Financial Crime World

New Regulations for Effective Governance and Risk Management in Banks

The Government of Sierra Leone has introduced new regulations aimed at strengthening corporate governance and risk management practices in banks operating in the country. These measures are designed to protect depositors’ interests, promote transparency, and ensure effective supervision.

Term Limits for Senior Executives

  • Non-Executive Directors will serve for a maximum of two terms of three years each.
  • Chief Executive Officers (CEOs), Deputy Managing Directors (DMDs), and Executive Directors (EDs) will serve for a maximum of two terms of five and six years respectively.

These term limits are intended to prevent the concentration of power and ensure that fresh perspectives are brought into decision-making processes.

Integrity of Bank Records

  • Directors, CEOs, and management staff are prohibited from making false entries or allowing others to do so.
  • Accurate and complete accounting records must be maintained at all times.

The integrity of bank records is crucial for transparency and trust in the banking system. Any attempts to manipulate or falsify records can lead to mistrust and undermine confidence in the financial sector.

Confidentiality

  • Banks must ensure the confidentiality of customer information and transactions.
  • Sensitive data must be protected from unauthorized access and use, and only disclosed with prior written consent or in accordance with legal requirements.

Maintaining confidentiality is essential for building trust and confidence in the banking system. Breaches of confidentiality can have severe consequences, including financial losses and reputational damage.

Corporate Culture and Values

  • The Board must set and adhere to corporate values that create expectations for lawful and ethical conduct.
  • Senior management and employees are expected to uphold these values and adhere to them at all times.

A strong corporate culture is critical for promoting responsible and ethical behavior in banks. It helps to create a positive work environment, encourages transparency and accountability, and supports the overall success of the organization.

Code of Conduct

  • All banks must have a code of conduct or code of ethics that defines acceptable and unacceptable conduct.
  • The code must prohibit staff from using their positions to obtain preferential treatment or using the bank’s name or facilities for personal gain.

A code of conduct is essential for setting clear expectations for behavior and ensuring that employees understand what is expected of them. It helps to promote a positive work culture, encourages transparency and accountability, and supports the overall success of the organization.

Whistleblower Policy

  • Banks are required to establish a whistleblowing policy that allows employees to report material concerns in confidence.
  • The policy must be communicated to all staff and ensure that reports are promptly investigated and addressed by an objective independent body.

A whistleblower policy is critical for promoting transparency, accountability, and ethical behavior in banks. It encourages employees to speak up if they witness misconduct or unethical behavior, and helps to create a positive work environment where reporting concerns is valued and respected.

Risk Governance Framework

  • The regulations emphasize the importance of effective risk governance, including a strong risk culture, well-defined responsibilities for risk management, and well-articulated risk appetite.
  • The Board is responsible for overseeing this framework and ensuring its alignment with the bank’s strategic objectives.

Effective risk governance is critical for ensuring the stability and success of banks. It helps to identify, assess, and manage risks effectively, and ensures that banks are prepared for unexpected events or challenges.

Prompt Reporting of Fraud

  • Banks are required to promptly report all cases of fraud to the Banking Supervision Department and Financial Stability Department of the Bank of Sierra Leone within 24 hours.
  • A copy of the full investigation report must be sent to the Central Bank upon completion.

Prompt reporting of fraud is essential for ensuring that banks take immediate action to address fraudulent activities. It helps to prevent further losses, promotes transparency and accountability, and supports the overall stability of the financial sector.

The new regulations are designed to enhance trust and confidence in the banking system, protect depositors’ interests, and ensure effective supervision. The Government of Sierra Leone is committed to promoting a robust and stable financial sector that supports economic growth and development.