Compliance Management System: An Overview


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The objective of financial institutions is to overcome setbacks which arise along their path to success. They are working in a dynamic environment which is influenced by emerging technology, globalization of markets, consolidation of industries and convergence of financial services. This is why financial institutions are constantly employing business strategies to modify their products and improve their offer to customers.

To achieve a good stand in the marketplace, there is need for best practices which also include compliance. Therefore, there is a compliance management system which has been enacted to assist financial institutions. This system must be integrated into the risk management strategies of the financial institution. Compliance must be introduced to employees as a daily routine in management of the financial institutions.

Purpose of a Compliance Management System

The main purposes of ensuring best practice by implementing a compliance management system include the following:

  • Distribution and enlightenment about compliance responsibilities
  • Increased understanding of employees about their responsibilities
  • Adequate incorporation of requirements into business processes
  • Assessment of operation of responsibilities to ensure fulfillment of requirements
  • Ensuring updates of materials and accessories necessary for the business institution
  • Ensuring corrective action is taken when and where necessary

Components of Compliance Management System

There are three elements of compliance management system, these are:

  • Compliance Board and Management: These overlook the entire process of compliance. There are some key functions of the board and management.
    • Express clear expectations about compliance as a best practice
    • Introduce clear compliance policies
    • Assign a responsible and authoritative person to ensure compliance
    • Allocate resources necessary for best practices
    • Ensure regular compliance audits
    • Provision of reports on various aspects of the financial institution as the need may be
    • Compliance Program: This is a set of assessment criteria which help in assessing employee performance. In other words it is best described as a business plan. There are some important components of compliance programs:
      • Compliance procedures and policies surrounding them
      • Monitoring of the various processes
      • Response to complaints by customers
      • Compliance Audit: There is need for best practices to eliminate litigation and other fraudulent practices from occurring in any financial institution. Therefore audits are necessary to evaluate productivity of the institution. The main areas of focus of compliance auditing include the following:
        • Experience and expertise of employees
        • Organization compliance function as a whole
        • Transactions
        • Complications with products
        • Customer service
        • Information of number and type of branches of the financial institution
        • Number of employees in each branch
        • Compliance with documentation

Compliance management systems are important in order to implement and maintain best practices. Additionally, there are software applications which have been designed to assist with compliance management.

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