“Consumer Banking” Compliance Assessment Essay

Consumer Banking Compliance AssessmentIntroductionPart One       The chore entities exact evolved tremendously all over time. Among the m either advancements made in the vocation enterprise attention is the smother of the creation of different operating building blocks. One of the or so fundamental operating building blocks is the meekness unit. Each operating unit is accorded its own mandates and hurt of references. This way, apiece unit is made somehow independent to the extent that it operates inwardly the acceptments of the entire organizations goals. In addition, each operating unit is stird with its responsibilities. This is in strong suit with the consumption of the creation of the unit in the first place. The number of the operating units depends on the classes of functions that be identifiable in the entire organization. Furthermore, all the operating units must be able to touch base with unity an some other. This is beca engage they atomic number 18 all operating in the best reside of the entire organization. If one and only(a) fails, all the others ar affected. at that placefore, none can prevail in solitude. It is as well meaning(a) to none that all the units should pick bulge a proper reporting procedure to the wariness and finally to the instrument panel of directors. This is because they be answerable to the board. Understanding the nature of each production line unit is thence very measurable. Identification of the elements that piddle the cargon unit is also of the essence(predicate). In this way, we can appreciate the role of each calling unit, how they link to each other and ultimately how they contri entirelye to the success of the entire business.       Compliance unit is a very finicky unit in the monetary persistence. It is special because its functions are not business activities but crowing advice to other business units on how to improve respectfulness w ith the rules and regulations. Just like whatsoever other operating unit, the intensity level of the respect unit in discharging its duties is affected by factors such as harm of reference, authority, reporting responsibilities, accountability and the quality of the lag. all(a) these factors together leave see that the unit is successful in its trading operations or it fails. If it is successful then it is relevant to the entire degraded because it bequeath provide the much motiveed assistance. If it fails, the entire firm testament possible fail because the conformance risks will ultimately catch up with it dapple un sensitive. It is therefore important to look critically at the factors that check up on that the open compliance unit is effective.       First and foremost, the terms of reference for the compliance unit predict the effectiveness of the unit. The terms of reference spell tabu the ad hoc task that the unit is mandated to carry erupt . The task should be nationd clearly with no ambiguity. For instance, in the case of the compliance unit, the task is to advise the business on how to comply with the represend rules, regulations, laws and standards. In addition, the compliance section monitors the business activities to find out whether they are within the regulations set out. The plane section also monitors the involve of employees to identify actual encroachments or potential violations of rules, procedures, policies, regulations and standards that are guidelines in the industry. In a nutshell, the duty of the compliance section is to create programs that permit the firms compliance. It is the duty of the precedential management and the business line supervisors that ensure ultimately that there is firm compliance with laws and the regulations. Furthermore, in the terms of references, the objectives of the compliance unit must be stated clearly. This way, the part will have the backdrop for measuring it s performance just like every other business unit. The objectives of the department may be with regard to how umpteen trainings that will be done at a vown time, how a great deal surveillance will be asked, how often policies will be reviewed among others. Lastly, the purpose of existence of the department must be clearly understood if the department has to be effective in discharging its duties. For instance, the department should be made aware that its main purpose is to assist the management in identifying compliance risks, assessing them and advising on what should be done to parry their repercussions as well as their recurrence. There are set guidelines that dictate the operations of the compliance unit. They stipulate the boundaries of the operations of the department and the limits of its mandate. If these guidelines and the instructions are adhered to, the effectiveness of the compliance unit will be realized in the firm. There will be no conflicts of interest between t he compliance unit and the management responsibilities.       The other important factor that influences the effectiveness of the compliance department is the authority. The authority of the compliance department should be clearly stated out. To ensure monitoring of the business activities and the detainment of the employees, the compliance staff should be effrontery unlimited function to admission fee all the instruction in all the business units in the firm. The compliance staff should be answerable to the board and the older management alone. For instance, gauge the business unit in a bank in shake up of loan processing is about to commit a crime with keep an eye on to the regulations that govern the operations. A client comes to the office of the business line animal trainer in this business unit. It happens that the client is a friend of the manager. According to the set regulations governing advancing loans, the client does not meet the criteria. The manager maneuvers and gas embolism the rules in favor of his friend to get the loan. This is an issue that touches on compliance. Without large authority on the part of the compliance staff to investigate the dish out of the manager in this business unit, then it would be infeasible to dig such a move. Perhaps it could end up undetected. To this extent, the compliance department would be deemed to have failed, but only because it had no authority over such circumstances.       How the compliance staff report their findings is also very important if the department is to be effective. In order of hierarchy, the board of directors is at the top. The senior management is the second. The board gives instructions to the senior management staff. The senior management gives instructions to the business line managers who in turn command business unit supervisors. The supervisors give orders to the employees. The compliance department does not play any direct role in th e business, it is therefore termed as a non-business department in the firm. The board and the senior management ultimately enforce compliance with the rules and the regulations starting with the business line managers and the business unit supervisors. Then the supervisors ensure that the employees toe the line in matters that regard laws, rules, regulations, procedures and the standards of the firm. The compliance department is abstruse identification of the possible violations of the compliance. If such violations are identified, they should be communicated to the right person. The take aim of the compliance department reports directly to the board and senior managers for an appropriate natural process to be taken. This is because, as we have already mentioned above, it is the responsibility of the board and the senior managers to ensure full compliance in the entire firm. The fact that the compliance department can report directly to the board makes it possible to distract a possible crisis that could result from misconduct of employees.       Another factor that influences the effectiveness of the compliance unit in a firm is the quality of the staff members. The staff should be well educated in matters that regard the state laws that affect the firm. In addition, they should have a good understanding of the rules, regulations, procedures and standards of that firm. This companionship will help them in making proper decisions when carrying out their duties. This is because it is impossible to tell when a violation has happened or is about to happen if one does not sack out what was supposed to done in the first place. The issue of quality of staff burn downs also in business units that are twisting selling process. It is important for the compliance officeholders to know the line of products that are cosmos sold and the suppliers who supply them. This is because some business entities enter into agreements with certain suppliers. For instance, in a certain business entity in Singapore that sells electronics from Samsung keep company, the following violation of the compliance was committed and went unidentified. In this particular instance, the manager in charge of sales decided that he could order some electronic devices from Sony Company without informing the rest of the management team.. The reason why this manager decided to do such a thing oblivious of its consequences to the entire business was because he thought that Sony products sold more than Samsung products of the same line. One lower-ranking compliance officer was inspecting the products in the business stock. He noticed two Sony and Samsung products but did not question. This is because he did not know that there was a deal between the business entity and Samsung Company and that presence of Sony products meant that the manager was not compliant.Part Two       The regulation of the fiscal services sector requires a delicate b alance macrocosm kept up(p) between over-regulation on the one hand and under-regulation on the other. This is because pecuniary services are delicate matters that are sensitive to any immaterial changes and the impact of any external force is significant in the survival of the fiscal industry. Regulation of monetary industry emanates from two levels. These levels include external and internal levels. External regulations are the most significant because they essentially target satisf natural action of the consumer of the services and not ineluctably the well-being of the financial industry. They are meant to make the financial institutions disciplined in terms of their services to their consumers. They are made by external bodies that wield how the financial institutions operate with respect to the quality of services that the end substance abuser receives. For instance, the consumer requires to know the truth about the services that they are about to purchase. Therefore, th ey require information that is not misleading. If left to the financial institutions, they would not care the candor of the information they give but the quantity of the sales. They would give misleading information that is only aimed at convincing the consumers to like their services. Internal regulation is aimed at maintaining the survival of the business in the world of competition. It ensures that the business shapes its niche and maintains its reputation. This way, it ensures that the business maintains the competitive atmosphere. Too much external regulation would have harmful effects in terms of survival of financial institutions. Too tiny regulation would lead to suffering of the consumers. A balance is therefore paramount to be maintained.       In Singapore, the Monetary Authority of Singapore (MAS), besides being the Central Bank, itis the institution that is charged with the responsibility of regulating all financial institutions including the banking and indemnification sector. The MAS uses many instruments to baffle financial institutions. First and foremost, it uses exemplifys of Parliament to spoil financial institutions. These Acts constitute the laws that if broken or violated culminate to a severe penalty. Among the most important Acts are the Banking Act 1999, the Financial Advisers Act 2005 and the Insurance Act 2002. Another instrument that the MAS uses is directives. They directives spell out the profound requirements of the financial institution. Notices are also issued to certain class of financial institutions to cut back certain requirements that are legally binding. Moreover, the MAS applies guidelines as an instrument to regulate financial institutions. Guidelines dictate the best practice standards that govern the conduct of the specified institutions. Codes are also applicable because they set out the rules governing the conduct of financial institutions with regard to the performance of certain activiti es. Examples of codes are those that govern how Takeovers and Mergers can be done. Practice Notes are used to guide the financial institutions on administrative procedures that pertain to the matters of licensing, reporting and compliance. Circulars are also very useful. They are paperss sent to specified financial institutions to pass particular information such as changes that can be anticipated in the near future. Finally, the policy statements of the MAS give more information on the expectations of the MAS on the financial institutions.The MAS has immense powers to regulate all the financial institutions. Among its powers is the power to approve financial institutions and to control their operations.       The MAS strives so hard to maintain the balance in the regulation matters to avoid over-regulation and under-regulation. Over-regulation hinders the creativity and innovations of the companies. The redress personnels would feel restricted in the way they res pond to the external demands if the MAS monitors the companys every move. On the other hand, if the policy companies were to be left unregulated or under-regulated, the consumers would suffer greatly. This is because the insurance companies would use any heart, whether ethical or unethical to gain an advantage over the competitors at the expense of the consumers. According to the Insurance Act 2002, Cap 142 has several provide that dictate how insurance companies should be created and operated. For instance, it is only a person who has been licenced by the Authority under the Act who can carry out an insurance business in Singapore. This provision ensures that all the insurers are know by the state of Singapore and that there is no chance that a consumer may be conned by a fraudster. According to the Act, anyone who claims to carry out insurance business while unregistered is liable to a venomous offense. The Act also gives guidelines that pertain to how Take-overs should be do ne in the insurance companies. Without proper Take-over procedures, the consumers may suffer. The authority also dictates how shareholding to the insurance companies is done. This way, the rights of the shareholders are maintained and their confidence in the insurance companies to which they have shares is boosted.       The MAS has also issued circulars to the insurance companies to postulate important messages . An example of the circular issued to the insurance companies Chief Executives is that dated 18 November, 2013. It required all the insurers to submit their assets and liability exposures. As already stated, guidelines are another important tool through which the MAS regulates the insurance companies. An example of a guideline that is dated 1st April, 2013. It was a guideline on the use of internal models for liability and capital requirements for life insurance products containing investment guarantees with non-linear payouts. Also, on 17th May 2013, a gui deline outlining the criteria for the registration of an insurance broker was issued. It requires that the applicant be a company among many other requirements. On 6th September 2013, a guideline was issued to all the financial institutions guide them on how to safeguard the ace of Singapores financial system. It categorically stated that MAS would not tolerate the use of the financial system to conduct illegitimate and criminal activities. Therefore, all financial institutions were required to uphold the lawfulness of the financial systems. Notices have also been issued on several occasions by the MAS the insurance companies. An example of the notice is that issued on 29th November 2013 with regard to the unbarred credit facilities to individuals. This notice provided requirements that an insurer has to comply to when granting unsecured credit celerity to an individual.       All the above are illustrations where the MAS has regulatory authority over the insura nce companies. We have seen that it regulates all the go of the operations of insurance companies from establishment to matters of coup and mergers. It is imperative that such a state body like the MAS should have control over financial institutions. The MAS is known to enhance open operations in the financial institutions in order to promote competitiveness and animation of innovations. This way, the MAS fulfills our argument that financial institutions should not be over-regulated. On the other hand, the MAS ensures that transparency,accountability and integrity principles are upheld in the operations of these financial institutions. It ensures transparency because the consumers wish to know what kind of services they are about to purchase from a financial institution. Again, these financial institutions are to be held accountable for their operations when they lead to overconfident or negative results. As already mentioned, all the financial institutions are supposed to upho ld the principle of integrity by not carrying out their operations to advance criminal and illegitimate activities. In this manner, the MAS is fulfilling our argument that financial institutions should not be under-regulated.Part Three       The need to escalate Non-routine and abstruse Matters to a designated officer would not arise if all the officers are in good order expert in dealing with such issues. This statement simply means that escalation of non-routine and complex matters is done because the officer who detects such an issue is not trained adequately to handle it. This also happens when a compliance officer identifies an issue, but then his or her authority is limited to escalating it to a supervisor or manager.       First and foremost, it is important to know which are these non-routine and complex issues that can arise in matters of compliance. According to the Financial Industry Competency Standards for Compliance, the following issu es constitute non-routine and complex matters. They include issues such as well-read breaches of regulations, guidelines and policies insider dealing misconduct misrepresentation sign-off new product sign-off advertising and promotional materials by the insurance institution among others. These are issues that are not covered by the animated policies on how they should be handled in case they happen.       A compliance officer has no power to reprimand an employee. He or she has no power to fire an employee on the grounds of misconduct. If this is the case then, issues such as intentional breaches of regulations, guidelines and policies need someone who can resolve them so fast to avert any compliance crisis. The power to deal with the complex and non-routine matters is in the hands of the supervisors and the executives of any firm. The compliance officer is left with an option to escalate such matters whenever they arise. This process of escalation takes time bec ause the compliance officer has to document all the steps obscure as well as the action taken by the appropriate person to whom the matter has been reported starting with the head of compliance department.       There are certain things that can be done to vest compliance officers to be able to deal with these non-routine and complex matters. First, these compliance officers need proper training to make them aware of possibilities of occurrence of such matters. Moreover,they need to be equipped with adequate skills to cope with such issues when they occur in order for them totake appropriate and rational steps. Although they may not be given powers to demote or fire a disobedient employee, they can be given a means through which they can address such matters to the board as a matter of urgency. In addition,when these compliance officers are trained adequately and are competent, supervisors may delegate some functions to them. such functions may include the power t o demote and to fire misbehaving employees. However, it is the responsibility of these supervisors to conduct a follow-up and review to ensure that the delegated functions are performed properly. Most important is the fact that the supervisor remains responsible for such delegated activities.       In short, if the compliance officers are adequately trained so that they can adequately handle the non-routine and complex matters, the wastage of time in averting possible compliance crisis would not occur. This wastage of time occurs especially if the supervisors dont take the necessary action to handle such issues. This requires that the matter should be escalated to the board of directors. Before the board sits to discuss the issue, it may be too late to avert the crisis and equal damage would already have occurred. Moreover, the process of escalation is very lengthy. It starts with the Head of Compliance. A complete brief need to be prepared explaining the issue and giving any relevant background information and the impact or the implications for the involved business unit, the personnel and the entire organization. Where possible, possible recommendations and alternative courses of action should be provided and their possible implications. All these steps cause unnecessary delays at could be detrimental to the organization in the long run. Therefore, training compliance officers as well as empowering them can help save the reputation of the firm in time. In addition, this could also help save an imminent catch on of the firm like in cases when employees decide to disregard the set regulations in the operations.ReferencesScanlan, A. and Purdon, C. 2006. Compliance Program Management for Financial Services Institutions in forthwiths Environment. Bus. Law., 62 p. 735.MAS Annual Report 2011/20 (www.msa.gov.sg)Source document