The
compliance function of a bank brokerage company or other financial institution is designed to ensure compliance with all applicable local or international rules, laws and regulations. The traditional compliance model was designed as an enforcement tool, with limited focus on identifying and managing real risks.
However, the tasks of compliance staff today include monitoring banking activities and identifying and assessing risk areas. The latter may include testing and assessing the adequacy of the bank's policies, security and risk assessment tools. The compliance unit can also implement solutions to address identified risks, design compliance programs for new rules and regulations, and monitor employee training programs.
Possible risks
Compliance rules, laws and standards typically cover matters related to maintaining reasonable standards of market conduct and treating customers fairly. Depending on the scope of the business, the banks' compliance tasks range from preventing conflicts of interest, money laundering and tax evasion to monitoring trading activities and ensuring compliance with applicable regulations. The compliance requirements for most financial institutions have increased significantly since the 2008 financial crisis, and new compliance issues keep popping up - such as behavioral risk, risk culture, anti-money laundering and risk of next-generation banking secrecy (AML / BSA) and third - and fourth -Risk, among other things.
The compliance function needs to expand its focus beyond the financial institution and its employees. It is also responsible for ensuring that the bank's customers do not use the bank for illegal activities such as tax evasion, money laundering or terrorist financing. If illegal activities are suspected, the compliance office must ensure that the bank takes the correct measures, otherwise it can be held liable.
While banks see compliance requirements as a way to keep their reputation clean, non-compliance can result in heavy fines and regulatory and legal sanctions, as well as reputational damage. “Compliance risk” is defined as the risk of a bank, regulatory or legal sanctions, loss of reputation or significant financial loss due to non-compliance with regulations, laws, regulations, relevant self-regulatory standards and codes of conduct for certain. to suffer business activities.
Compliance culture
After the financial crisis of 2008, bank compliance requirements increased significantly, with a corresponding growth in budgets and personnel. There are substantial differences between financial institutions in terms of the organisation of the compliance function. Internationally active banks can have both local and group compliance officers.
