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Compliance Function Requirements Take Effect in PNG

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Port Moresby, Papua New Guinea - The Bank of Papua New Guinea (BPNG) has announced that the compliance function requirements for banks in the country will take effect on January 1, 2017.

Objectives of Compliance Function

The new requirements aim to ensure that banks operate effectively and independently, with a strong focus on compliance risk management. The compliance function is responsible for:

  • Monitoring, testing, refining, and updating policies and procedures to ensure compliance with all relevant laws and regulations.
  • Advising the Board of Directors on compliance issues.
  • Educating staff on compliance matters.
  • Identifying and assessing compliance risks associated with business activities.
  • Reporting regularly to the Board and senior management on compliance matters and associated risks.

Requirements for Banks

To satisfy BPNG’s expectations, banks must ensure that their compliance functions are:

  • Permanent
  • Effective
  • Independent

This includes having a formal status within the bank, clear access to the Board or its committees, and staff who have the necessary knowledge and experience to identify and escalate issues to the Board and senior management.

Roles and Responsibilities

The Head of Compliance will be responsible for:

  • Coordinating the identification and management of compliance risks.
  • Supervising compliance function staff.
  • Being the principal contact point for BPNG on regulation-related matters.

Notification Requirements

Banks must notify BPNG in writing when the Chief Compliance Officer takes up or leaves their position, and to notify them of material breaches of compliance requirements.

Reporting Requirements

The compliance function will be required to:

  • Report annually to the Board and senior management on compliance matters and associated risks.
  • Provide assurances regarding compliance with all laws, regulations, prudential standards, codes, rules, and similar requirements for each jurisdiction in which they operate.

Corrective Measures

In the event that BPNG is not satisfied with a bank’s compliance function, it may:

  • Vary the conditions of the bank’s licence under section 14 of the Banking and Financial Institutions Act 2000.
  • Require immediate remediation of issues.
  • Suspend or limit certain business activities.
  • Prohibit certain transactions.
  • Reassess the fitness of responsible persons to continue holding their positions.

Effective Date

The effective date of this prudential standard is January 1, 2017, with full compliance required by December 31, 2018. Any questions or enquiries relating to the prudential standard should be addressed to the Financial System Development Department at the Bank of Papua New Guinea.