“The Compliance Function in Banks and the Need for Increasing and Strengthening its Role - Lessons Learned from Practice”

Abstract

Abstract

The environment in which banks operate requires familiarity with a growing number of techniques and regulations, as well as increasing attention to risk management policy. The following trends have been noticeable in recent years:

diversification of business lines within large groups

increase in the range of products on offer for the various categories of customer;

growth of complex transactions;

widening of the geographical area in which institutions are operating and accepting risks;

fiercer competition among institutions, resulting in further profitability constraints.

The overall outcome has been an increase and diversification of the risks incurred by institutions, against a background of continually evolving legislation. As a consequence, institutions are required to exercise a very high degree of vigilance, so as to ensure that their operations comply with the relevant rules and standards.

This paper focuses on compliance risk. First it describe the definition of this risk and the regulatory framework in place dealing with this risk in Albania Banking System. Also are described main principles on the subject of compliance from best practices. It then looks to existing practices in banks and the role of different Bank Bodies and structures involved in governing the compliance risk. Finally in the light of these practices are identifying some moments how systems for controlling this type of risk might be improved.

Keywords: Compliance risk; Governance of compliance risk; Organizational independence of compliance risk.