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Tunisia: Compliance in Financial Services Industry Takes Center Stage
Compliance has become a critical concept for businesses across various sectors, and the financial services industry in Tunisia is no exception.
What is Compliance?
The concept of compliance refers to the obligation of financial institutions to ensure they continuously comply with legislative and regulatory provisions specific to financial activities, professional and ethical standards, codes of conduct, including ethical codes and internal procedures.
The Risks of Non-Compliance
According to experts, non-compliance risk poses a significant threat to financial institutions, resulting in:
- Legal, regulatory or disciplinary sanctions
- Financial losses
- Reputational damage
In Tunisia, the compliance function within financial institutions is responsible for ensuring the integrity of financial transactions, combating fraud, money laundering, terrorism financing, market abuse, and embargoes.
The Importance of Compliance in Microfinance Institutions (MFIs)
Microfinance institutions (MFIs) that cater to individuals with limited access to traditional banking services face specific risks, including:
- Institutional risks related to their social or commercial mission
- Operational risks such as credit risk, fraud, or security
- Financial management risks
- External risks related to regulations, competition, demographics, physical environment, and macroeconomic conditions
To mitigate these risks, compliance is critical for MFIs due to their ethical commitment and humanitarian responsibility. Establishing a robust non-compliance risk management system and regulatory monitoring within the MFI is essential.
Best Practices in Compliance
Industry analysts believe that the compliance function within MFIs should:
- Contribute to developing a strong ethical culture
- Exemplify best business practices
- Ensure adherence to rules for sustainable performance
- Act as a partner to the business, translating regulations into specific operational actions
- Monitor real residual risks and facilitate change initiatives
Regulatory Environment in Tunisia
The regulatory environment in Tunisia has been strengthened with various texts and circulars reinforcing the importance of compliance. For instance:
- Law No. 2016-48 dated July 11, 2016, relating to banks and financial institutions stipulates that banks and financial institutions must establish internal audit, risk management, and compliance control functions independent of operational and support bodies.
- Circular BCT 2017-08 dated September 19, 2017, sets internal control rules for managing the risk of money laundering and terrorism financing.
- Circular BCT 2021-05 dated August 19, 2021, titled “Governance Framework for Banks and Financial Institutions,” highlights the advisory role of the compliance control function to administrative and management bodies regarding compliance with applicable laws and regulations.
Conclusion
In conclusion, compliance is a critical concept in the financial services industry in Tunisia, particularly for microfinance institutions that cater to vulnerable populations. Establishing robust compliance systems and regulatory monitoring are essential to mitigate risks and ensure sustainable performance. As the regulatory environment continues to evolve, financial institutions must remain vigilant and adapt to changes to maintain their integrity and reputation.