Compliance Issues Worldwide

January 31, 2007

The international community has made the fight against money laundering and financing of terrorism a priority. Estimated size of money laundering worldwide through the banking sector is more than US$ 500 billion to One trillion annually. To combat this menace, international authorities including FATF have formulated recommendations meant for financial service providers including banks, insurance companies, asset management companies, brokerage firms and other financial intermediaries.                           

 

KYC

These bodies warn that if banks and financial institutions fail to adhere to recommended compliance guidelines, they would tend to open themselves to operational, legal and reputational risks and consequent costs. Penalties imposed against non-compliance in certain countries are severe enough to force a bank or financial institutions ultimately close its operations.  

To tackle these risks, common trend for both large and small financial institutions is the transition away from task-oriented compliance programs to process-oriented compliance programs. Process-oriented programs require compliance to be practiced, tested, validated and evolved through out the organization on an ongoing basis.  

An effective enterprise-wide compliance-risk management program should be flexible to respond to change, and tailored to an organization’s corporate strategies, business activities, and external environment. Finally and more importantly, an effective enterprise-wide compliance-risk management program requires strong board and senior management initiation and oversight.

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January 31, 2007

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