Bank Compliance Management Research Paper

5. Compliance Management

5.1. Preamble

Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to its banking activities. Compliance laws, rules, and standards typically include specific areas such as the prevention of money laundering and terrorist financing and may extend to tax laws that are relevant to the structuring of banking products or customer advice.

Bank of Abyssinia S.C (BoA) as a Bank is committed towards best practices for its clients and stakeholders. In this regard, the Bank compliance management function strives

The complexity of transactions and the huge volume of trade flows can hide individual transactions and help criminal organizations to transfer value across borders.

BoA today has maintained correspondent bank accounts with well known 10 international foreign banks operated in USA, EUROPE, MIDDLE EAST, AND AFRICA and Relationship Management Administration (RMA) agreements with more than 282 international commercial banks all over the world as well as 8 money services business.

During the reporting period, the RCMD has responded questionnaires and provided various information and copies of documents related to anti-money laundering, countering financing of terrorism and sanction to 14 correspondent banks &/or relationship entities and 3 money services business as well as updated the Bank’s information on Bankers Almanac (Accuity) platform. Furthermore, the division processed and delivered the three monthly Western Union transaction monitoring reports to Western Union money service business.

5.4. Know Your Customer (KYC) and Customer Identification & Verification (CIV)

The bank while opening different accounts collects documents to identify and verify the customer as required under the laws to demonstrate that it has performed the existing KYC procedures. The objective of the KYC (Know Your Customer process) is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities.

The customer on-boarding requirements for the Bank are governed by Ethiopian legislation and are further guided by international standards such as the FATF recommendations and Basel Committee on Banking Supervision (“BCBS”) Guidelines. The legislation and recommendations aim to establish the best possible framework for FIs to obtain and retain customer information.

As customer on-boarding and CIV is such a critical element of the AML, CFT and Sanctions risk management approach, RCMD visited 10 branches based on EFIC Directives, BoA retail banking procedure, FATF recommendations to determine the quality of the on-boarding process and the customer CIV files. Accordingly, the RCMD identify and measure the possible compliance risks and also has given appropriate recommendations for rectification.

5.5. BoA’s Compliance with NBE’s Directive on Branch