|
|
|
|
|
|
|
Newsletter | August 2015, Issue 2
|
|
|
|
|
|
|
|
|
|
|
BANKING
|
|
|
|
|
FSC and FSS Announce Reforms to Audit and Sanctions of Financial Companies
|
|
|
|
On April 22, 2015, the Financial Services Commission (“FSC”) and the Financial Supervisory Service (“FSS”) announced the “Plans for Reforming Audit and Sanction of Financial Companies” (the “Plans”).
|
|
|
|
The Plans can be summarized into three main aspects: (i) enhancement of autonomy and responsibility of financial companies; (ii) reinforcement of defense rights; and (iii) strengthened monetary sanctions.
|
|
|
|
The key changes under the Plans are:
|
|
|
|
Reform of Regulatory Audit Procedure
|
|
|
|
|
On-site audit to be divided into “soundness audit” and “compliance audit”
|
|
|
|
Whereas audits are currently divided into general and special audits, general audits will be phased out to reduce the burden on financial companies. Instead, the FSS will perform “soundness audits,” which will examine financial soundness of the company and “compliance audits,” which will inspect breaches of rules or regulations (effective January 2016).
|
|
|
|
Internal audit and follow-up measures relating to credit or financial incidents to be performed by financial companies
|
|
|
|
Where individual loans become non-performing or financial incidents occur, the relevant financial company will conduct an internal audit and complete a sanctioning process on its own. The FSS will only conduct an ex post facto review of the internal control process, such as the appropriateness of measures taken. However, the FSS will conduct a regulatory audit where there is systematic illegal lending, negligence, embezzlement, or serious breach of consumer rights.
|
|
|
|
Delivery of Audit Opinion in place of obtaining a Confirmation Letter
|
|
|
|
Previously, the FSS collected a Confirmation Letter from financial companies when a violation of relevant regulations was found. In place of such Confirmation Letter, an “Audit Opinion,” setting out the FSS auditors’ findings, will be issued in the name of the head of the FSS audit team to financial companies. This change was made in response to criticisms that Confirmation Letters forced officers and employees to make signed confessions in connection with regulatory breaches during the audit process.
|
|
|
|
Supplementing Code of Conduct for FSS Auditors.
|
|
|
|
For the benefit of financial companies in connection with the audit process, the FSS will develop a Comprehensive Code of Conduct for FSS Auditors. This code of conduct will include: (a) making adjustments to the timing of onsite audits to take into account the financial company’s important management schedules; (b) preventing infringement of privacy during the audit; and (c) ensuring access to legal advice from lawyers throughout the audit and sanctioning process.
|
|
|
|
|
Reform of Sanctions
|
|
|
|
|
|
Shift from sanctions against individuals to monetary sanctions on institutions
|
|
|
|
The Plans propose to expand monetary sanctions (such as penalties or fines against institutions) both in scope and amounts rather than imposing sanctions against individuals.
|
|
|
|
With regard to sanctions against individuals, the scale will be revised so that it would be simplified either from the current five levels to two levels (light or heavy sanctions), or left with only an upper limit sanction while removing the lower limit. A task force, which was established in April 2015, will lay out detailed plans.
|
|
|
|
Expansion of the notification of matters on which financial companies need to take self-corrective measures (formerly known as “request for appropriate measures”) and onsite measures.
|
|
|
|
The audit and sanction regulations will be amended so that the responsible staff would not be subject to disciplinary actions by the FSS on the basis that the measures taken by the financial company were inadequate. Effective July 2015, for onsite measures applicable to minor matters, it is proposed that the notification period be extended to 15 business days following the completion of a general audit, and 10 business days following the completion of a special audit (rather than the completion date of the on-site audit).
|
|
|
|
|
|
|
Back to Main Page
|
|
|
|
|
|
If you have any questions regarding this article, please contact below:
|
|
|
|
|
|
|
|
For more information, please visit our website:
|
|
|
|
|
|
|
|