1. www.cls-group.com ® CLS and the CLS Logo are registered trademarks of CLS UK Intermediate Holdings Ltd © 2014 CLS UK Intermediate Holdings Ltd. Corporate Compliance: Compliance Framework and Hot Topics Tammy Eisenberg Executive Director, Corporate Compliance CLS Group March 6, 2014

2. 2 The views represented herein are solely those of the author and do not necessarily represent the views of the CLS Group. Disclaimer

3. 3 At it’s most fundamental, a bank Corporate Compliance program is about ethics and managing conflicts of interest. Put simply, it’s about doing the right thing. What is Corporate Compliance?

4. 4 Elements of a Corporate Compliance Program

5. »How does your organization define “Compliance Risk?” »Basel Committee on Banking Supervision – “Compliance and the Compliance Function in Banks.” »Compliance Risk is the risk of legal or regulatory sanctions, material financial loss, or loss of reputation a bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory standards, and codes of conduct applicable to its banking activities. What is Compliance Risk 5

6. 6 »A Compliance Risk Framework is a tool that identifies, measures, documents and assesses compliance risk associated with a bank’s activities, including: »Development of new products/services »New business practices »New types of business/customer relationships »Material changes to any of the above What is a Compliance Risk Framework

7. 7 »Federal Reserve SR 08-8 “Compliance Risk Management Programs at Large Banking Organizations with Complex Compliance Profiles.” »SEC Release Nos. IA-2204; IC-26299 “Compliance Programs of Investment Companies and Investment Advisers.” »FINRA Rule 3012 “Supervisory Control System.” Expectations of Regulators

8. 8 Board of DirectorsSenior ManagementEmployees Roles and Responsibilities

9. 9 Process

10. 10 Governance

11. 11 Inherent Risk Control Environment Residual Risk Risk Assessment

12. 12 Changes to Inventory of Laws/Inherent Risk Changes to Control Environment Changes to Residual Risk Monitoring and Testing

13. 13 »Ensure understanding of: »Purpose of Compliance Risk Framework »Roles and Responsibilities »Methodologies »Information to be Reported Training

14. 14 Business UnitsSenior ManagementBoard of Directors Reporting and Communication

15. 15 Classifications Type of policy documents Governance Approval process Review process Reporting of violations Training Requirements Format Required content What is a Compliance Policy Framework?

16. 16 Policy Describes how law/regulation/rule/standard applies and the requirements that must be met in order to achieve compliance. Generally, policies must be “reasonably designed” to achieve compliance. Guidelines Additional guidance or specifications underlying the policy Procedure A series of steps taken to accomplish the requirements of a policy or guideline. Describes: who is responsible, what must be done, how the procedure is followed, how often and how the procedure is documented. Types of Policy Documents

17. 17 Compliance Risk Framework (identifies type and severity of risk) Compliance Policy Framework (policy + procedures) Compliance Program Relationship between Frameworks

18. 18 Types of Compliance Policies CODE OF CONDUCT Anti-Money Laundering Supervisory Affairs Records Retention Anti Bribery & Corruption Gifts and Entertainment Information Barrier Policy

19. 19 There are hot topics for almost every kind of compliance policy! Hot Topics

20. 20 Lessons Learned

21. 21 Questions