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Compliance Program Management in Philippines: A Regulatory Overview
The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has issued guidelines for banks and other financial institutions (BSFIs) to establish an effective compliance program. The regulatory body emphasizes the importance of a dynamic and responsive compliance risk management system that identifies and mitigates risks associated with non-compliance with laws, rules, and regulations.
Compliance Risk Management
A BSFI’s compliance risk management system should be designed to identify and mitigate risks that may erode its franchise value, such as:
- Legal or regulatory sanctions
- Material financial loss
- Reputational damage
- Conflict of interest
- Unfair treatment of customers
- Money laundering and terrorist financing activities
Compliance Function
The compliance function is a crucial part of the BSFI’s organizational structure. It shall have a formal status and be established by a charter or other formal document approved by the board of directors. The compliance function should have the authority to:
- Obtain necessary information
- Conduct investigations
- Report directly to the board
Chief Compliance Officer (CCO)
The CCO is responsible for overseeing the identification and management of compliance risks. He/She shall:
- Supervise compliance staff
- Liaise with the BSP on compliance issues
- Ensure the integrity and accuracy of all documentary submissions to the BSP
Responsibilities of Board of Directors and Senior Management
The board of directors is responsible for ensuring that a compliance program is defined and compliance issues are resolved expeditiously. Senior management, led by the CCO, shall:
- Implement the compliance program
- Report periodically to the board on matters affecting its design and implementation
Cross-Border Compliance Issues
BSFIs conducting business in other jurisdictions should structure their compliance function to address local compliance concerns within the framework of their group-wide compliance policy.
Outsourcing of Compliance Risk Assessment and Testing
The review, assessment, and testing of the compliance program may be outsourced to qualified third parties. The handling and management of this outsourcing arrangement shall be governed by BSP regulations.
Summary
BSFIs in the Philippines are required to establish an effective compliance program that identifies and mitigates risks associated with non-compliance. The compliance function is a crucial part of this program, and the CCO plays a key role in overseeing its implementation.