Compliance

The purpose of the compliance function is to assist in managing its compliance risk, which can be defined as the risk of legal or regulatory sanctions, financial loss, or loss to reputation a bank may suffer as a result of its failure to comply with all applicable laws, regulations, codes of conduct and standards of good practice.

Compliance risk is sometimes also referred to as integrity risk, because a bank's reputation is closely connected with its adherence to principles of integrity and fair dealing. Banking supervisors must be satisfied that effective compliance policies and procedures are followed and that management takes appropriate corrective action when breaches of laws, rules and standards are identified.