Governance Definition
Rules-based compliance is an approach in which organisations meet regulatory obligations by implementing specific, clearly articulated rules and technical requirements.
Intro
Within regulatory governance frameworks, Rules-Based Compliance is a Governance Definition, not jargon. It refers to a compliance approach focused on adhering to detailed, prescriptive regulatory requirements, typically implemented through structured rule mapping and procedural alignment.
1. What is it?
Rules-based compliance is an approach in which organisations meet regulatory obligations by implementing specific, clearly articulated rules and technical requirements. Compliance is demonstrated by showing that:
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each regulatory article is mapped to a policy or control,
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required procedures exist,
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prescribed steps are followed.
It answers the question: “Have we implemented the rule as written?”
2. What problem does it address?
Rules-based compliance provides:
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legal certainty,
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clarity in regulatory interpretation,
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structured implementation pathways,
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defensibility in prescriptive regimes.
It reduces ambiguity in environments where regulators provide detailed technical standards.
3. Where does it appear in organisations?
Rules-based compliance is common in:
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SOX implementation environments,
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AML/KYC procedural frameworks,
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technical regulatory regimes (e.g., ICT standards under DORA),
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highly prescriptive reporting obligations.
It is often visible in regulatory mapping matrices and compliance checklists.
4. What can go wrong if misunderstood?
If relied upon exclusively, rules-based compliance may lead to:
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box-ticking culture,
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excessive focus on documentation over effectiveness,
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blind spots where regulation is silent,
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limited adaptability to emerging risks.
The key risk is compliance in form but not in substance.
5. Who is accountable, and what oversight is required?
Management is accountable for accurate rule interpretation and structured implementation. Boards must ensure:
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completeness of regulatory mapping,
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ongoing monitoring of regulatory updates,
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alignment between rule adherence and risk management.
However, boards must also ensure compliance does not become mechanical.
Difference from Principles-Based Compliance
Rules-based compliance focuses on following prescriptive requirements.
Principles-based compliance focuses on achieving regulatory intent and outcomes, even where rules are less explicit.