A strong compliance culture reflects a corporate culture of high ethical standards and integrity in which the board and senior management lead by example. A financial institution should hold itself to high standards in carrying on business, and at all times observe both the spirit and the letter of the law and regulations. Failure to effectively manage compliance risk may result in adverse consequences for the financial institution’s customers, shareholders, officers and the financial institution itself.
Compliance is the responsibility of all officers within a financial institution. All business lines and functions within a financial institution must carry out their responsibilities to ensure the effective management of compliance risk:
(a) business lines, through appropriate managerial and supervisory controls, are primarily responsible for managing compliance risk inherent in the day-to-day activities, processes and systems of the financial institution for which they are accountable;
(b) the compliance function is responsible for ensuring that controls to manage compliance risk are adequate and operating as intended. It is also responsible for assessing and monitoring compliance risk faced by the financial institution; and
(c) the internal audit function is responsible for providing independent assurance to the board and senior management on the quality and effectiveness of the institution’s overall internal controls, risk management and governance systems and processes, including those instituted by the compliance function.
The objective of the requirements in this policy document is to promote the safety and soundness of financial institutions by minimising financial, reputational and operational risks arising from legal and regulatory non-compliance.
This policy document sets out the following:
(a) expectations on the board and senior management to oversee and ensure the effective management of compliance risk, including the establishment of a compliance function and the position of chief compliance officer; and
(b) key features and responsibilities of the compliance function to support the effective management of compliance risk.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
