1. Compliance Risk Management
Nina A. Nichols
Assistant Director, Compliance Risk
Division of Banking Supervision and Regulation
Board of Governors of the Federal Reserve System
AIBA Quarterly Meeting
June 12, 2008

2. Federal Reserve Risk-Focused Supervision
SR 95-51, Rating the Adequacy of Risk Management Processes and Internal Controls at State Member Banks and Bank Holding Companies (November 4, 1995)
Credit, Market, Liquidity, Operational, Legal, Reputational Risks
Elements of Risk Management
Board and management oversight
Policies and procedures
Risk measurement, monitoring, and MIS
Internal controls
Consistent with evaluation of U.S. branches and agencies of foreign banks
SR 04-18, Bank Holding Company Rating System (December 4, 2004)

3. Risk-based Supervision for Compliance
SR applied with flexibility to match size, scope and complexity of operations
BSA/AML
FFIEC BSA/AML Examination Manual

4. Principles of Compliance Risk Management
Basel Committee, Compliance and the compliance function in banks, 2005
Common principles for compliance risk management
Stages of implementation in different jurisdictions
Varying levels of detail in statements of supervisory expectations across jurisdictions

5. Common Interpretive Questions; Emerging Issues
Responsibilities of Board and senior management
Compliance function
Status
Authority
Independence
Monitoring and testing
Assessing compliance risk
New business compliance controls
Outsourcing arrangements for compliance

6. Compliance Risk Management and Evolution of ERM
Compliance risk management within ERM framework
Firm-wide approach
Size and complexity of organization
Nature of compliance risks across:
Legal entities
Lines of business
Jurisdictions
Compliance function
Implementation of program
Oversight

7. Compliance Risk Management for International Operations
Program designed to ensure compliance in different jurisdictions of operation
Compliance function reflects size and complexity of operations, globally and within particular jurisdictions
Some flexibility regarding structure of function and oversight mechanisms
Role of directors and senior management