Licensing and Permitting

Principle 3: Link L&P with enforcement

 

Principle definition
L&P should be linked with enforcement and inspections to ensure that regulatory requirements are effectively implemented, risks are properly managed, and businesses are incentivised to achieve meaningful compliance.
Sub-principles	Criteria
3.1 Integrate L&P with enforcement, inspections and monitoring	Optimise the regulatory delivery system so it integrates L&P, regulatory enforcement and inspections Co-ordinate closely between L&P and the authorities responsible for enforcement and inspections Exchange information swiftly between regulatory bodies to have a full picture of what is going on
3.2 Promote compliance in L&P procedures	Provide support in L&P processes to promote compliance and reduce risks Manage expectations among individuals and businesses on the risks addressed through L&P Tailor international standards to local conditions for actual L&P implementation
3.3 Use incentives and sanctions to promote compliance	Choose appropriate tools to incentivise compliance Assess barriers to, and drivers for, compliance Use proportionate measures and sanctions Give regulators the power to exclude operators from the sectors in which they have been severe offenders

L&P should be part of a broader meaningful regulatory delivery system in order to be effective in managing risks and supporting economic growth. Integrating L&P with regulatory enforcement, inspections and monitoring is crucial to improving regulatory effectiveness and achieve the desired impact. Closely co‑ordinating L&P with enforcement and inspection activities ensures that compliance is maintained or enhanced, risks are managed, and policy goals are achieved.

Promoting awareness and proving clear guidelines to businesses and consumers is important for fostering a culture of compliance. The right communication between authorities and civil society can help regulated entities to understand their obligations. At the same time, a balanced approach that combines positive incentives with proportionate sanctions encourages compliance while violations are also appropriately addressed. Finally, there is a need for an approach that promotes accountability, supports innovation and ensures that regulatory frameworks remain responsive and adaptable to evolving needs and challenges.

Ultimately, rather than viewing L&P as a standalone process, it should be embedded within a broader system to manage risks and ensure compliance. A well-functioning system not only facilitates regulatory compliance, but also supports the overall integrity and effectiveness of L&P processes, benefiting both licensing authorities and applicants alike.

3.1. Integrate L&P with enforcement, inspections and monitoring

Optimise the regulatory delivery system so it integrates L&P, regulatory enforcement and inspections. In some contexts, ex post regulatory mechanisms – including enforcement and inspections, as well as compliance promotion and engagement efforts – may be just as effective, if not more effective, than L&P. Licensing shouldn’t be seen as a standalone effort to achieve a specific outcome – for instance occupational health and safety or environmental protection. Integrating L&P with complementary and reinforcing regulatory mechanisms such as enforcement ensures risks are as low as possible. However, risk management mechanisms should account for residual risks as all risks cannot be completely eliminated.

Co-ordinate closely between L&P and authorities responsible for enforcement and inspections. L&P can in some cases be performed by different agencies or by different departments than those responsible for regulatory enforcement and inspections, even within the same agency. If disconnected, they will lack effectiveness in ensuring compliance with key requirements and achieving their intended goals. By aligning more closely with regulatory enforcement and inspections, L&P authorities can better ensure that risks are properly managed, compliance promoted, and feedback provided for improvements.

These different authorities should establish formal communication channels, joint task forces and consistent risk assessment methods. Actions to build a cohesive framework will create a more robust regulatory environment – one in which authorities can better understand risk, monitor compliance, and respond promptly to violations when needed. Co-ordination and information sharing should in all cases be facilitated between L&P authorities, especially those responsible for closely related fields.

Exchange information swiftly between regulatory bodies to have a full picture of what is going on. An effective system to exchange information requires digitalisation and the systematisation and standardisation of data. Information from regulatory enforcement and inspections is crucial to understand compliance levels and the risks to be mitigated by L&P (including any need to update and optimise licensing requirements) (OECD, 2021[9]). Conversely, information collected through L&P can be used by inspection agencies for inspection planning, and to follow-up and to understand levels of risk and compliance (OECD, 2021[9]).

Implementing integrated information management systems that consolidate data from both L&P and inspection processes can help streamline operations, improve efficiency and enhance transparency. Examples of the advanced use of such data includes risk prediction and new solutions for reporting by regulated subjects.

3.2. Promote compliance in L&P procedures

Provide support in L&P processes to promote compliance and reduce risks. Licensing authorities should have the mandate, resources, and strategy in place to support industry as it navigates L&P related processes and seeks to understand key regulatory requirements. For L&P to be effective, promoting compliance is essential to ensure policy outcomes are achieved – for example to ensure that risk-based requirements are respected.

A simplified and easy to follow L&P process can help ensure greater compliance. Authorities should be able to facilitate smoother L&P processes – one which also supports inspections and enforcement. Relevant authorities should consider the introduction of useful tools, such as focal points, hotlines, and one-stop-shops for L&P processes. Additionally, they should develop guidelines, checklists, and publish FAQs in official websites. Public information campaigns, workshops, and training sessions can further support regulated subjects and help them to understand processes, requirements, and ways to manage risks.

Manage expectations among individuals and businesses on the risks addressed through L&P. When an individual or business holds a license or permit, consumers and citizens assume an acceptable level of safety and quality. However, there can sometimes be a mismatch between reality and this expectation. This can also happen when L&P is overused, leading to a false sense of security and increasing consumer safety risks.

Raising awareness amongst the community can help set reasonable expectations of the performance and operations of a business activity or service, distinguish acceptable risks from unacceptable ones, and empower consumers to submit complaints when standards are not met. Knowing the risks can help citizens take a more pro-active approach towards complaints which in turn can support complaint management and enforcement.

Tailor international standards to local conditions for actual L&P implementation. While international standards and best practices provide valuable guidance, their implementation should be tailored to the specific local context. L&P authorities must consider the actual institutional capacities, key compliance drivers, levels of informality, and other relevant local factors. Approaches such as stakeholder communication, incentives or deterrence mechanisms, and institutional co-operation should all be adapted to foster compliance and ensure the successful execution of L&P processes. This localised approach ensures that regulatory practices are both practical and effective in achieving desired outcomes.

3.3. Use incentives and sanctions to promote compliance

Choose appropriate tools to incentivise compliance. Positive tools, such as financial incentives, tax breaks and public recognition, act to reward compliant behaviour and encourage regulated subjects to meet or exceed regulatory requirements voluntarily. Conversely, negative tools, (including fines, penalties, blacklists, and/or legal action) can act as deterrents against rogue operators or regulated subjects who might otherwise carelessly create risks. This dual positive-negative approach ensures that regulated entities are motivated by both the benefits of compliance and the risks of non-compliance, fostering a culture of accountability and proactive compliance.

Assess why individuals and businesses comply, or don’t comply. Licensing authorities should put in place strategies to assess both the barriers to compliance (i.e. why regulated subjects do not comply) and drivers that support it (i.e. what can help regulated subjects to comply). This approach allows licensing authorities to understand and adopt the methods, tools and mechanisms that can ease and incentivise compliance with L&P. It can also help them to identify and fix regulations that are difficult to comply with. This includes addressing processes that lack legitimacy or identifying issues where regulated subjects are ill-informed and where greater awareness should be raised through appropriate channels.

Use proportionate measures and sanctions. Sanctions to L&P non-compliance should be used as a last resort and in a responsive and proportionate manner. Consideration should be given to the profile of the regulated subject to be sanctioned, including their compliance history and the risks generated by their non-compliance. For minor violations, guidance and warnings are usually appropriate. More serious or repeated violations can result in substantial penalties, including suspension of licenses or operations, and in some cases even criminal sanctions.

Give regulators the power to exclude operators from the sectors in which they have been severe offenders. In a number of countries, regulatory powers are defined in such a way that withdrawing or cancelling a licence is the only way that regulators can effectively escalate enforcement measures when a business commits repeated, blatant violations, creates major risks or harm, or engages in criminal conduct. In such a situation, without an L&P regime, the regulator loses its strongest instrument against "rogue" operators. In fact, as a general principle, regulators should be given by law the power to exclude such operators from the sectors in which they have been severe offenders, regardless of the existence of a license. Such powers ensure that enforcement is swifter and more effective, while avoiding the need to rely on L&P for activities where it is not appropriate.

Moreover, in cases of chronic failure to comply with regulation, or non-compliance bordering on and leading to criminality, cancelling a licence may prove inefficient to stop infractions; since the infringing activity already takes place outside of regulation, the authorities should have different, efficient means to prevent further infractions.

Fostering a culture of continuous improvement and accountability enhances the credibility and reliability of the L&P system. It also builds trust among stakeholders and the public, as they can be confident that the system is designed and managed to uphold high standards of safety, quality, and fairness. Ultimately, it supports an effective functioning of licensing systems, promoting innovation and economic growth while reducing risks.