The Compliance Function performs a crucial function as a component of the overall framework for corporate governance. In light of the principles of proportionality, specific principles, standards, and procedures have to be followed for the sake of compliance concerning Urban Co operative Banks. Except for Urban Co-operative Banks under All Inclusive Directions (AID), it shall be applicable to all Urban Co-operative Banks under Tier 3 and Tier 4 categories and the Urban Co-operative Banks in Tier 1 and Tier 2 categories shall be governed by the current rules. By no later than April 1st 2023, Tier 4 Urban Co-operative Banks must have implemented a board-approved policy and a compliance function.
Along with internal control and risk management procedures, the compliance function is essential to effective governance. The compliance function is responsible for enforcing that the Urban Co-operative Banks strictly comply with all legal and regulatory requirements, including those relating to conduct standards, controlling conflicts of interest, treating customers fairly, and ensuring the acceptability of customer service. The compliance function shall be responsible for undertaking the following activities:
- Assisting the Board and Senior Management in monitoring the application of compliance policy, including policies and procedures, guidelines from compliance manuals, internal codes of conduct, etc.
- The primary responsibility for determining the level of compliance risk in the organisation. It is necessary to analyse the compliance risks and implement the necessary risk management measures.
- The compliance function must perform adequate and representative compliance testing in order to monitor and test compliance, and the results of the testing must be communicated to Senior Management. Staff accountability will be looked at for serious compliance violations.
- Making sure that the regulatory and supervisory directives of RBI are followed in a timely and sustainable manner, in both letter and spirit. RBI will still demand a successful compliance programme with all Risk Mitigation Plan (RMP)/Monitorable Action Plan (MAP) points being followed within the allotted time frames. RBI may take legal action if RMP/MAP compliance is not satisfactory.
- The staff from operational departments may also use the Compliance Department as a resource when they need clarifications or interpretations of various legal and regulatory requirements.