Legal compliance is a fairly straight forward
notion. Bank is legal entity created by law and is bound by variety of rules,
regulations and laws. Non-compliance of the provisions of law is subject to penalty of a
significant magnitude. This is, perhaps, the most beneficial importance of compliance
in a business. No business wants to face criminal charges for not adhering to
the law. There are so many different regulations and laws in our country in regards to how a
business should manage its staff, how our business is handles, how advertising
is handles like recent public announcement to block accounts that triggered panic
among our trusted customers, the rules of engagement, rules on negotiating
with customers be it deposit mobilization or NPA recovery , on employees' salary,
safety rules, and duty to provide decent acceptable workplace to all employees
and product safety and corporate liability. With a proper compliance management
a Bank can stay on the light side of the law.
Executives of the Bank must always make sure
that everything it does is within framework of rules, and all employees act
according to the rules and regulations. The fraud prevention policy of the bank
was loosely defined which doesn’t cover the rules of legal compliance that is
foundation for prevention of mismanagement of Bank resources. The rules & regulations, it is often
argued, represent the will of the society. If the society wants more in the way
of what it expects from banks then the society has the means of making this
known through legislation. At the very least, from this point of view ,
complying with the law is acting as society demands, and a bank so acting is
socially responsible. When a Bank starts facing several court cases, the general
public will lose their trust in the Bank and sales in products and services
will eventually drop. Compliance will ensure that a Bank can uphold a positive
image and build consumer trust. This also helps build consumer loyalty, since
customers are more likely going to return to a service or product from a Bank
they identify as trustworthy. The defenders of this view argue
that a Bank’s legal obligations are its only truly defensible social obligation
given the restricted nature of Bank . It is founded in order to help society by
providing goods, services and jobs. Its aim is to do these as a means to making
a profit from its activities.
There is an obvious sense in which the
position is correct. Clearly, since what is demanded by law represents what the
society demands living up to the rule of laws means that a Bank to that extend
“socially responsible”. But there are three deficiencies with this position, if
taken to be the end of the discussion of our responsibility. The first is that
obeying the provision of law is not as same as obeying the spirit of law, and
it is not clear that it marks the end of the society demands. Many argue that the legalistic approach to
compliance often results in Bank trying to come as close as possible to
infringing the law without actually doing so , if that is to the Bank’s benefit
. And correlate is that the only way one can tell if one has come as close as
possible to the line is to over step it to see if the action is actually an
infringement and it result in legal charges. This legalistic approach to law is
not what most people usually have in mind when they speak of a socially
responsible Bank. The second deficiency is that a Bank may have additional
social and moral responsibility beyond those mandated by law. Bank of Bhutan with outreach to remote areas
is more of a service oriented than the business decision. Third is that we know
morality begins before the law does, and goes beyond what the law may require. This
is both because of lag of law behind morality and because laws may themselves
be immoral or inadequate to protect people’s rights and legitimate welfare.
A
Bank that fulfills regulatory business compliance through successful corporate
compliance management generally gets signed quickly and easily whenever needed.
ADB country office correspondent relationship was quickly singed with best perceived
legal compliance bank in Bhutan . They also pull through incidents like
individual court cases discreetly before it grows into a public concern.
Internal
compliance is also most important indicator for overall health of the Bank.
Internal compliance to safety, wages, employee benefits, compensations, and
employee protection will create a positive environment in the work place.
Employees are more fervent to work when they feel that that they are well
compensated for their efforts and that they are safe within the business’
reach. It is important that internal compliance is adhered to, since it will
ensure that employees are satisfied and that all complains or issues are
monitored and addressed properly before they grow and affect the entire Bank.
However, general perception among us is that Compliance and Risk management activity is seen as trivial function with venial duty in the Bank that does not add value to the growth and profitability. However, survival of fittest is the doctrine of the division to survive in the changing mindset of the environment.
There
will always be set rules to make sure everything is fair and safe for the Bank,
its staff, its consumers, and even its competitors. Bank can achieve all of the benefits and work towards higher productivity
and better market performance. However, I
don’t mean that we should be “ thought
Police” and force employee to feel and act in ways that serve only
organizational needs.
References : De George, R.T. 2010. Business Ethics (7th ed.). Prentice Hall, Upper
Saddle River: New Jersey
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