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Banks ‘paid $250bn for non-compliance’

Bahrain Business
Tue, 06 Feb 2018
By Avinash Saxena

MANAMA: Global banks have paid more than $250 billion in fines and penalties for non-compliance since the global financial crisis of 2008, Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj said.

Addressing participants in the 12th Annual Mena Regulatory Summit at The Ritz-Carlton Bahrain yesterday, he said the cost of non-compliance was not just monetary; it was also economic and social.

Stating that global banks have had to make major strategic organisational and governance changes in the last 10 years, Mr Al Maraj said this led to hundreds of thousands of employees losing their jobs.

“Banks had to re-strategise their businesses, often resulting in withdrawing from certain markets and business segments in order to de-risk the business and to focus on their core markets.

“In fact, de-risking, which has created its own issues of non-inclusiveness, is a result of failure in compliance.”

He said it was clearly the failure of the leadership that did not comply with rules, regulations and basic business ethics.

“Ethics, trust, integrity and compliance are essential for a safe and sound operating environment even after tightening of rules and enhanced regulatory engagement across the board.

“Promoting a culture of compliance at all levels is a complex and time-consuming task. It has to start from the top,” he said.

“The leadership of the institution – specifically the board and the CEO – need to walk the talk.

“Their actions must reflect the institutional values, even in matters which are grey areas.

“This may mean withdrawing from or declining some transactions or businesses,” said the CBB governor.

Talking about key initiatives by the regulator, Mr Al Maraj said a new financial penalties methodology for violations of non-date sensitive requirements will soon be issued.

“During the first half of this year we are going to issue a new enhancement to rules covering the compliance function requirements including structure, reporting, adequacy of resources and compliance-related roles and responsibilities of the board, senior management and compliance personnel,” he added.

The CBB governor also said the regulator laid a strong emphasis on Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) procedures and had zero tolerance for a lax attitude in that area.

“At the same time, we are also exploring new ways to facilitate banks to reduce their cost of compliance through electronic know your customer (KYC), without compromising on our commitment to following international standards.”

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