Financial Crime World

Banking Compliance Procedures in India: Chief Compliance Officer’s Role Takes Center Stage

Introduction

In a bid to strengthen banking compliance procedures in India, the Reserve Bank of India (RBI) has issued a circular outlining the responsibilities and eligibility criteria for the post of Chief Compliance Officer (CCO). This article highlights the key points from the circular.

Shared Responsibility: Business Units and Compliance Function

Key Takeaways

  • Compliance is a shared responsibility between business units and the compliance function.
  • Different departments within a bank are responsible for ensuring compliance with various statutory requirements.
  • The compliance function must ensure overall oversight and report to management.

Eligibility Criteria for CCO

Requirements

  • Age limit: not exceeding 55 years
  • Continuous association with the compliance function prior to completing 55 years may be eligible even if above the age limit
  • Minimum of 15 years’ experience in banking or financial services, out of which at least 5 years should be in audit, finance, compliance, legal, or risk management functions

Minimum Experience Requirements

Key Points

  • Control functions within business lines will also be considered as part of the required experience
  • The circular clarifies that experience gained in control functions can be counted towards meeting the minimum requirement.

Selection Process for Foreign Banks Operating Under Branch Model

Important Notes

  • The selection process and reporting line will be fully applicable to RBI provisions.
  • Any reference to the Board or ACB will be treated as equivalent to Regional or Head Office Compliance in this context.

Fit and Proper Criteria for CCO

Evaluation/Selection Process

  • The appointment of a CCO should involve an appropriate ‘fit and proper’ evaluation/selection criteria, including examining competency, integrity, and conflict of interest among other aspects.

Extension of Time Period for Appointment of CCO

RBI Decision

  • In light of difficulties faced by banks in appointing a new CCO meeting all requirements, RBI has granted an extension of time from the prescribed period of six months to nine months from the date of the circular.
  • Banks are free to reappoint the current incumbent as CCO if they meet the requirements.

Conclusion

The implementation of these measures is expected to strengthen banking compliance procedures in India and ensure that banks operate with integrity and transparency.