Compliance Requirements for Banks in the Philippines
The Bangko Sentral ng Pilipinas (BSP) has established strict compliance requirements for banks operating in the country to ensure adherence to relevant laws, rules, and standards. These requirements are outlined in Circular Nos. 972, 969, and 893.
Establishing a Compliance Risk Management System
All banking institutions must establish a dynamic and responsive compliance risk management system that identifies and mitigates risks that may erode their franchise value. This includes risks related to:
- Legal or regulatory sanctions
- Financial loss
- Damage to reputation
- Failure to manage conflict of interest
- Treat customers fairly
- Money laundering and terrorist financing activities
The Compliance Function
The compliance function shall have a formal status within the organization and be established by a charter or other document approved by the board of directors. It shall:
- Have access to information necessary to carry out its responsibilities
- Conduct investigations of possible breaches of the compliance policy
- Directly report to the board of directors or designated committee
Responsibilities of the Compliance Function
The compliance function shall:
- Advise the board on compliance issues
- Identify and assess compliance risks
- Develop and implement measures to mitigate these risks
- Oversee the implementation of the bank’s compliance program
- Ensure that all personnel and affiliated parties adhere to pre-defined compliance standards
The Chief Compliance Officer (CCO)
The CCO shall be responsible for:
- Overseeing the identification and management of compliance risk
- Supervising the compliance function staff
- Liaising with the BSP on compliance-related issues
- Ensuring the integrity and accuracy of all documentary submissions
- Meeting with the board of directors or designated committee to discuss compliance matters
Responsibilities of the Board of Directors and Senior Management
The board of directors and senior management shall:
- Ensure that a compliance program is defined for the bank
- Ensure that compliance issues are resolved expeditiously
- Ensure that all personnel and affiliated parties adhere to pre-defined compliance standards
- Implement measures to mitigate compliance risks
Compliance Requirements for Banks Operating in Multiple Jurisdictions
Banks operating in multiple jurisdictions shall have a structured compliance function that addresses local compliance concerns within the framework of their organization-wide compliance policy.
Outsourcing Arrangements
The handling and management of outsourcing arrangements for compliance risk assessment and testing must comply with BSP regulations.
Consequences of Non-Compliance
Failure to comply with these requirements may result in a finding that the bank’s compliance system is materially inadequate, which can be construed as unsafe or unsound banking practices.