I think this is a pretty common problem with any kind of business regulation -- how do I know that a factory isn't just illegally dumping its waste? Regulators

I think this is a pretty common problem with any kind of business regulation -- how do I know that a factory isn't just illegally dumping its waste? Regulators are usually working with less complete knowledge than the entities they regulate. You'd have to set up penalties large enough that the risks weren't worth it, but that ironically works better with larger companies since fly-by-night operations are free to just shut down and don't care that much about their reputations.