Circular of the General Office of the China Banking Regulatory Commission on Implementing Requirements on Case Prevention and Control
Circular of the General Office of the China Banking Regulatory Commission on Implementing Requirements on Case Prevention and Control
Circular of the General Office of the China Banking Regulatory Commission on Implementing Requirements on Case Prevention and Control
Yin Jian Ban Fa [2012] No. 127
April 13, 2012
All local offices of the China Banking Regulatory Commission; all policy banks, state-owned commercial banks, joint-stock commercial banks, and financial asset management companies; Postal Savings Bank of China; and trust companies, enterprise group finance companies, and financial leasing companies under the direct supervision of the China Banking Regulatory Commission,
Since the second half of 2011, major or significant cases involving teller operations of banking financial institutions have frequently occurred, attributable directly to risk exposures in teller services, account reconciliation and other processes. Some bank tellers conducted operations in serious violation of rules and procedures, and some offenses were committed under the direct instruction or authorization of principals of basic-level business institutions. These offenses were committed in simple manners, but were difficult to be detected featuring a high success rate, a long duration, and large amounts. Offenses committed by individual offenders have gradually been outnumbered by organized offenses with high technology and assistance on the inside. The occurrence of such offences shows that the constraint, control, management and other fundamental work of banking financial institutions for their teller services and basic-level business institutions remain rather inadequate. Once the tellers of banking financial institutions premeditate any offenses, it will be difficult to detect them in a timely manner through the accounting oversight, back-office review, internal audit and other internal controls, thus leading to repeated commitment of offenses with increasingly large amounts, and eventually resulting in major or significant cases.
For the purposes of enhancing the implementation of the fundamentals on case prevention and control of banking financial institutions, imposing strict standards on teller service operations, giving effective play to the role of their internal oversight and constraints concerning case prevention and control, eliminating bank employees' inertia and bad work habits, improving sensitivity in case prevention and control, and practically restraining case risks, the China Banking Regulatory Commission (hereinafter referred to as the "CBRC") issued the requirements on case prevention and control work for 2012, centering on post rotation, account reconciliation, internal audit and prohibited teller conduct, in hope of combining the efforts of regulatory authorities in case prevention and control with the implementation of internal prevention and control measures by banking financial institutions to promptly prevent cases from occurring or escalating through the strategy of striking early when the offenses are small and practically prevent major and significant cases.
Therefore, CBRC has promulgated the Opinions on Enhancing Case Prevention and Control and Implementing Requirements on Post Rotation, Account Reconciliation and Internal Audit and the Opinions on Prohibiting Teller Service Violations and Preventing Case Risks, which are hereby printed and distributed to you for your earnest implementation in compliance.
All local CBRC offices shall forward the Circular of the General Office of the China Banking Regulatory Commission on Implementing Requirements on Case Prevention and Control to CBRC sub-offices and relevant banking financial institutions within respective jurisdictions thereof.
Appendix I. Opinions on Enhancing Case Prevention and Control and Implementing Requirements on Post Rotation, Account Reconciliation and Internal Audit
For the purpose of practically preventing case risks attributable to teller operations and preventing and controlling such cases, based on the case prevention and control arrangements of the China Banking Regulatory Commission (hereinafter referred to as the "CBRC") for 2012, in consideration of the characteristics of cases occurring in the banking sector, and in accordance with relevant provisions of the Guidelines for the Internal Control of Commercial Banks, the Guidelines for Operational Risk Management of Commercial Banks, and the Guidelines for Internal Audit of the Financial Institutions in the Banking Industry, the following requirements regarding the rotation of employees at important posts, account reconciliation and internal audit in the case prevention and control work for 2012 of banking financial institutions (hereinafter referred to as the "institutions") are hereby put forward, which shall be strictly implemented by all institutions along with existing regulatory requirements:
I. On Rotation of Employees at Important Posts
All institutions shall be fully aware of the significant role of the rotation of employees at important posts in enhancing internal controls and preventing operational and moral risks, diligently organize and implement the rotation of employees at important posts, and incorporate rotation implementation into their business performance evaluation.
1. All institutions are required to establish a rotation system for employees at important posts, which shall be reported to the regulatory authorities as a fundamental internal control system of banks. All institutions shall determine the important posts on their own based on the concentration of operational risks and case risks as well as the principle that such posts play an important role in business operation, internal control management and risk prevention. In its rotation system for employees at important posts, all institutions shall clearly and exhaustively define the important posts, term of rotation, and manner of rotation.
2.
......