KYE procedures to weed out rogue bank employees

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday the recently-issued Know-Your-Employee procedures for banks is a way of tightening the current rules to weed out rogue personnel that may cause reputational risk to a bank and to the financial system.

Diokno said in an online briefing the KYE procedures foster a stable banking system.

“People are the very heart of every institution, especially in banking which is built on trust. The KYE rules are key to managing people risk by ensuring that the supervised financial institution hires persons with the right competency, experience and integrity to fulfil their duties and responsibilities,” Diokno said.

The BSP recently issued KYE rules aligned with global best practices as part of broader supervisory reforms to continue raising the bar on corporate governance and risk management in the domestic banking system.

Under said rules, BSP-supervised financial institutions are required to adopt a risk-focused screening process which considers sensitivities of certain positions that may require more stringent screening.

Adequate understanding of an employee’s personal background, character, conflict of interest and propensity to commit fraud or irregularity will be considered. The revised rules also emphasize the use of BSP records as part of the screening process of BSFIs.

The KYE rules also aim to address the situation when the person is already inside the BSFI, highlighting the importance of continuing assessment of employees' fitness and propriety to perform the responsibilities required of the position.

The new policy identified certain behaviors that serve as red flags warranting further scrutiny as part of personnel's performance evaluation.

Moreover, the new policy provides for the requirement for head office of BSFIs to act on requests for confirmation of accounts from their clients or depositors.

Separating the confirmation process from the branch or officer handling the account is a control measure aligned with the principles set out under the BSP’s operational risk management guidelines.

Diokno said around 7,500 names of rogue banks' officials and personnel were on their list, saying they were "dismissed."

When asked whether the latest KYE rules could cause bad behaviors of some bank officials and employees to decline or increase, Diokno said it was "hard to predict... If their bad behaviors continue, then it will increase."

Florabelle Santos-Madrid, director of the BSP's Financial System Integrity Department, said if there were bank officials involved in, for instance, money laundering activities, it is already a "red flag" in their KYE processes.

Topics: BSP , Know Your Employee , KYE , rogue bank employees
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