In our day and age, being compliant with regional, national and international laws and regulations is more important than ever. Many industries, especially finance, banking, transportation and international trade, have experienced an increase in regulations and reporting requirements. This has led to the emergence of various technologies and solutions that help organizations devise better compliance strategies and workflows.
Regulatory technology (RegTech) empowers organizations with tools to boost efficiency and sustainability in regulatory compliance. It uses new technologies to tackle the dense data landscape and meet compliance challenges.
Norm engineering is a relatively new term in RegTech and is quickly gaining traction and recognition. But what is norm engineering? What role can it play in RegTech? And what are the benefits and opportunities that norm engineering offers when it comes to increasing the efficiency of compliance management? Read on and find out!
What is norm engineering?
Norm engineering translates legal texts into practical specifications or executable models. It identifies decisions, norms, and evaluation grounds, turning legal grammar into tangible knowledge models, often AI-powered, to capture facts with clarity. This process involves encapsulating shared understandings and details without explicit statements. Projects like Psych, CYC, Watson, and initiatives by Google and OpenAI aim to establish standardized definitions across various domains.
Dealing with legal language is challenging, as rules cannot be directly articulated like everyday speech. Historically, the solution often used lines of code within languages like Prologue, hindering effective analysis. Norm engineering represents a paradigm shift. It converts rules into data, facilitating robust analysis and querying capabilities.
Machine-Readable Regulations and standardization
Machine-readable regulations and standardization are key concepts in norm engineering. MRR convert texts into a structured format for machine processing. Standardization examines dependencies and common elements in legal texts to identify important ones for compliance management. Combining machine-readable regulations and standardization allows you to conceptualize elements and integrate them into the legal text.
The benefits of norm engineering
1. Transcending the limitations of traditional rule-based coding
Norm engineering enables tasks like retrieving information on individuals born in a specific year. It also identifies regulations governing water or energy use in industrial facilities, drawing from many sources. Norm engineering transcends traditional rule-based coding, allowing comprehensive understanding and use of complex legal frameworks. Once you identify a decision in a legal text or establish a decision ground, you can create a concept from it.
2. Scalability and repeatability
Using standards in norm engineering enhances scalability and repeatability, providing a structured foundation for analysis. Applying standards across diverse regulatory domains poses a challenge due to significant variations in regulations. That’s why the standards need to be flexible to accommodate these differences while still facilitating effective analysis.
3. Establishing the relation between norms and grounds
Making compliance decisions requires the use of norms and grounds, two essential components of legal grammar. Norm engineering gives you the opportunity to pinpoint the relation between them in an early stage, allowing you to get all the decision building blocks and make effective well-informed and data-driven compliance decisions at the right time.
4. Creating better decision-making processes
Leveraging standards, standardization techniques, machine-readable regulations, and, in certain cases also AI, can greatly enhance the work of analysts. These fantastic four are the tools that make it possible to streamline tasks, eliminate boring and error-prone repetitive work, and ultimately create better decision-making processes.
5. Making better laws and regulations
Applying norm engineering and adopting machine-readable regulations also allows governments to streamline lawmaking processes and to largely close the gap between lawmaking and implementation that currently exists. Machine-readable regulations enable the identification of key elements and their definitions, streamlining the process and facilitating the easier translation of text, norms, and grounds into real-world implementations. The result? More effective laws and coherent regulations that can be integrated seamlessly into commercial practices. This benefits both governments and businesses.
6. Fostering innovations
The introduction of new products and services would become far more agile and accessible if norm engineering were to be used on a large scale. To give you an example, current regulatory ambiguities, such as those surrounding cryptocurrencies, stifle innovation. However, with norm engineering facilitating compliance and regulatory clarity, banks could swiftly introduce novel offerings, fostering a wave of innovation within the financial industry.
The convergence of technology and regulation has the potential to disrupt traditional business models and unleash a wave of creativity and competition, ultimately benefiting consumers and driving sector-wide advancement in many industries.
The obstacles
The fact that lawmakers and entrenched industries often favor traditional approaches and tend to include ambiguous terms in their texts (allowing them to allow for interpretation in various circumstances), can be an obstacle to the widespread use of norm engineering in the field of lawmaking and compliance management. Additionally, merely examining the law itself is often insufficient. One must also consider its history and how it has been interpreted in various jurisdictions. Encoding the knowledge of a single rule often necessitates delving into centuries’ worth of rules and cases.
The good news is that we expect that increased collaboration between IT and legal teams can and will enhance the understanding of norm engineering and machine-readable regulations, and will eventually lead to better laws and more effective, less error-prone compliance management processes.
Norm engineering and Be Informed
Together with TNO and the University of Amsterdam, Be Informed is working with industrial partners and governments on a norm engineering program. The aim of this program is to develop methods and instruments that allow organizations to unambiguously and explicitly record and share interpretations of legislation and regulations. The open structured language (FLINT) records and communicates this explicit interpretation of norms in the social, ethical and legal domains, making them understandable to humans and enabling automatic reasoning by machines.
Are you ready to reap the benefits of norm engineering and machine-readable regulations? And would you like to discover how the Be Informed platform can improve compliance in your organization? Then be sure to contact us. Together with TNO and the University of Amsterdam, Be Informed is working with industrial partners and governments on a norm engineering program. The aim of this program is to develop methods and instruments that allow organizations to unambiguously and explicitly record and share interpretations of legislation and regulations. The open structured language (FLINT) records and communicates this explicit interpretation of norms in the social, ethical and legal domains, making them understandable to humans and enabling automatic reasoning by machines.
Are you ready to reap the benefits of norm engineering and machine-readable regulations? And would you like to discover how the Be Informed platform can improve compliance in your organization? Then be sure to contact us. You can give us a call at +31 (0) 55 368 1420, can send an email to contact@beinformed.nl or fill out the contact form on our website.
