The landscape of compliance is set to undergo significant transformation in the coming years, driven by global political changes and the increasing influence of artificial intelligence (AI). The results of the 2024 elections have positioned new administrations in key regions, including the United States, the United Kingdom, the European Union, India, and Pakistan, all of which will impact business regulations and compliance practices.
As the United States prepares for the inauguration of its next President, a shift in the direction of major regulatory agencies such as the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) is anticipated. Kristy Grant-Hart, writing for JD Supra, explains that "new leaders will diverge from the old priorities," suggesting that compliance officers must brace for changes in enforcement strategies and legislative focus.
A prominent topic at the forefront of this compliance evolution is artificial intelligence. The EU has pioneered the first comprehensive AI Act, which sets a precedent for regulating AI technologies. Meanwhile, in the United States, while federal level responses have yet to materialise, at least 45 states proposed AI-related bills in 2024, with 31 already adopting resolutions or enacting legislation. With the Republican party poised to control both houses of Congress, the potential for a federal AI bill may arise, aimed at establishing national standards for AI usage in businesses before individual states can assert their regulations.
Compliance officers are advised to create an inventory of their company's AI applications, categorising them by their use in compliance, internal operations, and product development. Conducting risk assessments on these uses is crucial, as the focus is not merely on the technology itself but on the possible adverse outcomes associated with its application, such as algorithmic bias or data breaches. Organisations are encouraged to consult the EU AI Act to determine whether their applications could be classified as high-risk under the new law and to consider appropriate risk mitigation strategies.
Furthermore, the subject of tariffs has surfaced as a significant concern. The current administration has upheld and expanded tariffs imposed on China, leading to potential retaliatory measures from other countries. If large universal tariffs on imports are enacted, it could disrupt supply chains heavily reliant on foreign goods, resulting in increased prices and availability challenges. Companies are prompted to work closely with procurement departments to identify supply chain vulnerabilities, particularly in relation to China, and to ensure compliance with new auditing requirements.
Sanctions remain a vital tool for international relations, notably with ongoing sanctions against Russia amidst the conflict in Ukraine and increased scrutiny on nations like Iran. The new U.S. administration, predicted to pursue a diplomatic approach to the Russia-Ukraine situation, may eventually lead to the lifting of these sanctions. However, escalating aggression in the Middle East could lead to the imposition of additional sanctions. Companies are encouraged to conduct comprehensive risk assessments and consider investing in automated sanctions-reviewing software to manage these complexities.
Environmental, social, and governance (ESG) considerations continue to be a topic of concern within the regulatory space. Significant legislative developments have already unfolded, particularly in Germany and the EU, with strict mandates requiring transparency in supply chain practices and sustainability disclosures. Anticipating potential rollbacks in ESG-related laws under the new administration, businesses are reminded to prepare for compliance with existing EU regulations while maintaining proactive documentation of their environmental impact and adherence to social governance standards.
The issue of modern slavery in supply chains has garnered increasing attention from regulators, with stringent laws enacted in several countries, including the United Kingdom and Canada. The introduction of the EU Forced Labor Ban aims to eradicate the use of forced labour in goods produced within or sold to the EU. This legislative framework will likely come into effect by 2028, intensifying pressure on businesses to ensure their supply chains are free from human trafficking. Companies are advised to enhance due diligence processes around suppliers, particularly regarding modern slavery practices.
As the compliance landscape evolves, it remains critical for organisations to maintain rigorous oversight and ethical practices regardless of changes in administration or political climate. While new laws and regulations will unfold, existing statutes of limitations will continue to hold companies accountable for historical violations, reinforcing the necessity for unwavering compliance efforts.
The projections for 2025 indicate that regulatory priorities in the United States will shift significantly, while Europe, the UK, and California will proceed with their established trajectories. Companies may face heightened supply chain and third-party risks, necessitating robust responses to align with the anticipated enforcement landscape.
Source: Noah Wire Services