Each bank differs in the way it operates in its day-to-day functioning. However, one common factor which they all share is the role of the compliance department. Often described as the “bank’s internal police force”, compliance department plays a crucial role in maintaining the reputation and integrity of the bank by ensuring that the institution fully complies with applicable laws, rules and regulations.
Ultimate goal of this department is to ensure that the bank stays within the boundaries drawn up by the regulators, legislators and board of directors. With each bank varying in its duties and activities, the responsibilities of the compliance department are clearly and specifically defined and outlined by the bank accordingly.
Similar tasks include monitoring the activities of the bank as well as controlling, identifying and analyzing risk areas. This many involve testing and assessing the policies and equipment of the bank such as risk and security assessment tools.
And its responsibilities don’t end here! Compliance team also works towards designing and implementing solutions to address any risks that may have been identified as well as oversee employee training programs and develop compliance programs for new regulations.
Compliance department of a bank is not just limited to the bank, its policies and its employees. In fact, its focus extends towards the bank’s clients as well to ensure that the clients act within the law and not misuse the bank for any illegal activities including tax evasion, money laundering or funding terrorism. If any client is founding abusing the law, then it is the responsibility of the compliance department to ensure that the client is held responsible and appropriate action is taken.
Since each bank is different, the structure of its compliance department too varies. While smaller banks require a smaller unit and fewer staff members, larger banks (especially those with international branches and dealing in international transactions) require multiple compliance units with dozens of its staff working from various regions.
Although the compliance department can be a costly unit to operate, non-compliance can cost the bank more. Therefore, to guarantee the effectiveness of the unit, the Basel Committee on Banking Supervision recommends keeping the department independent and allotting resources adequately. And though the department itself is the bank’s internal enforcement unit, it too must be subjected to routine scrutiny and periodic, independent review.
About the Author
Felicia Dye graduated from Anne Arundel Community College with an associate’s degree in paralegal studies. She began her writing career specializing in legal writing, providing content to companies including Internet Brands and private law firms. She contributes articles to Trace775.com.
Investopedia: Compliance Department
OFAC: OFAC Regulations for the Financial Community
Basel Committee on Banking Supervision: Compliance and the Compliance Function in Banks
Bank Policies: Compliance Officer Job Description
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