Compliance – Internal and External Compliance

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What is the advice given by the Basel Committee for Banking Supervision regarding compliance?

Compliance should be handled by middle management.

Compliance is not important for financial institutions.

Compliance should start at the top of the bank. (correct)

Compliance is unnecessary in a corporate culture focused on profitability.

Who is usually responsible for the regulatory supervision of private banks?

Credit unions

Central banks (correct)

Investment banks

Commercial banks

In a corporate culture emphasizing compliance, what should the board of directors and senior management do?

Ignore compliance issues.

Outsource all compliance tasks.

Delegate compliance responsibilities to lower-level employees.

Lead by example in complying with regulations. (correct)

What does compliance mean in the context of banks and financial institutions?

Acting according to rules and regulations. Signup and view all the answers

How should a bank view compliance within its business activities?

As an integral part of the business activities Signup and view all the answers

What role does internal compliance play within a bank?

Ensuring that the bank complies with its own regulations Signup and view all the answers

What does compliance risk refer to according to the Bank for International Settlements?

Risk of legal or regulatory sanctions, financial loss, or reputation damage due to failure to comply with laws, rules, and standards Signup and view all the answers

What does the European Central Bank (ECB) aim to correct through its updated guidance on the internal governance of banks?

Weak or superficial internal governance during the financial crisis Signup and view all the answers

How is compliance risk sometimes referred to as?

Integrity risk Signup and view all the answers

What is the purpose of the compliance function within a bank according to the Bank for International Settlements?

Assist the bank in managing compliance risk Signup and view all the answers

Why must banking supervisors ensure that effective compliance policies and procedures are followed and that corrective action is taken when breaches are identified?

To maintain trust in the banking system and protect stakeholders' interests Signup and view all the answers

What is one consequence of a bank failing to consider the impact of its actions on shareholders, customers, and employees as highlighted in the text?

Significant adverse publicity and reputational damage Signup and view all the answers

What is the primary purpose of addressing the potentially detrimental effects of poorly designed internal governance arrangements?

To enable competent authorities to supervise and monitor internal governance adequacy Signup and view all the answers

What does KYC stand for in the context of financial regulations?

Know Your Customer Signup and view all the answers

According to SWIFT, what are the three key steps involved in KYC procedures?

Establish customer identity, understand customer activities, assess money laundering risks Signup and view all the answers

Which aspect of financial regulation does compliance with AML and CFT regulations fall under?

Conduct of business rules Signup and view all the answers

What is the role of external agencies like central banks in regulating banks?

Supervising financial stability in markets Signup and view all the answers

Why is it important for financial institutions to comply with prudential requirements?

To protect consumer rights Signup and view all the answers