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Compliance Function Responsibilities: A Global Trend

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A recent report by the Basel Committee on Banking Supervision highlights the importance of a strong compliance function in banks, while the European Securities and Markets Authority (ESMA) emphasizes the need for independence and adequate arrangements to ensure its tasks are fulfilled.

Key Responsibilities of a Compliance Function

While the responsibilities of a compliance function may vary depending on the industry and nature of corporation, there are several core areas that are universally accepted as essential:

  • Advice: Providing senior management with guidance on compliance laws, rules, and standards
  • Guidance and Education: Educating staff on compliance issues and acting as a contact point for compliance queries
  • Monitoring and Reporting: Identifying and reporting compliance risks and incidents
  • Risk Assessment: Conducting regular risk assessments to identify potential compliance breaches

A recent survey of large international companies found that the most common areas of compliance are:

  • Anti-corruption and ethical standards
  • Safety, health, and environmental compliance

The majority of respondents (76%) conduct a compliance risk assessment, while almost half (46%) have their Heads of compliance functions reporting directly to the CEO or President.

The State of Compliance Functions in Azerbaijan

In Azerbaijan, however, the concept of a compliance function is still in its infancy. While there are some regulatory demands for internal audit committees and risk management committees in certain industries, the idea of having a dedicated compliance function is still seen as distant. However, global corporate governance trends require faster and voluntary action to establish strong compliance functions.

KPMG Survey Findings

A recent survey by KPMG found that:

  • 76% of respondents conduct a compliance risk assessment, while 24% do not single out compliance risks in a separate risk group.
  • The majority of respondents (91%) have compliance controls set out in different documents, while only 9% have all compliance controls in one document.
  • The average number of employees in the compliance function is higher in companies that have been under investigation for violating anti-corruption laws, indicating the importance of having a robust compliance function.

Conclusion

In conclusion, a strong compliance function is essential for any organization to ensure compliance with regulatory requirements and maintain its reputation. While there are some challenges in implementing a compliance function in Azerbaijan, global trends require faster and voluntary action to establish strong compliance functions.