5. Regulatory Compliance Guidelines
5.1 Step 1: Consider the strategic context of regulation
18. The required outcome of this step is to demonstrate a good understanding of:
- the reasons for regulation
- the outcomes and objectives that regulation is expected to contribute to
- the context in which regulatory decisions will be made and implemented
- any critical relationships or linkages to other areas of regulation
19. This is necessary to help ensure that the approach proposed to achieving compliance is appropriate and sensitive to the broader context in which regulatory decisions will be made and implemented. A centralised approach to enforcing compliance may, for instance, be inappropriate in the context of a desire to build industry capability and responsibility. In such a circumstance, a role for industry in enforcing compliance may be more appropriate.
20. The following questions are intended to help ensure an adequate understanding of the purpose, outcomes and objectives for regulation.
1. What is the size and nature of the problem or risk that is being regulated for?
2. What are the purposes or objectives of the regulatory intervention?
3. Are there related policy outcomes or objectives that should also be taken account of in designing the compliance regime?
4. How important is compliance to wider government outcomes and objectives?
5. What are the relationships or linkages between this and other areas of regulation (both domestic and international)
21. If this context changes the approach taken to achieving regulatory compliance will need to be reviewed and maybe modified.
5.2 Step 2: Consider the operational context of regulation
22. The required outcome of this step is to demonstrate a good understanding of:
- the operational context including the characteristics of the sector or population being regulated
- the extent to which the need for and outcomes of regulation are accepted
- the likelihood of compliance or non-compliance
- the capacity of the regulator to administer and enforce the regulations
23. Particular characteristics of the context will have material implications for the design of the compliance regime. For instance, a context in which the reasons and need for compliance are well understood, and the means of achieving compliance are within the capacity of those being regulated, would require less of an emphasis on initial communication of regulatory requirements than a regulation that is novel or new.
24. Consultation with stakeholders and affected members of the public will help build this understanding. In interpreting the results of consultation policy makers and regulators should seek to validate that the views gained are representative of all stakeholders and affected parties.
25. Consultation may also be an important element of the compliance strategy – in communicating the reasons for regulation, the public good that is associated with regulation and ensuring widespread understanding of the need for regulation and a willingness to comply.
26. The following questions are intended to help ensure an adequate understanding of the regulatory context.
6. Who is required to comply with the regulation?
The population at large?
A particular population sub group?
Businesses?
Other?
6.1 How big is the target sector or population ?
6.2 Is it a clearly defined sector or population?
6.3 Is it a homogenous or heterogeneous sector or population?
6.4 Is it a sector or population that is generally well informed?
6.5 Is it a sector or population that is easy to communicate with?
7. How likely is compliance?
7.1 Is the regulation novel or is there a history of related regulation?
7.2 Is the sector or population likely to comply?
Is the sector or population supportive of the regulation?
Does the sector or population have the capability to comply?
Will members of the sector or population benefit from compliance (or face some or all of the costs of non-compliance)?
7.3 Are some parts of the sector or population less likely to comply than others?
Which parts?
Why?
7.4 What is the expected level of non-compliance?
8. Who would bear the costs of non-compliance?
8.1 What type of risk or harm would result from non-compliance?
8.2 What would be the costs of the risk or harm occurring?
8.3 Who would bear the costs of the risk or harm occurring?
Is it the same person, sector or population that is being regulated?
Does the person have the capacity to avoid the risk or harm?
5.3 Step 3: Develop the compliance strategy
27. The required outcome of this step is a strategy or plan for achieving compliance.
28. This strategy or plan should build on the understanding of the strategic and specific regulatory contexts gained from steps 1 and 2. This strategy or plan will need to be revisited in light of the findings of any evaluation or review as provided for in step 5.
29. By compliance strategy we mean the actions and interventions that will be taken by the regulator or provided for in law to achieve compliance.
30. At one level this might be the communication of regulatory requirements to those being regulated. At another level it might be a letter of warning. At another level it might be punishment of those in breach of regulatory requirements. It might also entail a choice between central enforcement of regulatory requirements and empowering others to enforce compliance or to obtain redress in cases that harm does occur.
31. The spectrum of options for achieving compliance is shown in Braithwaite's pyramid below. In an ideal world the purposes and objectives of regulation will be widely accepted, those being regulated will willingly comply and the focus of the regulators activity will be at the base of pyramid. In the real world, however, not all of those being regulated will always be "virtuous' actors". A rational actor may weigh up the costs of compliance against the expected benefits of non-compliance, the probability of non-compliance being detected and act accordingly in their self interest. For reasons of incompetence, criminal intent or irrationality some actors may never willingly comply, and in those circumstances the regulator might act to prevent non-compliant actors from engaging in further non-compliant behaviour or activity through measures such as removal of license or permits or even incarceration.3
Figure 2: Braithwaite's Pyramid
32. The rationale and assumptions underpinning the particular mix of strategies or actions chosen should be recorded so that they are transparent to decision makers and accessible to future regulators and policy makers, so that effectiveness can be reviewed and evaluated in future, and so that appropriate and informed choices made on it as knowledge improves and/or the regulatory context changes over time.
33. The following questions are intended to help ensure the adequate development of a compliance strategy.
9. What are the outcomes, objectives and purposes of compliance (from step 1)?
10. What are the important elements of the regulatory context that will have implications for the design and implementation of the compliance strategy (from step 2)?
11. What is an acceptable level of compliance?
11.1 Is total compliance necessary?
How much compliance is needed for the regulation to be a success?
11.2 Is strict compliance to the letter of the law necessary or is substantive compliance sufficient?
11.3 Can non-compliance caused by omissions, accidental circumstances or unintended behaviours be tolerated?
12. Do those being regulated have the capacity to comply?
12.1 Will it be necessary to build capacity within the regulated sector or population to achieve compliance?
12.2 If yes:
Is it in the interest of the sector or population to develop its own capacity?
Is there a case (in the public good) for the regulator to work with the regulated sector or population to build its capacity and capability to comply?
If yes, what would be the role of the regulator be relative to that of the regulated sector or population?
13. Are there other critical factors in the policy environment that need to be addressed before compliance is possible?
14. How will regulatory requirements be communicated?
14.1 What will be done to ensure that those that those being regulated (and protected by regulation) become familiar with requirements and know what must be done to comply?
Is it sufficient merely to publish the regulation?
Who is best placed to communicate regulatory requirements?
What means of communication will be most effective?
Is communication an initial or ongoing activity?
15. How will non-compliance be detected?
15.1 Is it necessary to detect most or all cases of non-compliance?
15.2 Who will detect specific cases of non-compliance?
The regulator
The sector or population being regulated
Those who suffer risk of harm?
15.3 What if any measures will be necessary to aid detection of non-compliance?
16. How will non-compliance be deterred?
16.1 Is it necessary to enforce the requirements of the regulation in all detected cases of non-compliance?
16.2 Will persons be warned of the implications of continued non-compliance?
Generally through public communications?
Directly through specific communications?
16.3 What sanctions are appropriate in first and repeat cases of non-compliance?
Warnings?
Fines?
Removal of rights, licenses or permits?
Criminal sanctions?
16.4 Who will apply sanctions?
Individual persons – through the courts or other means of redress?
Industry or professional or other non-government bodies?
A government regulator?
17. Is it clear how the compliance strategy is intended to:
17.1 Help mitigate the problem that is being regulated for?
17.2 Contribute to the purpose, outcomes and objectives of regulation?
18. What are the expected costs of the proposed approach to achieving compliance?
18.1 To the regulator, the regulated and any others that may be impacted?
18.2 Both over:
The short term as the strategy is developed and implemented?
Ongoing?
19. Are the expected costs of achieving compliance (to both the regulator and those being regulated) proportionate to the expected benefits of compliance?
20. Has the compliance strategy been documented?
5.4 Step 4: Implementation
34. The required outcome of this step is an effective implementation strategy.
35. Successful implementation of a compliance strategy is most likely when:
- roles and accountabilities for its implementation are clearly defined
- when necessary activities and tasks have been identified and planned for
- when resource / funding implications have been identified and addressed
36. The following questions are intended to help ensure the successful implementation of the compliance strategy.
21. Who is accountable for implementation of the proposed compliance strategy?
22. What are the specific functions associated with achieving compliance?
22.1 Identify who is responsible for each including assumptions regarding non-government roles and functions?
22.2 Consider linkages to other regulatory functions and whether any of these can be adapted or leveraged off?
23. Do those with compliance related roles and functions have the capacities and capabilities necessary to perform them?
Relevant technical expertise?
Relevant knowledge and experience?
Necessary relationships to the regulated sector and others
Necessary systems and processes?
Necessary staff and other resources?
24. Describe the expected costs of compliance functions?
24.1 Over the short as new requirements are implemented?
24.2 Ongoing?
25. Describe how the costs of compliance functions will be funded?
25.1 How will meet the costs of compliance functions?
By the tax payer?
By those being regulated?
Other?
25.2 What mechanism is proposed to collect the funds?
25.3 Will the proposed approach to funding reinforce incentives for compliance and cost effective regulation?
5.5 Step 5: Monitor, evaluate and review
37. The required outcome of this step is a plan for monitoring and reviewing the effectiveness of the compliance strategy.
38. Monitoring and review of compliance is necessary to ensure that the approach taken to ensuring it is working as intended. Monitoring provides a basis for learning and making adjustments or changes to approaches as circumstances change, as the success of strategies is known, and as the regulated sector evolves and changes over time.
39. The following questions are intended to help ensure that the effectiveness of the proposed approach to achieving compliance is monitored and reviewed once implemented.
26. What will be done to monitor compliance?
26.1 What will be measured?
What are the yardsticks or indicators of success?
26.2 How will compliance be measured?
26.3 How frequently will it be measured?
On an ongoing basis?
At a particular point in time?
27. What will be done to review the effectiveness of the proposed approach to achieving compliance?
27.1 How will information on compliance be used by the regulator to modify or adjust its implementation of the compliance strategy?
28. Is a full review of regulatory compliance planned?
28.1 By who?
28.2 When?
28.3 If not, why not?
29. How will the results of any such review or evaluation be used?
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