【EXPERT Q&A】What are the standards and procedures for compliance review?

May 23, 2025  Source: drugdu 83

Drugdu.com expert's response:

 

Compliance review is an essential task undertaken by enterprises or organizations to ensure that their business activities adhere to legal and regulatory requirements, industry norms, and internal rules and regulations. The standards and procedures for compliance review vary depending on factors such as industry, region, and enterprise size, but they typically encompass the following core elements:

I. Standards for Compliance Review

Legal and Regulatory Requirements

Applicable Laws: These include national laws, administrative regulations, and local regulations, such as the Company Law, Labor Contract Law, and Environmental Protection Law.

Industry Regulations: These are specific regulatory requirements for particular industries, such as anti-money laundering regulations in the financial sector and privacy protection laws in the medical industry.

International Treaties or Agreements: When engaging in cross-border business, enterprises must comply with international conventions or bilateral agreements (e.g., GDPR requirements for cross-border data flows).

Internal Rules and Regulations of the Enterprise

Articles of Association: These define the corporate governance structure and basic operational rules.

Internal Control Systems: These include financial approval processes, procurement management systems, etc.

Compliance Policies: These are compliance management guidelines formulated by the enterprise itself, such as anti-bribery policies and conflict-of-interest declaration systems.

Industry Standards and Best Practices

Industry Association Guidelines: These include ISO standards, industry white papers, etc.

Ethical Codes: These are business ethics and social responsibility requirements that enterprises must adhere to.

Contracts and Commitments

Externally Signed Contracts: These ensure that the enterprise's actions comply with contractual obligations.

Internal Commitments: These include behavioral norms in employee handbooks, management commitments to investors, etc.

Process for Compliance Review

Compliance review typically follows a standardized process to ensure systematic and effective review:

Preparation Phase

Clarify Review Objectives: Determine the specific scope of the review (e.g., a particular business, department, or the entire enterprise), key areas of focus (e.g., anti-corruption, data security), and compliance standards.

Form a Review Team: Led by the compliance department, a cross-functional team is formed, involving legal, financial, and business departments, with external experts or lawyers brought in as necessary.

Develop a Review Plan: This includes a timeline, resource allocation, and review methods (e.g., document review, interviews, questionnaires).

Information Collection and Analysis

Gather Relevant Materials: Obtain relevant laws and regulations, internal systems, business process documents, contract agreements, transaction records, etc.

Identify Compliance Risks: By comparing compliance standards with actual situations, potential risk points are identified, such as unauthorized business operations or violations of environmental regulations.

Assess Risk Levels: Risks are graded (e.g., high, medium, low) based on the likelihood of occurrence and impact.

II. Review Implementation

Document Review: Check the completeness of institutional documents and the compliance of operational records.

On-Site Inspections: Conduct field visits to business operations to verify the implementation of systems.

Interviews and Investigations: Communicate with relevant personnel to understand compliance issues in actual operations.

Data Analysis: Utilize data analysis tools to identify abnormal transactions or behavioral patterns.

Problem Rectification and Reporting

Prepare a Review Report: Summarize the issues identified during the review, risk levels, and improvement suggestions.

Formulate a Rectification Plan: For identified issues, clarify the responsible department, rectification measures, time nodes, and acceptance criteria.

Track Rectification Progress: Regularly check the progress of rectification to ensure that issues are effectively resolved.

Continuous Improvement

Refine Compliance Systems: Revise or supplement internal rules and regulations based on review results.

Strengthen Training and Promotion: Conduct compliance training to enhance employees' compliance awareness and capabilities.

Establish Long-Term Mechanisms: Incorporate compliance reviews into daily management, regularly conduct self-inspections, or accept external audits.

III. Precautions for Compliance Review

Maintain Independence: The review team should be independent of the reviewed department to ensure the objectivity of review results.

Emphasize Communication: Maintain good communication with the reviewed department to ensure accurate information transmission and avoid misunderstandings.

Protect Privacy and Business Secrets: Strictly adhere to confidentiality requirements during the review process to prevent information leakage.

Monitor Industry Trends: Compliance standards may change with adjustments in laws and regulations or the industry environment, necessitating timely updates to review content.

By adhering to the above standards and processes, enterprises can effectively identify and manage compliance risks, ensure the legality and compliance of their business activities, and safeguard their reputation and interests.

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