What does Compliance mean?
Its appropriate to understand the import, impact and intent of the term “compliance”. The Merriam-Webster Dictionary defines “compliance” as “
(a) the act or process of complying with a desire, demand, proposal, regimen or coercion,
(b) conformity in fulfilling official requirements.”
In banking parlance, compliance alludes to adherence to a set of laws, regulations, rules, practices, related Self-Regulatory Organization (SRO) standards, and codes of conduct applicable to the various banking activities. To my mind, banking compliance can be broadly segregated in three parts-
a) Internal compliance, including SRO standards : The internal compliance means adherence to the internal policies formulated by the Board based on which an internal governance framework would have been laid down. Thus, internal compliance would be applicable to all employees of the bank.
b) Regulatory Compliance
c) Legal Compliance.
The regulatory and legal compliance, on the other hand, is applicable to the bank as a whole- the institution itself would be responsible for ensuring adherence to the extant regulatory instructions and above all, for abiding by the laws of the land, both in letter and spirit.