Financial Crime World

Director and Senior Manager Performance Assessment Under Scrutiny

Enhancing Corporate Governance Standards

SUGEF has introduced new regulations requiring banks and financial institutions to conduct thorough assessments of their directors and senior managers. This move aims to enhance corporate governance standards by evaluating the suitability of candidates for these positions, including their honesty, integrity, and reputation.

Suitability Assessment Process

According to CONASSIF 15-22, regulated entities must:

  • Approve a suitability policy that includes a valuation of key factors such as criminal convictions, sanctions, and pending lawsuits.
  • Conduct an assessment test to determine whether candidates possess the necessary skills, work style, knowledge, and personality for the position.

Performance Evaluation Policy

In addition to assessing suitability, regulated entities must:

  • Implement a performance evaluation policy for each member of the management body and senior management team.
  • Apply this policy on a regular basis to identify and address any weaknesses or discrepancies in their performance.

The board of directors is responsible for supervising the performance of the senior management team and taking necessary actions when expectations are not met. This includes complying with company values, risk appetite, and risk culture.

Remuneration Requirements

Regulated entities must ensure that their remuneration policies align with their corporate governance code. The board of directors is responsible for:

  • Approving remuneration conditions.
  • Defining a system that encourages good performance and promotes acceptable risk management criteria.

A Remunerations Technical Committee must be established to monitor the design and function of an adequate remuneration system. This committee must provide independent recommendations on remuneration policies and practices to manage risk, capital, and liquidity.

AML/KYC Requirements

Financial institutions are also required to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations. This includes:

  • Implementing know-your-client (KYC) and know-your-employee (KYE) procedures.
  • Regular reporting obligations for suspect transactions.

Regulated entities must obtain and keep information about the identity of beneficiaries of open accounts or financial transactions when there are doubts about clients who are not acting on their own behalf. Anonymous or numbered accounts are also prohibited.

Consequences of Non-Compliance

Breaching these requirements can result in:

  • Internal disciplinary actions.
  • Economic penalties.
  • Fines imposed by SUGEF.

Regulated entities must ensure that they comply with these regulations to maintain a strong reputation and avoid financial consequences.

Conclusion

The assessment of directors and senior managers is a critical component of corporate governance standards. Regulated entities must prioritize this process to ensure that their leaders are fit and proper to hold their positions.