakthrough. While commonly associated with cryptocurrencies, blockchain has broader applications and potential. Blockchain operates on a distributed ledger framework, running concurrently on numerous nodes distributed across geography, organizations, and individuals. What distinguishes blockchain is its cryptographically guaranteed data integrity and irreversibility.

Once ledger transactions are grouped into blocks and recorded in the database, they undergo cryptographic authentication, making it extremely difficult to illicitly alter any part of the ledger. This immutability is one of the most remarkable aspects of blockchain in terms of compliance. Once data is saved in the chain, it cannot be changed or deleted. Consequently, blockchain is used as a document or proof of transfer for digital assets like bitcoins or other cryptocurrencies.

The immutability of blockchain can also serve as proof of compliance. Blockchain technology can be used to record the steps required by regulatory requirements. The immutable recording of actions and their outcomes can create an audit log for regulatory authorities to ensure adherence.

Regulatory compliance includes policies such as “know your customer” (KYC) and anti-money laundering (AML). Blockchain can play a significant role in these areas. Banks and financial institutions often have to complete multiple tasks and steps to onboard new clients, including confirmation, verification, and data collection. This process can be time-consuming, sometimes taking several months. However, many of these steps could be streamlined if the data was already stored in a secure, tamper-proof database like an incorruptible blockchain.

Blockchain technology has the potential to enhance both private regulatory compliance and assist regulatory agencies. Agencies can have near-real-time access to secure compliance-related data stored on regulated financial organizations’ blockchains. This would enable regulators to continuously improve their oversight, rather than analyzing information retrospectively.

In conclusion, regulatory compliance is a protocol that every industry must adhere to. However, with the help of technology, processes such as KYC and financial crime prevention can be among the first to be improved and made more efficient. All industries stand to benefit greatly from these advancements.