Neglecting to accomplish regulatory requirements can have severe financial, legal and reputational consequences for business. Often, a violation can result in fines, and even jail time. Violations can have irreversible harm for everyone involved, even if that person was not directly involved in the action or omission that violates regulations. 

Hino Motors, a Toyota subsidiary, was penalized $1.6 Billion for falsifying emissions data. This is a deceptive trade practice, and also fraudulent. Although every member of Hino Motors was not directly involved in the instrumentality that led to this misrepresentation in the consumer market, the whole company suffered as a result. 

The U.S Department of Justice is the main enforcement agency of the federal government that prosecutes fraudulent activities, including fraudulent activities related to the receipt of public benefits (i.e. COVID-19 relief, Disaster Relief, etc.). 

Financial reporting violations can lead to operational restrictions, such as those imposed on Bank Of America which was ordered to improve its anti-money laundering compliance due to failure to detect the opening of falsified accounts.

The major risk of ‘’reputation damage’’ or ‘’harm to accompany reputation’’, as shown by Morgan Stanley’s $15 million settlement with the SEC. Due to lapses in oversight that allowed employees misconduct to go unanswered. 

In more serious instances, individuals can face criminal charges as evidenced by breaches of the Bank Secrecy Act. In order  to mitigate these kinds of risks, it’s advised that businesses emphasize compliance and establish robust compliance frameworks to ensure they have adequate regulatory safeguards.

Regulations are not just archaic rules, they are well thought out procedures codified as law, to ensure the wellbeing of companies and the regulated industry at large.

To prevent the oversight failures that resulted in the Morgan Stanley’s , the company could have implemented the following measures:

• Clearer accountability structures : By defining specific roles and responsibilities within an organization or company, the responsible officers have a way to ensure proper supervision, and also facilitate timely corrective actions. Thanks to this, things become more clear at every level of the organization, reducing ambiguity, and reducing the likelihood of oversight failures. Regulatory compliance promotes the culture of responsibility.