“Consumer Banking” Compliance Assessment Essay

Consumer Banking obligingness AssessmentIntroductionPart unriv eithered The controversyation entities brace evolved trem eradicateously over time. Among the me truly advancements make in the affair concern industry is the return of the creation of different run wholes. One of the approximately important operating units is the complaisance unit. Each operating unit is accorded its give birth mandates and terms of references. This way, each unit is made somehow independent to the effect that it operates within the requirements of the correct organizations goals. In addition, each operating unit is charged with its responsibilities. This is in origin with the purpose of the creation of the unit in the archetypal place. The number of the operating units depends on the classes of functions that be recognis adapted in the entire organization. Furthermore, solely the operating units must be able to yoke with one an an some new(prenominal)(prenominal). This is be ca purpose they be all operating in the ruff interest of the entire organization. If one fails, all the others be moved(p). Therefore, none tummy work in solitude. It is overly important to none that all the units should choose a proper reporting procedure to the direction and finally to the hop on of directors. This is because they be answerable to the display panel. Understanding the nature of each reliance line unit is thitherfore very important. Identification of the elements that constitute the business unit is also important. In this way, we tidy sum appreciate the role of each business unit, how they link to each other and ultimately how they contribute to the success of the entire business. Compliance unit is a very special unit in the monetary industry. It is special because its functions atomic number 18 non business activities but giving advice to other business units on how to improve submission with the rules and politys. Just kindred any other op erating unit, the effectiveness of the conformity unit in discharging its duties is affected by chemical elements much(prenominal) as terms of reference, license, reporting responsibilities, accountability and the feeling of the staff. All these factors together allow see that the unit is successful in its operations or it fails. If it is successful then it is relevant to the entire immobile because it will provide the much regarded assistance. If it fails, the entire firm will standardizedly fail because the abidance risks will ultimately catch up with it while unawargon. It is consequently important to look critically at the factors that determine that the established ossification unit is effective. First and foremost, the terms of reference for the accordance unit predict the effectiveness of the unit. The terms of reference spell issue the specific task that the unit is mandate to verbalise aside. The task should be give tongue to clearly with no ambiguity. For instance, in the case of the conformity unit, the task is to advise the business on how to comply with the flummox rules, regulations, laws and standards. In addition, the conformism incision monitors the business activities to find let out whether they be within the regulations set out. The plane section also monitors the make do of employees to identify actual violations or potential violations of rules, procedures, policies, regulations and standards that ar guidelines in the industry. In a nutshell, the duty of the conformism plane section is to micturate programs that support the firms compliance. It is the duty of the superior management and the business line supervisory programs 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 department will have the backdrop for measuring its performance just like any othe r business unit. The objectives of the department may be with necessitate to how many trainings that will be make at a disposed time, how often surveillance will be conducted, how often policies will be reviewed among others. Lastly, the purpose of existence of the department must be clearly unsounded 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 debar their repercussions as well as their recurrence. There are set guidelines that dictate the operations of the compliance unit. They set apart 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 the compliance unit and the mana gement 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 conduct of the employees, the compliance staff should be given unlimited function to access all the information in all the business units in the firm. The compliance staff should be answerable to the board and the senior management alone. For instance, suppose the business unit in a bank in charge of loan processing is closely to commit a offense with respect to the regulations that govern the operations. A client comes to the office of the business line omnibus in this business unit. It go acrosss that the client is a friend of the conductor. agree to the set regulations governing advancing loans, the client does not meet the criteria. The music director maneuvers and bends the rules in favor of his friend to get the loan. This is an issue that touches on compliance. Without enough authority on the part of the compliance staff to check the conduct of the manager in this business unit, then it would be unfeasible to unearth much(prenominal) a misconduct. 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 tender any direct role in the business, it is therefore termed as a non-business department in the firm. The b oard and the senior management ultimately do compliance with the rules and the regulations starting with the business line managers and the business unit supervisors. thus the supervisors ensure that the employees toe the line in matters that cipher laws, rules, regulations, procedures and the standards of the firm. The compliance department is involved identification of the executable violations of the compliance. If such violations are identified, they should be communicated to the safe psyche. The spot of the compliance department reports directly to the board and senior managers for an prehend consummation to be interpreted. This is because, as we have already mentioned above, it is the function of the board and the senior managers to ensure full compliance in the entire firm. The fact that the compliance department tin enkindle report directly to the board makes it possible to avert a possible crisis that could result from misconduct of employees. Another factor t hat influences the effectiveness of the compliance unit in a firm is the caliber of the staff members. The staff should be well educated in matters that deal the state laws that affect the firm. In addition, they should have a good taking into custody of the rules, regulations, procedures and standards of that firm. This knowledge will help them in making proper decisions when bestowing 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 know what was supposed to done in the first place. The issue of quality of staff arises also in business units that are involved selling process. It is important for the compliance policemans to know the line of products that are being sold and the suppliers who supply them. This is because some business entities enter into agreements with real suppliers.For instance, in a certain business entity in Singapore that sells electronics from Samsung Company, the succeeding(a ) 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 junior compliance officer was inspecting the products in the business stock. He spy both 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 arena requires a fine balance being maintained between over-regulation on the one hand and under-regulation on the other. This is because pecuniary services are delicate matter s that are sensitive to any outdoor(a) changes and the impact of any foreign force is significant in the survival of the pecuniary 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 satisfaction of the consumer of the services and not necessarily the well-being of the financial industry. They are meant to make the financial institutions make grow in terms of their services to their consumers. They are made by external bodies that oversee how the financial institutions operate with respect to the quality of services that the end user receives. For instance, the consumer requires to know the truth about the services that they are about to purchase. Therefore, they require information that is not mis come about. If left to the financial institutions, they would not share the truthfulness of the information they give but the quantity o f 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 respite and maintains its report. This way, it ensures that the business maintains the competitive atmosphere. in like manner much external regulation would have catastrophic effects in terms of survival of financial institutions. Too little regulation would lead to suffering of the consumers. A balance is therefore paramount to be maintained. In Singapore, the Monetary Authority of Singapore (MAS), too being the Central Bank, itis the institution that is charged with the responsibility of regulating all financial institutions including the banking and redress policy sector. The MAS uses many instruments to work financial institutions. First and foremost, it uses Acts of fantan to regulate financial institutions. These Acts constitute the laws that if broken or violated cease to a severe penalty. Among the most important Acts are the Banking Act 1999, the pecuniary Advisers Act 2005 and the Insurance Act 2002. Another instrument that the MAS uses is directives. They directives spell out the legal requirements of the financial institution. Notices are also issued to certain class of financial institutions to impose 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 stipulate institutions. Codes are also applicable because they set out the rules governing the conduct of financial institutions with regard to the performance of certain activities. 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 documents sent to specified financial institutions to pass particular information such as changes that can be anticipated in the near future. Finally, the redress statements of the MAS give more information on the expectations of the MAS on the financial institutions.The MAS has commodious powers to regulate all the financial institutions. Among its powers is the power to approve financial institutions and to retain their operations. The MAS strives so hard to maintain the balance in the regulation matters to forefend over-regulation and under-regulation. Over-regulation hinders the creativity and innovations of the companies. The insurance personnels would feel restricted in the way they do to the external demands if the MAS monitors the companys every move. On the other hand, if the insurance companies were to be left unregulated or under-regulated, the consumers would suffer greatly. T his is because the insurance companies would use any means, 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(prenominal) provisions that dictate how insurance companies should be created and operated. For instance, it is only a person who has been licensed by the Authority under the Act who can carry out an insurance business in Singapore. This provision ensures that all the insurers are recognized by the state of Singapore and that there is no run across 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 criminal offense. The Act also gives guidelines that pertain to how Take-overs should be done 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 w ay, 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 convey important messages . An character 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 enthronisation guarantees with non-linear payouts. Also, on 17th May 2013, a guideline 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 w as issued to all the financial institutions guiding them on how to safeguard the integrity of Singapores financial transcription. 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 advocate the integrity of the financial systems. Notices have also been issued on several make by the MAS the insurance companies. An example of the notice is that issued on 29th November 2013 with regard to the unsecured credit facilities to individuals. This notice provided requirements that an insurer has to comply to when granting unsecured credit facility to an individual. All the above are illustrations where the MAS has regulatory authority over the insurance companies. We have seen that it regulates all the steps of the operations of insurance companies from shaping to matters of takeover and mergers. It is imperative that such a state body like the MAS sho uld have control over financial institutions. The MAS is known to enhance blustering operations in the financial institutions in order to promote conflict and spirit 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 need 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 positive or negative results. As already mentioned, all the financial institutions are supposed to uphold 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-re gulated.Part Three The need to come out Non-routine and Complex Matters to a designated officer would not arise if all the officers are properly trained in traffic with such issues. This statement merely 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 adjacent issues constitute non-routine and complex matters. They include issues such as intentional breaches of regulations, guidelines and policies insider dealing misconduct misrepresentation sign-off new product sign-off advertising and promotional materials by the insur ance institution among others. These are issues that are not covered by the existing 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 steadfast 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 intensify such matters whenever they arise. This process of escalation takes time because the compliance officer has to document all the steps involved 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 empower compliance o fficers 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 exceedrence 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 maneuver 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 to 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. around important is the fact that the supervisor remains responsible for such delegated acti vities. 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 unavoidable action to handle such issues. This requires that the matter should be escalated to the board of directors. originally the board sits to discuss the issue, it may be too late to avert the crisis and enough damage would already have occurred. Moreover, the process of escalation is very lengthy. It starts with the engineer 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 ste ps 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 at hand(predicate) collapse 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 Todays Environment. Bus. Law., 62 p. 735.MAS Annual Report 2011/20 (www.msa.gov.sg) root word document