Answer: institutions operate in a dynamic environment influenced by industry
consolidation, convergence of financial services, emerging technology, and market
globalization. To remain profitable in such an environment, financial institutions
continuously assess and modify their product and service offerings and operations in the
context of a business strategy. At the same time, new legislation may be enacted to
address developments in the marketplace.
All these forces combine to create inherent risk. To address this risk, a financial
institution must develop and maintain a sound compliance management system that is
integrated into the overall risk management strategy of the institution. Ultimately,
compliance should be part of the daily routine of management and employees of a
financial institution.
This chapter discusses the elements of an effective compliance management system --
board of directors and management oversight, the compliance program, and the
compliance audit.
COMPLIANCE MANAGEMENT SYSTEM
A compliance management system is how an institution:
¾ learns about its compliance responsibilities;
¾ ensures that employees understand these responsibilities;
¾ ensures that requirements are incorporated into business processes;
¾ reviews operations to ensure responsibilities are carried out and requirements are met;
and
¾ takes corrective action and updates materials as necessary.
An effective compliance management system is commonly comprised of thre
Explanation:
