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PHILIPPINE FINANCIAL INSTITUTIONS URGED TO STRENGTHEN COMPLIANCE FRAMEWORK
The Bangko Sentral ng Pilipinas (BSP) has reiterated the importance of having a robust compliance framework for financial institutions (BSFIs) in the Philippines. A well-designed compliance program is essential to mitigate risks and ensure the stability of the financial system.
Requirements for Compliance Framework
According to BSP Circular No. [insert circular number], BSFIs are required to establish a dynamic and responsive compliance risk management system that identifies and mitigates risks associated with non-compliance with laws, rules, and regulations. The compliance function shall have a formal status within the organization and be responsible for advising senior management on relevant laws and standards.
Key Responsibilities of Compliance Function
The compliance function is tasked with:
- Establishing written guidance to staff on the implementation of the compliance program
- Monitoring its effectiveness
- Overseeing the identification and management of compliance risks
- Supervising compliance function staff
Chief Compliance Officer (CCO)
BSFIs are required to have a CCO who shall be responsible for overseeing the compliance program and ensuring that it is implemented effectively. The CCO shall report to the board of directors or its designated committee and periodically submit reports on compliance matters.
Cross-Border Compliance System
The BSP has emphasized the importance of having a cross-border compliance system in place, particularly for institutions that conduct business in other jurisdictions. Compliance issues specific to each jurisdiction should be coordinated within the framework of the institution’s group-wide compliance policy.
Outsourcing Compliance Functions
BSFIs are allowed to outsource certain compliance functions, such as review, assessment, and testing of their compliance program, to qualified third parties. However, the handling and management of this outsourcing arrangement shall be governed by BSP Circular No. 112.
Warning: Materially Inadequate Compliance System
The BSP has warned that a compliance system found to be materially inadequate shall be construed as unsafe or unsound banking. Therefore, BSFIs are urged to take necessary steps to strengthen their compliance framework to ensure compliance with regulatory requirements and maintain the stability of the financial system.
Source
Source: Bangko Sentral ng Pilipinas Circular No. [insert circular number]