COMPLIANCE MONITORING AND REPORTING

Compliance laws, rules and standards generally cover matters such as observing proper standards of market conduct, managing conflicts of interest, treating customers fairly, and ensuring the suitability of customer advice. They typically include specific areas such as the prevention of money laundering and terrorist financing, and may extend to tax laws that are relevant to the structuring of banking products or customer advice.

The expression “compliance risk” is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to its banking activities (together, “compliance laws, rules and standards”).

A bank that knowingly participates in transactions intended to be used by customers to avoid regulatory or financial reporting requirements, evade tax liabilities or facilitate illegal conduct will be exposing itself to significant compliance risk.

Compliance laws, rules and standards have various sources, including primary legislation, rules and standards issued by legislators and supervisors, market conventions, codes of practice promoted by industry associations, and internal codes of conduct applicable to the staff members of the bank. For the reasons mentioned above, these are likely to go beyond what is legally binding and embrace broader standards of integrity and ethical conduct.

It is in such a scenario that outsourced services of Compliance Monitoring & Reporting by companies such as Archis Business Solutions Pvt Ltd gain significance. While theoretically compliance should be part of the culture of the organization and not just the responsibility of specialist compliance vendor or staff, nevertheless, a bank will be able to manage its compliance risk more effectively if it outsources the compliance function to a specialist organization where the required structures are in place and the processes are fine-tuned over time with the “compliance function principles”. Apart from the obvious saving on manpower & training costs, with properly documented division of responsibilities, the inherent risks are almost completely mitigated!