Compliance Principles

Definition

Compliance Principles is a set of principles articulated by the BCBS in guideline document BCBS 113 and implementation BCBS 142. The guideline defines Compliance Risk in the context of Bank supervision and highlights a number of principles towards effective Regulatory Compliance

Principle 1

The bank’s board of directors is responsible for overseeing the management of the bank’s compliance risk. The board should approve the bank’s Compliance Policy, including a formal document establishing a permanent and effective Compliance Function. At least once a year, the board or a committee of the board should assess the extent to which the bank is managing its compliance risk effectively.

Principle 2

The bank’s senior management is responsible for the effective management of the bank’s compliance risk.

Principle 3

The bank’s senior management is responsible for establishing and communicating a compliance policy, for ensuring that it is observed, and for reporting to the board of directors on the management of the bank’s compliance risk.

Principle 4

The bank’s senior management is responsible for establishing a permanent and effective compliance function within the bank as part of the bank’s compliance policy.

Principle 5

The bank’s compliance function should be independent

Principle 6

The bank’s compliance function should have the resources to carry out its responsibilities effectively.

Principle 7

The responsibilities of the bank’s compliance function should be to assist senior management in managing effectively the compliance risks faced by the bank. If some of these responsibilities are carried out by staff in different departments, the allocation of responsibilities to each department should be clear.

Principle 8

The scope and breadth of the activities of the compliance function should be subject to periodic review by the Internal Audit function

Principle 9

Banks should comply with applicable laws and regulations in all jurisdictions in which they conduct business, and the organisation and structure of the compliance function and its responsibilities should be consistent with local legal and regulatory requirements.

Principle 10

Compliance should be regarded as a core Risk Management activity within the bank. Specific tasks of the compliance function may be outsourced, but they must remain subject to appropriate oversight by the head of compliance