You are on page 1of 2

What is the purpose of compliance?

Compliance laws, rules and standards generally cover matters such as observing proper standards
of:
Market conduct,
managing conflicts of interest,
treating customers fairly, and
Ensuring the suitability of customer advice.
They typically include specific areas such as:
The prevention of money laundering,
Terrorist financing, and
May extend to tax laws that are relevant to the structuring of banking products or
customer advice.
A bank that knowingly participates in transactions intended to be used by customers to avoid
regulatory or financial reporting requirements, evade tax liabilities or facilitate illegal conduct
will be exposing itself to significant compliance risk (the risk of legal or regulatory sanctions,
material financial loss, or loss to reputation a bank may suffer).
Compliance laws, rules and standards have various sources, including:
Primary legislation, rules and standards issued by legislators and supervisors,
Market conventions,
Codes of practice promoted by industry associations, and
Internal codes of conduct applicable to the staff members of the bank.
For the reasons mentioned above, these are likely to go beyond what is legally binding and
embrace broader standards of integrity and ethical conduct.
Compliance officers will primarily be responsible for banks/DFIs effective compliance relating
to:
a)
b)
c)
d)

SBP Prudential Regulations,


Relevant provisions of existing laws and regulations,
Guidelines for KYC, and
Anti-money laundering laws and regulations.

What is the optimal organizational structure of the compliance function within a bank, at
what different levels is compliance practiced?
We see examples of compliance challenges in three key areas:
Products,
Sales channels, and
Customers.

The broader source of compliance risk now more than ever is embedded throughout business
activities where customer experience, sales, products, and processes meet.
Customer:
Inconsistent customer sales and servicing experiences across channels.
Products vary in how they utilize channel-specific features.
Multiple handoffs or manual activities when transitioning between channels.
Sales channels:
Definition of primary characteristics, preferences, and behaviors for targeted customer
segments differs between products in the same category.
Limited tracking of usage and channel mix variations within and across products for each
segment.
Inconsistent fee treatment and product availability across customer segments, especially
in comparison with demographic characteristics described in the Equal Credit
Opportunities Act.
Differing communications, sales, and service approaches for customer segments using
similar products.
Product management:
Unclear or complex disclosures, terms, and conditions. Inconsistent fees and product
availability across customer segments, especially when compared with characteristics
described in the Equal Credit Opportunities Act.
Overlapping products that meet the same customer need without clear differentiation.
Differing communications, sales, and service approaches for customer segments using
similar products.
Large number of product variants, leading to errors in application processing and
difficulties maintaining and managing changes.

You might also like