Compliance Risks

Question 1

What is compliance risk?

Answer 1

The risk of not having:

• Compliance with laws and regulations
• Sound fiduciary principles
• prudent ethical standards
• client documents
• internal policies and procedures
• contractual obligations

Question 2

What could heighten compliance risk?

Answer 2

• substandard customer onboarding and due diligence
• shortcomings in ethical culture and expertise of management
• weak internal compliance systems and training.

Question 3

What is the BIS definition of compliance risk?

Answer 3

The risk of legal or regulatory sanctions, material financial loss, or loss to reputation a firm may suffer as a result of a failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and code of conduct applicable to its banking activities.

Question 4

What are some of the technological tools that can help enhance compliance risk assessments?

Answer 4

1. Prevention - building in compliance requirement into business applications.
2. Detection systems and reports - trade or transaction screening.
3. Recording incidents and breaches, complaints and recording relevant MI to identify trends in error rates.
4. Online regulatory information systems
5. Effective online training and refresher courses