PASA COMPLIANCE ENFORCEMENT POLICY 1/2017 · PDF file2 14 July 2017 PASA Compliance Enforcement Policy ... This includes the power and mandate to promote observance by ... The principles

PASA COMPLIANCE ENFORCEMENT POLICY 1/2017

21 August 2017

Marié Smit

Agenda

2 14 July 2017 PASA Compliance Enforcement Policy

• Background

• Terminology

• Principles of Compliance Enforcement in PASA

• Structures and their Duties under PASA Compliance Enforcement Policy 1/2017

• Compliance Enforcement Processes and Procedures

• Urgent Remedial Process (URP)

• Further Areas of Refinement

• Questions

BackgroundPASA is responsible to organise, manage and regulate the participation of its Members in the NPS.

This includes the power and mandate to promote observance by its Members of the terms of the PASA Constitution, PASA Policies and the Regulatory Framework of the NPS and to enforce compliance with same.

The First PASA Compliance Enforcement Policy adopted in 2011:

• Conferred compliance enforcement duties on:– PCH PGs (i.r.o their respective Clearing Rules)

– A Compliance Committee (comprised of Member Bank compliance officers)

– PASA Council.

• Concerns with this approach:– Independence

– Objectivity

– Expertise

– Detracting from primary duties of structures

• Concerns were also echoed in the SARB’s Review of PASA.


Background

PASA has therefore adopted more sound corporate governance principles in the management and enforcement of Non-compliance by implementing Structures and processes that:

• Avoid potential conflicts of interest

• Subscribe to a clear delineation of roles between rule drafting, and compliance enforcement;

• Promote the principle of independence into compliance management and enforcement processes ; and

• Support :

– the IOSCO Objectives and Principles of Securities Regulation,

– Policy objectives of the regulation, supervision and oversight of the payment system as FMI, set out in various policy documents released by the BIS; and

– The objectives contemplated in the Financial Sector Regulation Act,


Terminology


First, Some Terminology…Action

An all-encompassing event, which includes a fact or process, with singular or multiple consequences.

Administrative Fine

A predetermined monetary fine up to R10 000.00 approved by PASA Council from time to time, applicable per specific Action of Non-compliance (e.g. Debit Order deduction without a Mandate)

Clearing Rules

• Those rules and agreements approved by PCH Participant Groups from time to time with regards to the clearing of payment instructions under their control

• instructions issued and decisions made by the PCH Participant Groups

• criteria approved by the various PCH Participant Groups

• The respective PCH Participant Group Constitutions, as approved by PASA Council;

Compliance Manager

The compliance manager in the employ of PASA and which is to fulfil the roles, functions and responsibilities as contemplated in clause 5.2 of the PASA Compliance Enforcement Policy


First, Some Terminology…Natural Justice

For purposes of the Compliance Enforcement Policy, is based on two fundamental principles, namely:

• ‘audi alteram partem’ - (the right to be heard) and

• ‘nemo judex in parte sua’ (no person may be a judge in their own case or in a case where they have an interest in).

The principles of Natural Justice include the right of any person against whom allegations are made, to have:

• advance notice of the allegations and evidence

• the opportunity to challenge allegations and evidence before decisions are reached;

• the right of appeal against any decision taken;

• the requirement to be procedurally and substantively fair, equitable and transparent, which will enable each party to respond within reasonable timeframes to all allegations made against it, or to appeal.

Non-compliance

Not complying with the Regulatory Framework of the NPS; PASA Constitution and PASA Policies, which includes a decision by PASA Council, the Chief Executive Officer or Structures.


First, Some Terminology…

Sanction

Include, but are not limited to the following –

• publishing the details of non-compliance or contravention by a Member in

PASA’s annual review;

• withdrawing a Member's status of good standing as directed by Council

after consultation with the Reserve Bank

• imposing a fine as provided for in the Compliance Enforcement Policy

(currently capped at R1 000 000.00 per Action of Non-Compliance)

Structures

means structures duly established and mandated by PASA Council to

perform the roles assigned to them


Principles


Compliance Enforcement Policy 1/2017

Principles on which PASA’s Compliance Enforcement Policy is Based

• The principles of Natural Justice.

• A Sanction may only be imposed for an Action resulting in Non-compliance.

• If a Member fails to remedy Non-compliance following the imposition of a Sanction, a further

Sanction may be imposed.

• Whether or not a Sanction has been imposed, a Non-compliant Member shall remain

responsible to remedy its Non-compliance.

• No Member of PASA, impacted by another Member’s Non-compliance, forfeits any of its

rights in terms of the relevant PCH Agreement or the PASA Constitution.


Compliance Enforcement Policy 1/2017

Changes in a Nutshell

• Chinese walls between rule creation and rule enforcement.

• Independence in enforcement.

• Risk-based enforcement.


Structures and their Compliance Enforcement Duties under New Policy

PASA Council

• As governing body of PASA, Council retains

ultimate responsibility for compliance by ensuring

that the necessary structures, processes

mandates and rules are in place to enforce

compliance.

• Receives reporting on state of compliance and

compliance enforcement in PASA from PASA

Compliance Manager.

• Crucially PASA Council itself will no longer be

tasked with the enforcement compliance.

• PASA Council will, however, remain the only

structure that can withdraw a Member’s status

of good standing


Compliance Duties of Structures under New Policy

PCH PGs

• Responsible for creating Clearing Rules

• Responsible for reporting to PASA any possible

non-compliance to Clearing Rules.

• Responsible for providing a view on the risk

introduced through an instance of non-

compliance.

• Responsible for taking action in respect of any

feedback received from the compliance

enforcement structures (e.g. clarification of rule).

• Responsible for agreeing annual Compliance

Monitoring Plan with PASA Compliance

Manager.


Compliance Committee

• Disbanded


PASA Compliance Manager

• Investigate any alleged Non-compliance

• Compile a report on such alleged Non-compliance

• Make a recommendation to the CEP, where appropriate

• Monitor and refer any Non-compliance by Members to

the appropriate CEP, CCES

• Notifies the relevant PCH PG, PASA Council and the

PASA CEO of matters referred.

• Facilitate the enforcement processes contemplated in the

Compliance Enforcement Policy.

• Manage and facilitate Urgent Remedial Processes

between Members as contemplated in the Compliance

Enforcement Policy.


Compliance Enforcement Panel

• Comprised of three Independent Consultants

(Legal Experts, many with payments and

banking expertise)

• Will assess a matter of alleged non-compliance

referred to them, and make a finding on the

merit thereof, i.e. find a the Member compliant/

non-compliant.

• May impose a Sanction on the Member, if

Member found to be non-compliant.


Council Compliance Enforcement Sub-Committee

• Comprised of

– Independent Chair of PASA Council

– 1 Independent PASA Councillor

– 2 Independent Consultants from the CEP

• Adjudicates matters escalated to it by the

Member or the Compliance Manager following a

finding and/or Sanction by the CEP.

• Based on its adjudication, the CCES may:

– Uphold or overturn the finding of the CEP; and/or

– Uphold, overturn and/or impose a new Sanction

15 Date Title

South African Reserve Bank (NPSD)

• Final point of escalation for Member or the

Compliance Manager who wishes to

appeal a decision by the CCES.

• Based on its adjudication, the SARB may:

– Uphold or overturn the finding of the CEP;

and/or

– Uphold, overturn and/or impose a new

Sanction

Process & Procedure


Compliance Enforcement Process


Compliance Enforcement Procedure


1. Notice of Referral to the CEP is provided to the allegedly non-compliant Member approximately 30 calendar days prior to the date on which the matter is to be assessed by the CEP.

2. A Member’s written representation must be submitted within 14 calendar days of the date of the Notice of Referral to the CEP. The Chair of the CEP may allow an extension of this period on good cause shown;

3. Oral representation to the CEP will only be permitted in the event that the facts of a Compliance Matter is under dispute;

4. Oral representation will be contained to the content of the written submission.

5. The Chair of the CEP will provide the Member with the CEP’s findings within 14 business days of the date of on which a matter was assessed by the CEP, unless the CEP has requested additional information. In the case of the latter, the Chair of the CEP will provide the Member with the CEP’s finding within 14 business days of the date on which the last outstanding information was received.

6. A recording of proceedings may be obtained from PASA upon request, but shall not be transcribed by PASA.

7. Written notice of intention to escalate the finding of the CEP to the Council Compliance Enforcement Sub-Committee (CCES), as contemplated in Clause 5.3.8 of the PASA Compliance Enforcement Policy, must reach the parties contemplated in Clause 5.3.8.1 of the PASA Compliance Enforcement Policy within 14 calendar days of the date on which the Member received the CEP’s findings.

Compliance Enforcement Procedure: Escalation & Appeal


If a Member wishes to have the finding and/or the Sanction of the CEP reviewed by the CCES, the Member must

• Give written notice, signed by its Responsible Senior Officer, of its intention to do so to the Compliance Manager; and

• Pay an administrative fee of R20, 000.00, which fee will be refundable in the event of the CCES overturning the finding and/or Sanction of the CEP

If a Member wishes to appeal the finding and/or the Sanction of the CCES, the Member must

• Give written notice signed by its Chief Executive Officer, of its intention to do so, to the Reserve Bank, the CCES and the Compliance Manager; and

• Pay an administrative fee of R50, 000.00 (Fifty Thousand Rand) to PASA, which fee shall be refundable in the event of the Reserve Bank overturning the finding and/or Sanction of the CCES;

Urgent Remedial Process (URP)


Urgent Remedial Process


What is the URP

• To resolve urgent issues as soon as possible and to mitigate the impact on an Aggrieved Member (AM).

• The URP is separate from any of the compliance enforcement processes .

• The URP may be initiated in the event of Non-compliance to any provision of the PASA Policies, the PASA Constitution, the Regulatory

Framework of the NPS.

Process

1. AM lodges complaint with Compliance Manager. providing details of :

a) the alleged Non-compliance,

b) as well as the grounds for urgency.

2. Compliance Manager gives Transgressing Member (TM) notice of the complaint within 1 business day of receipt of the complaint.

3. The TM must respond within 3 business days of the receipt of the notice from the Compliance Manager.

4. The response of the TM must:

a) Deny or acknowledge Non-compliance;

b) If acknowledged, the timeframe within which it will be rectified;

c) If denied, the facts and circumstances of the matter which must include a response to all the issues alleged by the AM; and

d) Deny or acknowledge the urgency of the matter, together with a motivation for the position taken.

Urgent Remedial Process


5. The Compliance Manager notifies AM and provide the response to the AM within 1 business day

6. AM to reply to allegations contained in the TM’s response within 3 business days.

7. The Compliance Manager must then assess the facts provided to him by the parties and may engage the assistance of an Independent

Consultant to enable the Compliance Manager to make an informed finding.

Mediation

• The Compliance Manager may also decide to mediate the complaint or dispute in order to achieve early closure of the complaint.

• Mediation of a complaint will be informal , but subject to Natural Justice.

Further Areas of Refinement


Areas of Further Refinement


1. Institution of Admin Fines for frequently recurring , low risk transgressions (e.g. Surcharging)

2. Creation and Implementation of Compliance Monitoring and Risk Matrix

3. Creation and Implementation of formal Compliance Model

Conclusion / Questions


Documents

PASA COMPLIANCE ENFORCEMENT POLICY 1/2017 · PDF file2 14 July 2017 PASA Compliance Enforcement Policy ... This includes the power and mandate to promote observance by ... The principles