Formula 1 motorsport managing director Ross Brawn says the 2021 cost cap "has teeth", and that a fraudulent breach could cost a team the world championship.
The first ever set of FIA financial regulations has been approved by the World Motor Sport Council, which includes a $175million spend cap.
That figure is fixed for 21 races, with $1m to be added for any races above that total.
Brawn stressed that the new regulations were "essential" for F1, and a huge improvement on past efforts to secure a resource-restriction agreement.
"Financial regulations are the dramatic change in F1," he said.
"We've tried for these in the past, and we've not been successful. I think the crucial thing about the financial regulations now is that they are part of the FIA regulations.
"So the sanctions for breaching financial regulations will be sporting penalties of some sort, depending on the severity of the breach.
"Whereas before we had the resource restriction, which was a gentlemen's agreement between teams - well there's not many gentlemen in the paddock I'm afraid, and that was a failure.
"But this has teeth. If you fraudulently breach the financial regulations, you will be losing your championship. So it has serious consequences if teams breach these regulations."
A range of penalties will be available to the FIA for serious offences, including deduction of drivers' and constructors' points, testing restrictions, suspension from competition and exclusion from the championship.
A team could also have its future cost cap reduced for a breach.
"We've got a very strong team of financial experts within the FIA and within F1, and we've sought outside support on this," added Brawn.
"Deloitte are one of the experts on sports finances, they've been very involved with the football world, and you can see the positive effect that's starting to have.
"They've been pretty well thought out, but they will need development, like any regulation.
"I fully expect that we are going to have challenges in the future to implement this, but it's absolutely essential for the good of F1 that we have a control on the finances and how much is spent in F1.
"They are essential for the wellbeing of F1. Budgets have been escalating. F1 is almost a victim of its own success in that the rewards of success are so valuable that the justification for investment keeps coming."
FIA president Jean Todt admitted he was sceptical about the cap at first, but is now convinced the new financial rules will work.
"[The] cost cap, it means halting the growing spending gap between teams and the performance differential that naturally ensures," he said.
"Through that our goal is to have a closer championship and also being more unpredictable on the track.
"The first step on the road is also for greater sporting equality, and through that we consider the best compromise can be achieved.
"Of course $175m is still a high figure, plus all the extras around, but we consider it as a first step."
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