Great post, Allison. I'm reading another book (though it's not easy because the kindle version is very poorly formatted) called Compliance Strategy for Regulators by Telita Snyckers-Norgaard and she makes a very strong statement about choice and real limitations on regulatory (state) power. It's common sense but how many times does an argument about the legitimacy of a particular regulator regime end with people shouting, "It's the law!" :-)"It would be foolish to lull ourselves into a false sense of security that those we regulate are in fact compliant, simply because legislation requires them to be - and, yet, some regulators do exactly that.It would be equally foolish to assume that those we regulate do not have choices when it comes to compliance. In fact, the people we seek to regulate have many compliance-related choices: they can choose whether to comply, or the extent to which they comply. They can choose whether to comply early, or in the nick of time. They can choose to engage with the regulatory system in a constructive manner, in order to improve it, or to disengage from the regulator and their obligations.Practically speaking, in most environments, there is a very good chance of non-compliance going undetected. Regulators typically have limited funding and limited staffing.""
Published Sep 21, 2014 by Victoria FERAUGE
Thanks for the comment Victoria. I could not agree with you more when you say that those whom the state would regulate "can choose whether to comply, or the extent to which they comply." That financial institutions had compliance choices under FATCA has been obfuscated by proponents of IGAs who seem to think that, but for an IGA, all non-US financial institutions would have faced higher compliance burdens under FATCA. Not so. Some would have, undoubtedly, but others, especially smaller players, would have chosen not to comply. They would have chosen then either to face the consequences of non-compliance (30% penalty on US-source income), or to avoid the regime altogether (divest from US income sources). Those choices are taken away by IGAs, since under IGAs governments agree to enforce FATCA requirements on all of the financial institutions they regulate, taking away the "face the penalty or divest" choice. This completely changes the stakes for detection and punishment as between regulators and the regulated, and it also introduces a second-level compliance regime, at the international level (between states).
Published Sep 15, 2014 by Allison Christians