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RISKS & COMPLIANCE

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RISKS & COMPLIANCE. Compliance. Revenue. Challenges for Commercial Banks Cross Border Business KYC and AML Policies, Procedures Role of Technology in addressing Compliance Risk Impact of Non Compliance. Challenges for Commercial Banks Establishment of Governance Architecture for Banks

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Presentation Transcript
risks compliance

RISKS & COMPLIANCE

Compliance

Revenue

Finsight Media Presentation

slide2
Challenges for Commercial Banks
  • Cross Border Business
  • KYC and AML Policies, Procedures
  • Role of Technology in addressing Compliance Risk
  • Impact of Non Compliance

Finsight Media Presentation

slide3
Challenges for Commercial Banks
  • Establishment of Governance Architecture for Banks
      • Basel II Norms
  • Adherence to KYC Norms
  • Implementation of AML Procedures
  • Sales Practices
  • Product Regulation
  • Code of Conduct

Finsight Media Presentation

slide4
Governance Architecture
  • The Basel II Accord or Basel II updates 1988 Capital rules for Risk Management procedures that align capital with operational credit and Market risks for banks operating internationally.
  • Basel II Mandates new regulatory methods for calculating capital to support operational risk.
  • Banks must determine operational risk in its methods of calculating the amount of capital, as an institution must set aside to cover risk.
  • Banks must maintain data on how risks are determined.
  • Operational risks of loss arise
    • From failed Technology
    • From failed process
    • From failed Infrastructure
    • From failed Personnel
    • From other (external events and includes legal / compliance risk)

Cont…5

Finsight Media Presentation

slide5
Risk covers Front, Middle, Back offices
  • Involves Risk identification
    • Understand risk profile
    • Develop tools (KRIS)
    • Policies, Procedures
  • Involves Risk Assessment
    • Self Assess
    • Risk Mapping
    • Analysis
  • Involves Risk Reporting
  • Effectively – Risk Control
      • Mitigation
      • Action Plans
      • Share lessons
  • Effective Internal Control / Management

Finsight Media Presentation

slide6
Adherence KYC Norms & AML Procedures
  • Detailed Procedures required – KYC Norms
    • Multiplicity of documents
    • No single verification procedures
    • Risks exists in genuiness of dox (eg. Forgery, Falsification)
    • Negative lists to be established (Account opening)
    • Documents not available. Eg. Certain categories – opening of accounts in rural areas
  • AML Procedures
    • Nascent stage
    • Transaction Monitoring not still in place
    • Technology support needed
    • Discipline / Education required to understand AML Procedures
    • September 11 events have complicated account opening process, AML procedures due to Terrorist activities
    • Extensive use of Cash Transactions for commercial purposes
    • Parallel Economy Existence
  • Challenge to implement good KYC systems; AML Procedures, Technology solutions can help – cost will be an issue.
  • Balance between Mandatory Compliance of KYC and customer opportunities.

Finsight Media Presentation

slide7
Sales Practices
  • Transparency in Sales Practices
    • Understanding the product
    • Understanding Customer requirements
    • Practices not to evolve for profit / or commission.
    • Balance between Fixed / Variable incentives
    • Licensing requirements
      • Mutual funds
      • Insurance
      • Portfolio Management
    • Telecalling Policies, procedures clearly spelt out
    • Risks of non-deposit products clearly spelt out
    • Code of conduct on Sales Practices (Fair Practices)
    • Sales (Front) office – Training & Certification Process.
  • Product Regulation
    • RBI – rules / circulars
    • Compliance to local regulations
    • Compliance to home country regulations (Multinationals)

Finsight Media Presentation

slide8
Code of Conduct
  • Tele Banking
  • Sales Calls
  • Collections Policy
  • Separate Policies, Procedures – Fiduciary transactions.
  • Customer complaints review
  • Whistle Blowing, Policy
  • Ombudsman Policy

Finsight Media Presentation

slide9
Cross Border Business
  • Conflict between Home Country and Host Country regulations
  • Conflicts in Sales Policies / Procedures
  • Adherence to overseas country regulations on products.

Finsight Media Presentation

slide10
Role of Technology in addressing compliance risk
  • Negative list
  • Dedupe Systems
  • KYC Process
  • Transaction monitoring
  • Early warning systems – Cards Business
  • Operational Risk Systems
  • Internet – Protection (hacking) systems
  • Customer Profile
  • Credit & Risk – Credit Approval process
  • Reports

Finsight Media Presentation

slide11
Impact of Non Compliance
  • Affects Franchise, Business opportunities
  • Reputation of Company at stake
  • No possibilities for New License
  • Moral issue – employees may leave
  • Affects Leaders / Professionals

Finsight Media Presentation

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