Rising cost of compliance breaches worries banks

Sustenance of stakeholder value in the nation’s banking sector may remain a pipe dream unless the current rising cost of compliance breaches by banks with its attendant reputation damage is radically tackled.

The Managing Director of Heritage Bank, Mr. Ifie Sekibo, said this during a goodwill message to members of the Committee of Chief Compliance Officers of Banks in Nigeria.

He spoke during the August edition of the committee’s monthly meeting hosted by the bank in Lagos.

The managing director, in a statement by the lender, noted that compliance function had been elevated to play a pivotal role in the sustenance of stakeholder value in the nation’s banking sector.

This, he said, was because compliance risk had become a core risk in banking business, adding that every time a bank paid a penalty for compliance infraction, value was destroyed.

He said, “The business, regulatory and legal landscape around the globe is increasing in complexity while the scrutiny by the banking public, law enforcement agencies and regulatory bodies is intensifying”.

“Meanwhile, financial institutions now have to grapple with the rising cost of compliance breaches and the underlying risk of reputation damage. Banks in particular also have to navigate the proliferation of new regulatory requirements and address stakeholder expectations”.

“I am also not unaware of the giant strides that CCCOBIN has made in assisting to get Nigeria off the Financial Action Task Force Grey List, the introduction of uniform account opening forms in collaboration with the Central Bank of Nigeria and other contributions to policy development especially in the area of AML/CFT; but, there are operational issues that compliance officers need invites to handle to get us to the promised land”.

While identifying internal stakeholder knowledge gap as a great problem besetting the banking sector, Sekibo called on the compliance practitioners to re-examine their relationship with other staff who view compliance professionals and their activities as a pain rather than a value enhancer.

“The failure of all internal stakeholders to recognise that a regime of compliance failure destroys value – and that compliance frameworks around liquidity, credit, operations, treasury and other departments are designed to enhance value – remains a big threat”, Sekibo stated.

Speaking further, he noted that, “It is people and not institutions that fail to comply. The depth of trust deficit existing between compliance officers and the larger staff has some part to play in the people risk and knowledge gap that local and global financial institutions currently face; compliance officers therefore need to do more to reduce this trust deficit to such levels that can promote greater incentive to comply more without coercion”.

Earlier, CCCOBIN Chairman and Chief Compliance Officer of Access Bank, Mr. Pattison Boleigha, pledged the commitment of the body and its members to the task of sanitising the nation’s banking sector in order to deliver maximum value to all stakeholders.