Federal Bank aims at a benchmark compliance model
The bank’s compliance team is working on evolving a new paradigm in compliance model:
The pandemic has severely affected the compliance function of banks. The initial days were quite challenging for the whole team at Federal Bank as it was dependent on office desktop systems, paperbased documents and physical meetings. Sunilkumar KN, Chief Compliance Officer at the bank explains that during the lockdown, the bank prompted the team to switch to WFH. Also, there were challenges in regulatory interactions. The conduct of annual audit by the regulator was difficult, with part of the activity being done off-site and the onsite activity also getting delayed. And balancing the need for enhanced diligence with welfare of team members and families was a formidable challenge the bank faced.
ACCESSES WITH CONTROLS
The compliance team made several changes - physical meetings were replaced with Microsoft Teams based meetings; paperbased documents were avoided wherever possible, making use of e-mail for routine communication and digital applications for approvals. The bank also came up with a ‘Work From Anywhere’ policy where all the necessary accesses for IT applications were put in place with adequate controls. During the second lockdown, all the team members could work from home and most of the activities could be performed seamlessly.
AGILE WORKING MODE
All business continuity plans had to be reviewed and reworked. Sunilkumar says going forward, the bank would like to provide an agile mode of working for all the team members with flexibility of working either from the office or home, but still keeping their work commitments and schedules.
WFH r e q u i r e d mor e frequent meetings. This contributed to making compliance more efficient and effective. Says Sunilkumar: “One key change we have brought in was the introduction of daily meetings of 45-60 minutes, where all the key aspects of work and regulatory circulars
were discussed involving all members of the team. In fact, it turned out to be a blessing in disguise because it changed the productivity of the team.”
The team also made a difference in i ndustry interaction. “Last year, we conducted a number of webinars coordinating with the HR department of the bank, i nviting experts having varying exposure in banking, regulations, foreign exchange, digital innovation, etc. These programs, named ‘DAKSHA series Webinars’, had enthusiastic participation from top management and members of business, compliance and control teams,” says Sunilkumar.
NEW APPLICATIONS
The changes that the bank made to compliance applications were part of its efforts to improve the compliance monitor i ng a nd r i s k management processes. Sunilkumar says the bank made considerable changes to make these effective and efficient, also fine-tuning the work-from-home paradigm. It also involved a self-testing process, wherein every branch and department validated the level of compliance by conducting tests based on data sets and a standard questionnaire. The bank also framed a robust compliance risk assessment program and quality assurance program to rate the compliance risk and ensure sustenance of compliance standards.
Sunilkumar says the bank also added new features to existing compliance applications. It refined the compliance risk monitoring process comprehensively to cover all areas of business and products. Further, a standard process of compliance vetting was introduced.
APPLICATION IN PIPELINE
The bank is now embarking on a journey of tech-based innovations to rewrite its compliance controls and standards. “The Continuous Control Monitoring (CCM) is a new technological solution leveraging data analytics and AI,” says Sunilkumar, adding: “The solution will be an industry first and will help multiple control functions such as compliance, audit, vigilance and compliance risk assurance to comprehensively monitor scenario-based alerts on any transactional deviations within 24-48 hours.”
The team is also working on a technology and functional refresh for AML/financial crime compliance areas - a system that will provide an exhaustive list of management and screening capabilities of individual transactions, comparable with the FATF recommendations and international standards. The bank is also developing a comprehensive obligation register, covering more than 80 statutes and 30 regulatory authorities/ industry bodies.
TARGETS AND PLANS
Sunilkumar says the team is targeting to complete a major part of the CCM and AML initiatives well before the end of the financial year. “With that we can proudly present our compliance model as benchmark for the industry,” says he.