Compliance basically is adherence to set laws and regulations. This can be achieved through:
- The process of identifying and analyzing the rules governing the operations of the bank to create a robust rule book for the bank.
- Designing and implementing adequate controls in order to conduct business in accordance with the rule book.
- Monitoring the effectiveness of the controls put in place.
- Compliance parameters are vast-ranging from government-sanctioned regulations, to strict internal processes established within organizations.
- The recent Global crises has caused Banks to take a long hard look at the people processes and technologies they have in place to ensure guidelines are met.
- Banks have now introduced and strictly enforced compliance requirements at all levels of the organization that support the customer experience and profitability.
OBJECTIVES OF THE COMPLINACE FUNCTION
The compliance function must, on a pro-active basis, identify, document and assess the compliance risks associated with the bank’s business activities, including the development of new products and business practices, the proposed establishment of new types of business or customer relationships, or material changes in the nature of such relationships. If the banks has a new products committee, compliance function staff should be represented on the committee.
1.1 The Compliance Unit will play an independent function with the objective to:
- Identify and evaluate the compliance risks (as defined in paragraph 1.2) within the organization;
- Control and monitor all measures taken to mitigate the compliance risks.
- Report accordingly to execute management and the Board of Directors, as appropriate;
- Act as an adviser in compliance matters within the organization.
The Compliance function intervenes at the third control level, i.e at the level of controls performed by executive management on activities under their direct responsibility.
1.2. The compliance risk is defined as the risk the bank may suffer as a result of its failure to comply with applicable laws, regulations, codes of conduct and standards of good practice and includes:
- Legal and regulatory risks;
- Reputation risks;
- Litigation risks;
- Risk of financial loss:
- Compliance risk may not be readily measurable. It is a risk associated with reputation and integrity, the bedrock of any organization. No business can therefore afford to compromise compliance risk.
- Compliance risk is a combination of regulatory and reputational risk.
- Regulatory Risk: is the risk that procedures implemented by the organization to ensure compliance with relevant statutory, regulatory and supervisory requirement are not adhered to or are inefficient and ineffective.
- Reputational Risk: Is the risk that the organization may be exposed to negative publicity due to contravention of applicable statutory, regulatory and supervisory requirements and or providing a service that does not comply with fit and proper industry standards.
1.3 Applicable laws, regulation and professional standards relate to:
- Laws, regulations and circulars governing access to the financial sector and performance of banking or financial activities.
- The prevention of money laundering and terrorism financing.
- Confidentiality of information banking secrecy;
- Professional ethics, including the protection of the client interest ( Investor protection, client information, market integrity, prevention of price manipulation etc; insider trading and market abuse;
- Internal code of conduct fostering and ethical environment, and best practice rules established by professional associations (e.g. ACCOBIN) or financial organizations (e.g. Nigerian stock Exchange, EFCC, NFIU);
- Where deemed appropriate rules of labour, social or environmental law.
RESPONSIBILITIES AND COMPETENCIES OF THE COMPLIANCE FUNCTION
The Compliance function must:
- Ensure compliance with Anti-money Laundering and Counter Terrorism Financing Laws in the country.
- Ensure compliance with local laws and regulations as stipulated by the Acts.
- Ensure compliance with Group policies and confirm compliance to the Group office.
- Ensure proper follow ups on Inspection Reports by submitting corrective action Grids.
- Encourage whistle blowing for unethical practice through the KPMG hotline.
- Ensure continuous training on business ethics, anti-money laundering and counter terrorism policies.
- Ensure continuous monitoring of SIRON Embargo, SIRON PEP & SIRON AML, to ensure that the bank does not process transactions for money launderer’s and terrorists.
- Ensure that banks tenders evidence in court as stipulated by court summons.
- Ensure that staff members are not unduly harassed by regulatory authorities nor treated unfairly during the course of their investigations.
- Identify and assess the compliance risks associated with the organization’s current and proposed future business activities, including new products, new business relationships and any extension of operations or network on an international level;
- Identify and keep an inventory available to all staff of essential laws and regulation pertinent to the organization;
- Advise management on the applicable laws, regulation, rules and standards and inform them about any developments in these areas;
- Establish written guidelines to staff and service providers on the appropriate implementation of the laws, regulation, rules and standards through policies and procedures (Compliance publications, to be issued periodically);
- Assess the appropriateness of internal policies, procedures and guidelines, ensure a follow-up of any identified deficiencies, make recommendations for amendments where necessary, and supervise the implementation of corrective measures to mitigate the identified deficiencies;
- Monitor compliance with internal policies, procedures and guidelines by performing regular and comprehensive compliance risk assessments and testing; report the results on a regular basis and promptly where deemed necessary to executive management and, if necessary, the Board of Directors;
- Centralize all information on compliance-related issues (e.g breach of regulation, non-respect of procedures, conflict of Interest);
- Facilitate the development, approval and maintenance of the banks compliance policy and manual for the management of compliance risks;
- Educate staff with respect to compliance with the applicable laws, rules and standards and act as advisor on compliance queries from staff members;
- Liase with relevant external bodies and regulators on compliance matters; exercise any specific legal responsibilities such as reporting suspicious transactions related to money laundering and fight against terrorism financing;
- Establish and/or supervise appropriate compliance checks and controls as it relates to know your Customer (Business), Preservation and retention of records as stipulated by the money laundering Prohibition Act 2012 (as amended).