Regulatory Capture

Regulatory Capture is a form of government failure where a regulatory agency, intended to act in the public interest, is co-opted to serve the commercial and political interests of the industry it is charged with regulating, often resulting in rules that favor the regulated entities over the broader public good. This phenomenon is particularly critical in the financial sector, where it can weaken the enforcement of Anti-Money Laundering (AML), Know Your Customer (KYC), and sanctions compliance frameworks.