A new resolution, published by the institution last August, regulates the compliance policies to be adopted by financial institutions and those authorized to operate by BACEN.
On 28 August, the Brazilian Central Bank (BACEN) published
Resolution 4,595, which provides for compliance policies to be
adopted by financial institutions, and those who are authorized to
operate by BACEN. The new resolution mandates that these companies
must maintain a compliance policy that is compatible with their
business and, in particular, ensure the effective management of
compliance risks.
It should be noted that this new resolution further deepens
the subject addressed by Resolution 4,567, which came into force at
the end of July. It already improved the existing compliance
standards, requiring the creation of exclusive and independent
channels for reporting evidence of fraud or illicit acts. At the
time, we explained the impacts of this resolution here.
Important points
With Resolution 4,595, BACEN goes beyond the implementation of the
complaint channel. Financial institutions are required to implement
their compliance policies by 31 December 2017 and ensure their
management. This means not only its development, but also the
guarantee, through reports to be presented to the Central Bank, of
its effective implementation and results. In addition to this
point, highlighted in Article 2, others also apply. In total, the
resolution contains 14 articles, and some are worth mentioning:
- Article 5 makes clear that the compliance policy should define the allocation of sufficient resources for the performance of compliance activities;
- The article also notes that the policy should define the channels of communication with the officers in charge (board of directors, management, and audit committee) to report the outcome of compliance activities. This means the implementation of a consequence management of the measures taken;
- Another obligation, under Article 7 of the resolution, requires the compliance officer of the financial institution to prepare a report (at least one per year), summarizing the results of the compliance activities conducted. The Resolution did not provide a report template, but this is an issue that TMF Group will be monitoring closely to provide information as soon as the definitions are released;
- The article also notes that the management of these policies, including the production of the required reports, can be carried out by third parties. To avoid conflicts of interest, the remuneration of these partners cannot be tied to the results obtained by the business areas.
The new resolution does not list the sanctions applicable
in case of non-compliance with the rules, but they will certainly
come; because this is applicable to companies that have BACEN's
authorization to operate, it is possible that these sanctions may
even include suspension of this authorization.
It's complex, get expert help
In practice, Resolutions 4,595 and 4,567 together,
determine that financial institutions and other organizations
authorized by BACEN have an exclusive complaint channel, with a
policy for handling these complaints and reports that account for
the implementation of these policies and the results
obtained.
That is not something simple and, more than that, it is not part of
the core business of these institutions.
According to Resolution 4,595, so far, the Central Bank should only
receive information about how much companies are investing and
dedicating themselves to the issue of compliance. Most likely, in
the future, this will have even more complex developments –
hence the importance of relying on a specialist partner right
away.
These issues are closely related to the work performed by TMF
Group's compliance team, which is fully capable of covering all
the demands made by the Central Bank so far, as well as the ones
coming up.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.