Dealing with Non-Compliance: Important Key Principles

Posted in Sanctions Compliance on April 2, 2024
Dealing With Non-Compliance

Dealing with non-compliance principles include the supervisor of the board, string corporate governance, and management combined with internal policies and procedures. Corporate governance is a practice that determines the procedures for establishing transparent policies and internal controls that help management achieve corporate compliance. 

The importance of corporate governance consists in the fact that it is one of the key elements and a prerequisite for the regulatory compliance activity of a company. Without an effective corporate governance system, the company will be unable to achieve its set strategic goals and objectives. 

The organizations must understand the applicable regulations and standards that require appropriate compliance to achieve the goals and objectives. Compliance is an integral part of a company’s risk management, which, in turn, is an integral part of the corporate governance system of a company. 

Dealing With Non-Compliance

Key Principles when Dealing with Non-Compliance

When dealing with non-compliance, the compliance officer or relevant subject matter expert should understand the matter and gather all the relevant information to check the extent of non-compliance. The compliance officer or subject matter expert must apply the knowledge and professional judgment to understand whether an act constitutes the non-compliance, which is ultimately a matter to be determined by the compliance officer and regulatory or legal experts.   

When non-compliance is identified, the compliance officer should discuss the matter with the relevant employee or departmental head, which is to be discussed with management and the compliance committee. Such a discussion clarifies the compliance officer’s understanding of the facts and circumstances relevant to the instance of non-compliance. 

The discussion requires the management or compliance committee members to take the appropriate action to avoid prospective regulatory action or penalty. The non-compliance must be dealt with under the regulatory provisions and authorities given by the regulator. The act of non-compliance must be dealt with according to the compliance requirements in the applicable regulations.

When discussing the matter of non-compliance, the compliance officer or subject matter expert shall advise the required or suggested action points to the management or committee members. Such advice or suggestion helps rectify or mitigate the consequences of non-compliance, deter the commission of non-compliance, or disclose the matter to the regulatory authority for further guidance or action.

Dealing With Non-Compliance

A company must establish a mechanism to ensure all non-compliance incidents are identified and reported to an appropriate committee. This company’s action ensures that the management may apply the relevant controls to avoid the potential penalties or to reduce the effects of non-compliance through the application of suggested regulatory requirements in case of non-compliance.

Companies must determine that internal compliance controls are operating as designed continuously. Companies must establish mechanisms to verify compliance controls are being followed in instances to deal with non-compliance. Companies must promptly establish mechanisms to report material compliance breaches to senior management and supervisors. Companies should be prepared to provide the supervisors with relevant non-compliance status and ensure that non-compliant areas or regulations are identified for future compliance.

When dealing with non-compliance issues, the compliance officers must ensure that they provide appropriate advisory and assistance, including to the management, and provide compliance training to the employees to enable them to deal with non-compliance issues and instances.

Final Thoughts

Non-compliance is defined as a person’s failure to act within stated boundaries or refusal to comply with such regulations or rules. Depending on the circumstances, noncompliant behavior can be intentional or unintentional.