FAQs on Compliance Functions in Banks and Role of Chief Compliance Officer

The RBI, on September 11, 2020, notified guidelines (‘Compliance Guidelines’) requiring banks to tighten compliance functions with a view to bring uniformity in the approach followed by banks and to align the supervisory expectations on Chief Compliance Officers (‘CCO’) with best practices. The RBI, on February 2, 2021, issued frequently asked questions (‘FAQs’) on the Compliance Guidelines clarifying, amongst others, the following:

i.     Expectations from various Departments / Functions of Banks: The RBI reiterated that compliance is a shared responsibility of the business units of the banks and the compliance function, although different groups / departments in the banks are responsible for complying with different statutory requirements. While the concerned departments of the banks would be held responsible for their respective areas, each staff member and the compliance function should ensure adherence to applicable statutory provisions. Where there are serious gaps in such compliances, the compliance function should take necessary action to correct the compliance culture; and

ii.    Experience: The RBI clarified that the intent behind the requirement of the CCO having overall experience of at least 15 years in the banking and financial services out of which 5 years is required to be in audit/compliance functions in the Compliance Guidelines was that the identified CCO should be a well experienced official who can discharge the mandated functions independently and effectively. The RBI also clarified that if a regional / zonal / business head has the requisite experience on the control functions of the business lines for five years or more, such person would be eligible for the post of CCO.

Published In:Inter Alia - Quarterly Edition - March 2021 [ English Chinese japanese ]
Date: March 31, 2021