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.
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.
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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.