Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Round-up on compliance issues with PSD2 implementation

The Payment Services Directive 2 (PSD2) became effective in the European Union as of January 13, 2018.  These revised rules replace the first Payment Services Directive, which was previously in place from December 25, 2007.

The purpose of PSD2 is to provide stronger consumer protections when making electronic payments, especially in online purchases, promote fintech innovations in online and mobile payments as well as open banking applications, and improve the efficacy and safety of cross-border payments within the EU.

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Round-up on justice issues with marijuana legalization

The ongoing discussion about marijuana legalization has gained great momentum and now must include vital justice considerations.  As the process of decriminalizing marijuana cultivation, use, and possession gains public acceptance, the scope of the discourse must widen to include racial and social justice reforms.  These issues are critical for understanding in the mixed progress of legalization, the efficacy and impact of enforcement trends, and ongoing requirements for regulatory design and social equity gains.

Cory Booker, US Senator from the state of New Jersey, is the author of the Marijuana Justice Act and has spoken repeatedly about the need for states to consider criminal justice reforms alongside medical and recreational marijuana legalization campaigns.  As states legalize future marijuana possession, use, and distribution but do not consider corrective action for people with previous criminal convictions they create an unjust and unfair double standard where legalization benefits one set of citizens and does not alleviate what Senator Booker refers to as “collateral consequences” that seriously impair another set.

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Tension between innovation and regulation

Cutting-edge technology and competent supervision are often depicted as being at odds. Silicon Valley regards state and federal regulatory approaches with professional skepticism, reflecting the widespread sentiment that supervision is oppressive and stifling to creativity and design.  As the rationale goes, the ideas of futurists, technologists, designers, and engineers cannot develop freely amid the restrictions of legal and compliance controls.  By the same token, oversight attempts are presumed to be inadequately prepared for the task of keeping up with fast-paced technological advancements.

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Selected Dirty Money episodes for corporate compliance

Dirty Money is a documentary series that premiered on Netflix in January 2018.  The series focuses on different case studies of corporate corruption.  The documentaries delve into the political and cultural causes behind the key events in each case, motivations of the individuals involved, and the way that society has been impacted by these situations, some of which remain under investigation or legal challenge.  While all the episodes are interesting to study for general themes of corporate compliance and/or ethical culture and organizational integrity, four of the episodes are especially relevant.

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Round-up on anti-money laundering compliance

The practice of money laundering takes on many forms, all with the objective of transferring money earned from illegal activities into the legal financial system for further use.  These various strategies for transferring profits from theft, drug sales, bribery, or other illicit activities are all targeted for the criminals to gain access to legitimate banking and from there use the money for mainstream activities such as investing, shopping, or buying property.

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Round-up on compliance issues with GDPR implementation

GDPR – the General Data Protection Regulation – is intended to establish a stronger, unified system of protection of personal data for individuals and businesses within the European Union. GDPR was adopted directly by the European Parliament, the Council of the European Union, and the European Commission on April 27, 2016. Following a two-year transition period, GDPR will become directly binding and enforceable as of May 25, 2018.

GDPR is an improvement upon the 1995 Data Protection Directive, intended to enhance control by individuals over their own personal data and accountability for organizations in how they collect, handle, and maintain it. The Data Protection Directive was implemented by individual law in each of the EU nations and therefore created a patchwork of standards and practices varying between the member states.   GDPR therefore is intended to simplify and integrate requirements in a more cohesive and competent supervisory model.

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Round-up on FCC compliance

This is the seventh in a series of seven posts about regulatory compliance priorities and enforcement trends.  The first post was about the Commodity Futures Trading Commission (CFTC).  The second post was about the Federal Trade Commission (FTC).  The third post was about the Securities & Exchange Commission (SEC).  The fourth post was about the Food & Drug Administration (FDA).  The fifth post was about the U.S. Department of Agriculture (USDA).  Last week’s post was about the Environmental Protection Agency (EPA).  Finally, today’s post, the final one, will be about the Federal Communications Commission (FCC).

The U.S. Federal Communications Commission (FCC) is the US regulator charged with supervising interstate communications via the mediums of radio, television, wire, satellite, and cable.  The FCC was created by the Communications Act of 1934 to replace the Federal Radio commission, a predecessor regulator with jurisdiction over radio only, and incorporate the telecommunications regulation responsibilities of the Interstate Commerce Commission, in recognition of the advancement of communication and broadcasting technologies.

The modern FCC has six main operating objectives: providing affordable access to broadband internet; maintaining a competitive framework for communications services providers; ensuring the efficiency and efficacy of spectrum (radio); setting media regulations which encourage digitalisation, competition, and diversity; cooperating with public safety and homeland security crisis communications; and contributing to ongoing modernization of the FCC itself as innovation evolves.  Within these objectives, the FCC sets media policy pertaining to broadcast, cable, and satellite television and broadcast radio regarding content, indecency, ownership, and transition to digital.  Interstate telecommunications services including landed telephone, internet, mobile services, and a variety of other radio and broadcasting networks and databases are also within the FCC’s purview.

Certainly the biggest story in recent years involving the FCC has been the changes to the Obama-era Net Neutrality rule.  For a basic but thorough explanation of Net Neutrality, recent changes to its regulatory handling, and the various interests at stake, check out this QuickTake from Bloomberg.

  • Cooperation with the FTC: In the aftermath of the rollback of net neutrality protections ensured by the FCC in its December 2017 vote, much of the regulatory attention has been on assurances that the FTC will step into the gap to pick up on vital enforcement efforts.  The two agencies have agreed to a memorandum of understanding on their collaboration with each other, much of which appears to be based on pre-Net Neutrality classifications which established shared jurisdictions for the FCC and the FTC.  The details of this plan, however, both in its depth and its ultimate application, remain to be seen:  FCC and FTC outline how they’ll cooperate after net neutrality vote   
  • Legal engagement with states: Facing regulatory rollback at the federal level and judging legislative action to be unlikely, some states have started to consider creating their own legal frameworks in absence of a higher supervisory authority providing oversight. California is one state which has been vocal about wanting to fill the regulatory gap created by federal rollbacks by creating state systems to establish accountability, and the topic of Net Neutrality is a hot-button one for states to get involved.  Because the FCC’s order bars states from making their own overt rules about Net Neutrality, lawmakers will need to get creative about using their resources and existing regulatory authority to capture broadband internet service providers (ISPs) in their jurisdiction to force constructive compliance:  In the Wake of the FCC’s Net Neutrality Repeal, California Eyes Its Own Net Neutrality Law  
  • …And cities: California is far from the only state spurred into action by the Net Neutrality change, as over 20 states have mounted various challenges to the decision and/or efforts of their own to require ISPs doing business in their states to observe Net Neutrality.  Cities are engaged also, with New York City officials considering the ways the city can enforce the principles of Net Neutrality on its own:  States and Cities Keep the Battle for Net Neutrality Alive 
  • Corporate political engagement: Changes in regulatory position and public policy on topics of great consumer interest are practical candidates on which corporations can engage and take political position. The Net Neutrality repeal was not only controversial but provoked a wide range of emotional and intellectual reactions from the public.  So, it’s an interesting and compelling corporate social responsibility (CSR) tactic for many companies to engage politically about Net Neutrality and thereby enhance their relevance to and credibility with current and prospective customers.  Burger King got a lot of attention for doing so not only boldly but informatively:  Why is Burger King better at explaining net neutrality than the FCC?  

Post-Net Neutrality rule-making, the FCC will likely seek a new alignment on a broad variety of issues impacting its wide mandate.  As demonstrated by the diverse range of priority topics below, the FCC will have a full regulatory agenda for 2018, and rehabilitation of its public image and its processes through which it engages with consumers, lawmakers, and stakeholders, will be a top priority for the agency.  As discussed in this article, the challenges are inherent in rebounding from 2017 and setting a fresh set of priorities for 2018.

As this series on regulatory enforcement and compliance interests has shown, whatever the current rhetoric on the proper reach of supervision may be, these agencies will always have a huge impact on life and business.  Whether this is through regulatory expansion, delay and inaction, or rollback, the choices made on regulatory agendas have sweeping influence on topics as diverse as investor protection, public health and safety, the environment, consumer rights, and all areas of the securities and financial markets.

 

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MiFID II conduct principles and markets integrity

MiFID II – the second Markets in Financial Instruments Directive – became law across the European Union on January 3, 2018.  It’s intended to overhaul the entire supervisory framework for financial sector organizations who are in the EU, have clients in the EU, or wish to have access to or establish equivalency for the markets there.  Its predecessor law, MiFID I, became law in 2004 and was judged to have not stood the test of time in the aftermath of the global financial crisis.  Therefore the seven year drafting process – from 2010 to 2007 – that culminates in MiFID II implementation this year is aimed to set a higher regulatory standard for investment banks, broker-dealers, and other institutional market participants and their employees.

Much of the attention about MiFID II implementation has focused on the burden to organizations from financial costs, human capital and efforts, and changes in commercial strategy that will be required for firms to work toward compliance with the new laws.  The laws are thousands of pages long and touch nearly every area of the financial services markets.  Some of the major areas of focus in MiFID II are investment research, transaction reporting, and brokerage compensation arrangements.  However, the far reach of banking and securities markets activities into the economy means that laws intended to govern this sector have a broad and dramatic scope as well.

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Travel safety and regulation

Travel safety is one of the most important objectives of the overall supervisory agenda.  Consumer protection and public safety intersect in this topic.  Keeping travellers away from harm and maintaining safe and orderly routes and equipment should be the top priority of any commercial entity providing transportation to consumers.  At the same time, companies working in the transportation sector look to legal and regulatory requirements to set minimum standards for safety infrastructure and motivate investments in technology and human capital improvements.  Regulatory action, or inaction, can therefore have a huge impact on protective measures and responses to threats to safety taken by companies such as airlines, rail transit operators, and private transportation providers.

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Round-up on EPA compliance

This is the sixth in a series of seven posts about regulatory compliance priorities and enforcement trends.  The first post was about the Commodity Futures Trading Commission (CFTC).  The second post was about the Federal Trade Commission (FTC).  The third post was about the Securities & Exchange Commission (SEC).  The fourth post was about the Food & Drug Administration (FDA).  Last week’s post was about the U.S. Department of Agriculture (USDA).  Today’s post will be about the Environmental Protection Agency (EPA).  Finally, the seventh post, on Thursday February 1, will be about the Federal Communications Commission (FCC).

The U.S. Environmental Protection Agency (EPA) is the US regulator charged with supervising and enforcing federal laws concerning human health and the environment.  The USDA was created in 1970 by an order of President Richard Nixon in the course of an executive reorganization that consolidated a number of offices and councils that were created by the National Environmental Policy Act of 1969.  The EPA has never been formally elevated to executive cabinet status but is often accorded this rank operationally anyway. 

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