Compliance risk is the risk of legal or regulatory sanctions, material financial loss or loss of reputation a UCB may suffer as a result of its failure to comply with laws, regulations, rules, and codes of conduct applicable to its activities, the RBI said in a circular.
The RBI said as part of the overall structure for corporate governance, the compliance function serves a critical role.
Therefore, it has been decided to introduce certain principles, standards and procedures for Compliance Function in UCBs, keeping in view the principles of proportionality, it added.
“Compliance Function shall ensure strict observance of all statutory and regulatory requirements for the UCB, including standards of conduct, managing conflict of interest, treating customers fairly and ensuring the suitability of customer service,” it said.
The UCB, it said, should lay down a board-approved compliance policy clearly spelling out its compliance philosophy, expectations on compliance culture, structure and role of the Compliance Function, and the role of the chief compliance officer (CCO).
The CCO should be appointed for a minimum fixed tenure of not less than 3 years.
However, in exceptional cases, the board/ board committee may relax the minimum tenure by one year, provided appropriate succession planning is put in place, the circular said.
The Policy shall be reviewed at least once a year, the circular added. PTI NKD NKD ABM ABM
