Compliance Function Requirements for Banks: A Global Overview

Independence of Compliance Function

The independence of the compliance function is a crucial aspect of ensuring that banks operate in accordance with regulatory requirements. Here are some key findings:

• Jurisdictional Requirements: 15-16 jurisdictions require independence, while 2-4 recommend it.
• Measures to Ensure Independence:
  • Separate reporting lines: This measure is required by 14/15 jurisdictions.
  • Right to communicate with staff and obtain records: This measure is also required by 14/15 jurisdictions.
  • Formal status within the bank: All 14/15 jurisdictions require this measure.
  • No remuneration tied to financial performance: Only 7 jurisdictions require this, but 3 more recommend it.

Departure of Head of Compliance

When a head of compliance leaves their position, it’s essential that supervisors and boards are informed. Here’s what we found:

• Jurisdictional Requirements: Only 9-10 jurisdictions require informing the supervisor and board of directors of the departure and reasons.

Resources of Compliance Function

Adequate resources are necessary for an effective compliance function. We looked at how different jurisdictions address this issue:

• Jurisdictions with Resource Requirements: 14 jurisdictions address resources in their laws or binding guidance.
• Key Aspects:
  • Skills: A critical aspect of the compliance function.
  • Experience: Essential for ensuring that the function is effective.
  • Proportionality: The size and complexity of operations are important factors to consider when determining resource requirements.

Tasks Performed by Compliance

A well-defined scope of work is essential for an effective compliance function. Here’s what we found:

• Jurisdictional Requirements: 15 jurisdictions define responsibilities in laws, regulations, or binding guidance.
• Seven Areas of Responsibility:
  • Advising senior management on compliance: A critical aspect of the compliance function.
  • Providing guidance and education to staff: Essential for ensuring that employees understand compliance requirements.
  • Identifying and assessing compliance risk: A key responsibility of the compliance function.
  • Developing new products and business practices: The compliance function should be involved in this process.