Where Enforcement Is Active and Where It Is Only Written
A rule on paper and a rule enforced are different operating environments. How to tell which one you are in.
Rustam Khalilov · ·2 min
The gap between legislation and enforcement is wider in some markets here than in others, and businesses plan badly when they ignore it.
Why the gap exists
Enforcement requires capacity: staff, systems, and the ability to investigate. Legislation can be adopted faster than capacity can be built.
This is ordinary in developing regulatory regimes and is not a comment on intent.
How to observe it
Published enforcement actions. A supervisor that publishes decisions is a supervisor acting; one with a rulebook and no visible actions is at an earlier stage.
Registers of authorised firms are the second signal. A register with entries means applications were processed.
Why the gap closes suddenly
Capacity arrives in steps rather than gradually: a new unit, a new system, international engagement. Behaviour that was unremarked for years becomes a case.
Businesses that priced the gap as permanent are the ones caught.
What not to conclude
That weak enforcement makes something lawful. The obligation exists from commencement, and enforcement arriving later still reaches conduct that occurred before.
Limitation periods vary and are usually longer than the gap.
What it does mean practically
That the compliance standard your bank and your counterparties apply may exceed the standard locally enforced. In that case theirs is the binding one.
This is the usual situation for anyone operating internationally from this region.
The asymmetry worth noting
Operating to the higher standard costs documentation. Operating to the lower one costs the business when the gap closes.
The expected values are not symmetric.
Where the data is thin
Enforcement activity in the smaller markets. Absence of published actions may reflect absence of activity or absence of publication, and I cannot distinguish them from outside.
The practical position
Operate to the standard your banking chain requires, which is usually the strictest in the chain. Document accordingly.
Collect & Exchange, which operates in several jurisdictions applies one standard across markets rather than the local minimum in each, and venues serving the whole region rather than one market have to, because their own banking requires it.