While monetary fines are still rapidly growing as a result of persistent non-compliance, they are not seen to have changed the underlying behaviour, with many firms considering financial penalties to be part of the standard costs of doing business. Thomson Reuters said regulators are moving on to using a wider range of measures to ensure compliant behaviour. The wider impact can result in the firm or the individual suffering multiple instances of the cost of the penalty, the ramifications of which will be felt by all stakeholders.

Other key findings include:

* Monetary fines, while still significant and growing, can be the least of the "costs" imposed on a firm or individual. Financial implications are much wider than the actual fine levied. They can include the end of a business line, the curtailment of the ability to sell specific products or ultimately the end of the business itself.

* Regulatory action can have a negative impact on the share price of a firm and damage its relationship with investors. Additional regulatory powers could also now result in firms being required to increase liquidity or capital, putting them at a disadvantage to their more compliant peers.

* Senior managers are in the regulatory firing line. As a deliberate international regulatory approach, senior managers are increasingly being held to account for their own behaviour, with the potential for claw-backs on bonuses and a career-ending criminal conviction. All of which is in addition to being significantly distracted by having to spend increasing amounts of time on remedial actions rather than focusing on the business itself.

* Expensive and disruptive operational consequences of non-compliance include the increased cost of recruiting and retaining high-quality compliance resources and implementing past business reviews and customer redress programs, which may require costly third parties or skilled persons.

* Increased regulatory scrutiny, complexity, regulatory change and customer distrust are set to continue as a result of the widespread compliance failures.

* Action needs to be taken at the most senior levels not only to be compliant but also to avoid the growing costs of non-compliance.

"Since this report was last conducted in 2008, regulation and the financial landscape has undergone a complete transformation," says Andrew Neblett, SVP and managing director, enterprise risk management at Thomson Reuters. "Regulators are under intense pressure and are coming up with more creative ways to enforce and promote compliance. The new challenges that firms face go way beyond just a fine, and companies and individuals need to be aware of the wider implications that non-compliance can have throughout an entire organization starting from the bottom-up."

Financial Implications

The study shows that total fines levied by the UK Financial Services Authority jumped to