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Compliance

Report

The regulatory landscape has changed significantly over the years with a

swathe of new legislation being introduced annually.

The bank ensures the continuous up-skilling of compliance personnel in

order to facilitate capable and exceptional service delivery.

The primary role of Al Baraka Bank’s compliance function is to monitor

regulatory and reputational risk.

Regulatoryriskisunderstoodtobetheriskthatthebankcouldbeexposed

to penalties and sanctions for not complying with statutory, regulatory

andsupervisoryrequirementsimposedbytheSouthAfricanReserveBank

and any other regulatory bodies by which Al Baraka Bank is regulated.

Reputationalriskistheriskthatthebankcouldbeexposedtonegative

publicity resulting from a contravention of laws applicable to the bank.

The compliance function sets out to actively assist management in

complying with both the letter and spirit of the law and supervisory

requirements. The compliance officer performs under an authority

delegated by the board, in terms of a board-approved compliance charter

andenjoysunrestrictedaccesstothechiefexecutive,theauditcommittee

and the chairman of the board.

Updates or reports are regularly submitted to the audit committee, board

andtheSouthAfricanReserveBankregardingmattersofcompliance.There

were no material issues of non-compliance which had to be reported during

the2013financialyear.

SignificantregulatorydevelopmentswhichimpactedonAlBarakaBank

during the period under review included the following:

• Anti-moneylaunderingcontrolandcombatingof

terrorism legislation

 Withlong-standingproceduresandpoliciesinplace,thebankenjoys

a systematic approach to detecting suspicious activity and reporting

such transactions, in the prescribed format, to the authorities. There

have been significant enhancements to technology related to anti-

money laundering and terrorist detection and the bank continues to

explore all relevant systems and processes to assist in this function.

The bank’s focus on compliance continues being maintained by

dedicated branch staff, the anti-money laundering officer and

compliance officer.

• FinancialAdvisoryandIntermediaryServicesAct(FAISAct)

Al Baraka Bank’s licence allows for the implementation of various

activities designed to ensure compliance with the Act. These include:

 • Theidentificationandappointmentofadditionalrepresentatives,the

establishment of training requirements and the updating of the

required register;

 • Areviewofprocesses,communication,promotionalandother

materials to align with the requirements of the Act and codes of

consumer protection;

• Theup-skillingofstafftomeetthequalificationrequirementsofFAIS;and

 • Theupdatingofthebank’sFAISpolicyandproceduredocumentas

and when required.

• HomeLoanandMortgageDisclosureAct

This legislation was introduced to level the playing fields in respect of

access to residential property finance by formerly disenfranchised

 membersofoursociety.Inthisregard,extensivesystemchangeswere

 necessitatedbytheAct.Furtherchangesinreportingrequirements

were introduced during the period under review by the Office of

 DisclosureintheDepartmentofHumanSettlements.

This, in turn, necessitated further extensive enhancements to the

 bank’ssystems.TheOfficeofDisclosureisfurnishedwiththerequired

statistics on an annual basis.

• NationalCreditRegulations(NCR)

The bank complies with ethical standards in terms of credit-granting,

 inclusiveofregularcommunicationwithandreportingtotheRegulator.

Policies, processes and documents are also continuously revised to

ensure sufficient alignment with the requirements of prevailing

credit legislation.

• Monitoring

Monitoring is regarded as a vital component of the compliance function

and an extensive monitoring plan has been incorporated into the bank’s

 system.Inaddition,themonitoringoflegislationhasbeengreatly

enhanced as a direct result of the introduction of new compliance

 software.Fourinternalcontrolofficers,oneeachintheDurban

 andCaperegionsandtwointheGautengregion,alsoassistwith

 monitoringcomplianceofvariouselementsoflegislation.Independent

monitoring of legislation is also conducted separately by the

compliance division.

• Newlegislation

 ProtectionofPersonalInformationAct:

 TheProtectionofPersonalInformationAct,whichhasbeensignedinto

law, but which is not yet effective, has resulted in the establishment of

 aprojectteamtodriveitsimplementationwithinthebank.

• ForeignAccountTaxComplianceAct

 TheForeignAccountTaxComplianceAct(FATCA):

This Act imposes a penal withholding tax on foreign entities which

 refusetodisclosetheidentitiesofUSpersonswith

 offshorebankaccountsand/orinvestmentsthatcommit

tax evasion.

 TheAlBarakaBankingGroupinBahrainhasconductedanassessment

 ofFATCAcompliancewithinthegroupandeachofitssubsidiaries

and relevant reports have been issued to each unit. The bank here, in

 SouthAfrica,hasformedataskforceandsteeringcommitteetoensure

 compliancewithFATCA.

• Combinedassurance

The compliance, risk and internal audit divisions have

been putting together an effective bank-wide Combined

Assurance Model. Once completed, this will greatly

assist the bank in streamlining processes and

further enhancing corporate governance.

• Zerotolerance

The bank applies a zero tolerance approach with regard to

non-compliance and prides itself on maintaining a

healthy culture of compliance to laws, rules, standards

and policies.

Wherever possible, the requirement to comply is repeatedly emphasised

with a view to ensuring full compliance with all relevant laws.

The bank also employs a rigorous recruitment policy to ensure

members of staff with the correct skill-sets and attributes, as well as

qualifications, are secured for compliance-related positions. The bank’s

commitment to compliance remains resolute.

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