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Corporate Governance Part 1 - Corporate governance is the collection of…
Corporate Governance Part 1 - Corporate governance is the collection of mechanisms, processes and relations by which corporations are controlled and operated
Due Dilligence - the performance of an investigation of a business or person, or the performance of an act with a certain standard of care.
The risk-based approach of the business will be informed by the monitoring of patterns of business, for example:
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Once the business has identified and assessed the risks it faces of being used for money laundering or terrorist financing, it must ensure that appropriate controls are put in place to lessen these risks and prevent the business from being used for money laundering or terrorist financing.
Managing and mitigating the risks will involve:
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Conducting ongoing monitoring of the transactions and activity of customers with whom there is a business relationship; and
Applying customer due diligence measures to verify the identity of customers and any beneficial owners;
Having systems to identify and scrutinise unusual transactions and activity to determine whether there are reasonable grounds for knowing or suspecting that money laundering or terrorist financing may be taking place.
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UK Corporate Governance Code - The Code sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders.
Performance evaluation – the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.
Re-election – all directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. The board should ensure planned and progressive refreshing of the board.
Information and professional development – the board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge.
Remuneration – levels of remuneration should be sufficient to attract, retain and motivate directors of the quality required to run the company successfully, but a company should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.
Appointments to the board – there should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.
Remuneration procedure – there should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.
Board balance and independence – the board should include a balance of executive and non- executive directors (and in particular independent non-executive directors -NED's) such that no individual or small group of individuals can dominate the board’s decision taking.
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Chairman and Chief Executive – there should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.
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The FRC promotes high standards of corporate governance through the UK Corporate Governance Code - It is a guide not rues
The Walker Report of 2009- examine corporate governance in the UK banking industry and make recommendations, including in the following areas:
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Board management:
The effectiveness of board practices and the performance of audit, risk, remuneration and nomination committees
The role of institutional shareholders in engaging effectively with companies and monitoring of boards
The balance of skills, experience and independence required on the boards of UK banking institutions
Whether the UK approach is consistent with international practice and how national and international best practice can be promulgated
The effectiveness of risk management at board level, including the incentives in remuneration policy to manage risk effectively