Internal Controls

Internal controls are the systems through which the bank provides and ensures continuing compliance. These generally consist of sound organizational structures, comprehensive policies and procedures, and adequate training.

Organizational Structure

The ability of the compliance committee to implement the compliance program, administer it, and institute effective corrective action depends on that committee's authority, independence, and role, as perceived by other employees, as well as on the support provided by the board and senior management. The compliance committee should be able to:

Perform audits across departmental lines.

Access all operational areas.

Ensure that line management implements corrective actions/changes in policies and procedures.

Policies and Procedures

An effective compliance program includes compliance policies and procedures. Policies provide the framework for the bank's procedures and a source of reference and training for the bank's personnel. Comprehensive and fully implemented policies communicate clearly with all bank personnel the board's and senior management's commitment to compliance. Procedures must be developed to implement the bank's policies. Generally, the degree of detail, specificity, and formality will vary according to the complexity of the issues or transactions addressed by such procedures. Policies and procedures at the bank must be designed to provide personnel with enough information to complete a normal transaction, to the best of management's abilities and taking in consideration the size of the bank. These policies and procedures may include appropriate regulation definitions, sample forms and instructions, and — where appropriate — directions for routing, review, retention, and destruction of the transaction documents.