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How are Banks Audited to Ensure Compliance?

Strict Regulations for Banks to Ensure Safety

Banks provide an important service to the people. These financial institutions are responsible for managing our finances and keeping hold of our money for us. Since they keep hold of sensitive financial data of the people, they are required to follow strict regulations to ensure its safety. With banks now using online technology for providing its banking services to the people, the data security risks have become even greater. This has created the need for stricter regulations and for the banks to comply with them. Banks that don’t comply with these regulations are reprimanded and lose their approval rating among the people. Visit Credicorp Bank to get the best banking services that are tailored to your specific needs. 

What Can Banks Do to Ensure Compliance?

For a bank to ensure compliance with the banking regulations, it needs to have a robust system of checks and balances. At each step of the way, the banks should try to maintain compliance with the industry practices and regulations. However, simply doing just this is not enough. A bank needs to make sure that its regulatory compliance is properly tested and vetted by a third party. Only after doing this, would the bank be able to ensure full compliance with the banking industry regulations. This regulatory compliance testing can only be achieved by having an audit which is commonly termed as a compliance audit. 

What Happens in a Bank Compliance Audit?

A bank compliance audit is an important requirement for any bank. It involves the systemic checking of a bank’s compliance with industry practices. Bank compliance audits are performed by external regulators and auditors that belong to a third party. It is the auditor’s duty to assess whether the bank is complying with the regulations set by the banking industry or not. The following are some of the tasks that are a part of a bank compliance audit. 


 Checking of Transactional History

The auditor is going to check the transactional history of the bank and make sure that everything has been done as per the guidelines provided by the banking industry. The bank would have to ensure that the transactions are transparent and nothing is left in the dark. The auditor will sift through the entire transactional history so it is important that the bank provides full disclosure. Usually the bank will be provided some time to get the transactional history in order for the auditor to check it. 


Checking of Records

Auditors check the records and documents maintained by the bank as well during a compliance audit. Banks are required to keep hold of the records and present them when asked for by the auditor. Failure to maintain the records in a systemic manner would mean that the bank wasn’t able to ensure compliance to this industry requirement. So, it is in the best interest of the banks to ensure that they keep track of the documents and records and remain in a position to deliver them to the auditor as and when required.  


 Assessment of Regulatory Compliance

The auditor will be assessing the regulatory compliance of the bank too. This would include checking of the banks internal policies and working principles and seeing to it that they fall under the regulations of the banking industry. The auditors can ask questions in this regard from the board members of the bank to even the regular employees of the bank. So, everyone should be ready to answer their questions.   


 Assessment of Risk Management Strategy

During a bank compliance audit, the risk management activities of the bank are also scrutinized and assessed. The auditors will check whether the bank is actively participating in mitigating the risks that are being faced by them or not. The bank must have a risk management strategy in place and must be able to satisfy the auditors that it is working as per the guidelines of the banking industry regulations. Ensuring this is critical for the banks or they won’t be considered in compliance with the industry regulations.    


 Checking of Data Security Practices

Data security practices are also now checked and vetted by regulators when doing a bank compliance audit. The IT department of the banks are visited by the auditor in this phase and are asked to demonstrate what they are doing to ensure the security of the data of their customers. The data security practices of the bank should be in compliance with the industry standards or the bank won’t be able to get the compliance certification from the auditor.


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