Definition:
Regulatory compliance refers to the process of ensuring that businesses follow the laws, regulations, and guidelines set by financial authorities. It includes compliance with anti-money laundering (AML), Know Your Customer (KYC), and data protection regulations.

Contextual Explanation:
Payment Service Providers (PSPs) and financial institutions must comply with various regulatory frameworks to maintain their licenses and operate legally. Compliance measures often include regular audits, reporting, and risk assessments.

Why It Matters:
Failure to comply with regulations can result in heavy fines, legal action, and reputational damage. It also ensures financial stability, consumer protection, and prevention of financial crimes.