Financial Crime World

Compliance Risks in Finance: A Growing Concern in Malaysia

As the financial sector continues to evolve, regulatory bodies in Malaysia are increasingly focusing on compliance risks that pose a significant threat to financial stability.

Key Frameworks for Risk Management

The Risk and Compliance Division of Bursa Malaysia has established several key frameworks to manage risk, compliance, and corporate integrity segments:

  • Enterprise Risk Management Framework: A comprehensive framework aimed at identifying, assessing, and mitigating enterprise-wide risks.
  • Integrity and Compliance Management Framework: A framework that outlines the principles and guidelines for ensuring ethical conduct and compliance with laws and regulations.
  • Business Continuity Management Framework: A framework that aims to ensure business continuity in the event of disruptions or crises.
  • Framework on Risk Management for Outsourcing Arrangements: A framework that provides guidance on managing risks associated with outsourcing arrangements.

Integrated Governance, Risk & Compliance (iGRC) Framework

The division’s iGRC Framework aims to ensure that all entities within the Bursa Malaysia Group adhere to a consistent set of principles and guidelines. This framework is designed to promote effective governance, risk management, and compliance practices across the group.

Adopting Global Guidelines

In addition to its own frameworks, Bursa Malaysia has adopted guidelines issued by:

  • Securities Commission Malaysia: The Malaysian securities regulatory body that provides guidance on credit and liquidity risks.
  • International Organization of Securities Commissions (IOSCO): An international organization that sets standards for securities regulation and oversight.

Compliance Risks Remain a Growing Concern

Despite the efforts made to implement robust risk and compliance frameworks, compliance risks remain a growing concern in Malaysia’s finance sector. The country’s clearing houses, BMSC and BMDC, are exposed to counterparty risks from the clearing participants’ perspective, making it crucial for these entities to effectively manage such risks.

Prioritizing Compliance and Risk Management

As regulators continue to scrutinize financial institutions, companies must prioritize compliance and risk management to avoid potential penalties and reputational damage. This requires a proactive approach to identifying and mitigating risks, as well as ensuring that internal controls are robust and effective.

Conclusion

While Malaysia’s finance sector has made significant strides in implementing robust risk and compliance frameworks, there is still much work to be done to mitigate compliance risks. As the industry continues to evolve, it is essential for regulators and financial institutions alike to stay vigilant and adapt to changing regulations and market conditions.