This paper discusses the factors that influence effective compliance and provides suggestions for how regulators and firms can improve levels of compliance.
We have published this Occasional Paper alongside an Insight article - Creating and sustaining cultures of compliance: insights from psychology and beyond
No-one should underestimate the challenge faced by financial regulators in ensuring compliance with the extensive rules, principles and guidance that govern conduct of financial services. Regulators’ approaches to compliance have tended to combine the use of detection and punishment to change firms’ incentives through strategies of ‘credible deterrence’.
Insights from psychology suggest that these strategies can be complemented by an approach that seeks to change the ‘choice architecture’ of compliance decisions. Drawing on the insights in this paper, we consider a number of actions regulators can take to enhance compliance.
Zanna Iscenko, Chris Pickard, Laura Smart and Zita Vasas.
Zanna Iscenko, Laura Smart and Zita Vasas work in the Strategy and Competition Division of the FCA. Chris Pickard is a consultant at Economic Insight Ltd. All worked on this paper while in the Chief Economist’s Department at the FCA.
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