Chapter 28: Compliance Governance Structure (CAIIB – Paper 1)
1. What is the primary purpose of a bank's compliance governance structure?
A. To increase profitability at all costs
B. To delegate all regulatory responsibilities to junior staff
C. To ensure adherence to laws, regulations, and internal policies
D. To manage only customer complaints
A compliance governance structure ensures that a bank follows applicable laws, regulations, and internal policies, thereby managing risks and maintaining trust with stakeholders.
2. Who holds ultimate responsibility for compliance in a bank?
A. Branch Managers
B. The Board of Directors and Senior Management
C. Compliance Department staff only
D. Customers
Ultimate responsibility for compliance rests with the Board of Directors and Senior Management, who must ensure that policies, procedures, and controls are effectively implemented.
3. In a typical compliance organisational structure, who reports directly to the board regarding compliance matters?
A. Branch staff
B. External auditors only
C. Customer service department
D. Chief Compliance Officer (CCO)
The Chief Compliance Officer (CCO) typically reports directly to the board to ensure independent oversight of compliance matters.
4. Which of the following is a key responsibility of senior management in compliance governance?
A. Establishing effective policies and ensuring implementation across the bank
B. Approving customer loans only
C. Filing tax returns personally
D. Conducting internal audits independently of compliance
Senior management is responsible for setting up effective policies, ensuring proper implementation, and promoting a culture of compliance across the organization.
5. What is the role of the compliance committee in a bank?
A. Approving branch budgets
B. Marketing and sales strategy formulation
C. Monitoring adherence to laws, regulations, and internal policies
D. Hiring staff for operational roles
The compliance committee monitors adherence to laws, regulations, and internal policies and reports significant issues to senior management and the board.
6. In a bank, the corporate office compliance structure primarily ensures:
A. Day-to-day branch cash operations only
B. Centralized oversight and uniform implementation of compliance policies
C. Only marketing strategies of branches
D. Personal investment advice to employees
The corporate office compliance structure provides centralized oversight to ensure uniform implementation of policies and regulatory requirements across all branches and departments.
7. Which functional department typically handles compliance monitoring and reporting in a bank?
A. Human Resources
B. Marketing
C. IT Helpdesk
D. Compliance Department
The Compliance Department is responsible for monitoring adherence to regulations, internal policies, and reporting compliance issues to senior management and the board.
8. Functional departments in a bank support compliance by:
A. Implementing policies and procedures relevant to their specific operations
B. Only approving marketing campaigns
C. Managing external audits independently of compliance
D. Handling customer complaints exclusively
Each functional department ensures that policies and procedures related to their area of operation are followed, supporting the overall compliance framework.
9. Who is responsible for coordinating compliance activities between corporate office and branches?
A. Branch Cashier
B. Marketing Head
C. Compliance Officer / Regional Compliance Head
D. IT Administrator
The Compliance Officer or Regional Compliance Head acts as a link between corporate office and branches to ensure consistent application of compliance policies.
10. Why is it important for functional departments to have defined compliance responsibilities?
A. To allow branches to create their own independent policies
B. To ensure accountability and reduce regulatory risk
C. To focus solely on customer acquisition
D. To avoid reporting to senior management
Defined compliance responsibilities in functional departments ensure accountability, proper monitoring, and reduction of regulatory risks for the bank.
11. What is the primary objective of compliance structure at field level in banks?
A. To independently design corporate policies
B. To focus only on customer service issues
C. To implement corporate compliance policies and monitor adherence locally
D. To approve branch budgets
Field level compliance ensures that corporate compliance policies are implemented at branches and regional offices, monitoring day-to-day adherence and reporting issues to higher management.
12. Who typically ensures compliance at the branch level?
A. Regional Marketing Head
B. Chief Financial Officer
C. IT Administrator
D. Branch Compliance Officer / Branch Manager
At the branch level, compliance is overseen by the Branch Compliance Officer or Branch Manager, who ensures local adherence to policies and reports significant issues upward.
13. How does a regional compliance structure support field operations?
A. By creating independent policies for each branch
B. By providing guidance, monitoring, and ensuring uniform compliance across branches in the region
C. By handling only customer complaints
D. By approving personal loans for employees
The regional compliance structure acts as a link between corporate office and branches, providing guidance, monitoring, and ensuring uniform compliance across all field operations.
14. Which of the following is a key responsibility of field-level compliance officers?
A. Reporting local compliance breaches to regional or corporate compliance
B. Designing corporate-wide compliance policies
C. Managing corporate budget allocation
D. Approving new products independently
Field-level compliance officers are responsible for monitoring local adherence to policies and promptly reporting any breaches to regional or corporate compliance authorities.
15. Why is it important to have a defined compliance structure at field levels?
A. To allow branches to operate without oversight
B. To reduce corporate office involvement completely
C. To ensure consistent implementation of policies and timely detection of breaches
D. To focus solely on marketing initiatives
A defined field-level compliance structure ensures consistent policy implementation, timely detection of breaches, and proper escalation to maintain regulatory compliance.
16. What is the primary purpose of internal controls in a bank?
A. To replace external audits completely
B. To safeguard assets, ensure accuracy of records, and promote operational efficiency
C. To increase the number of branches only
D. To handle marketing campaigns
Internal controls are designed to safeguard assets, ensure the accuracy of financial and operational records, and promote operational efficiency within the bank.
17. Which of the following is a key component of internal controls?
A. Only customer service improvement
B. Branch expansion strategy
C. Segregation of duties, authorization, and reconciliation procedures
D. Employee social events planning
Key components of internal controls include segregation of duties, proper authorization, reconciliation procedures, and monitoring to prevent errors and fraud.
18. Why is internal control considered important for regulatory compliance?
A. It helps ensure adherence to laws, regulations, and internal policies
B. It increases branch profits automatically
C. It reduces the need for senior management oversight completely
D. It focuses solely on marketing compliance
Internal controls help ensure that the bank complies with applicable laws, regulations, and internal policies, reducing regulatory risk.
19. Which of the following best describes the relationship between internal controls and risk management?
A. Internal controls are unrelated to risk management
B. Risk management replaces the need for internal controls
C. Internal controls focus only on profit generation
D. Internal controls are a key component of risk management to identify, prevent, and mitigate risks
Internal controls are integral to risk management, helping banks identify, prevent, and mitigate operational, financial, and compliance risks.
20. Who is ultimately responsible for ensuring effective internal controls in a bank?
A. Only branch staff
B. Board of Directors and Senior Management
C. Only internal auditors
D. Customers
The Board of Directors and Senior Management hold ultimate responsibility for establishing and maintaining effective internal controls in the bank.
