Newsletter December 2014 GUIDELINES FOR WHISTLE BLOWING FOR BANKS AND OTHER FINANCIAL INSTITUTIONS IN NIGERIA. On May 16, 2014, the Financial Policy and Regulation Department of the Central Bank of Nigeria (CBN) published a circular on the Guidelines for whistle blowing for banks and other financial institutions in Nigeria. Whistle-blowing can be defined as the reporting of alleged unethical conduct of employees, management, directors and other stakeholders of an institution by an employee or other person to appropriate authorities. The objective of this newsletter is to highlight the guidelines on whistle blowing and our views on them under the following headings: the scope of the policy, the whistle blowing procedures and the protection of the whistle blower. 1. Effective date of the guidelines for whistle blowing According to section 1.2 of the guideline, compliance is mandatory from October 1, 2014. Banks and other financial institutions are required to forward copies of their whistle blowing guidelines to CBN within three months effective from the date of issuance of the guidelines. In essence, all banks and other financial institutions must submit their guidelines August 16. enable stakeholders of banks and other financial institutions to report any act of impropriety to appropriate authorities. Such acts include, impropriety or fraud, failure to comply with a legal obligation or statutes, improper conduct or unethical behavior, failure to comply with regulatory directives, other forms of corporate governance breaches, amongst others. They are all aimed at promoting good corporate governance, enhancing levels of compliance by banks as well as promoting investor confidence in the capital market. Also, Banks and other financial institutions are required to render quarterly reports on their compliance with the provisions of the whistle blowing guidelines along with their corporate governance compliance status returns. By implication, the first set of quarterly reports would be due by December 2014. Furthermore, the external auditor of each bank and other financial institutions are required to report annually to the CBN on the extent of its compliance with these guidelines. Our view is that it would be submitted alongside the report of the auditors on the financial statements due in March 2015. 2.1Scope of Whistle blowing policy The policy is designed to 2.2Whistle Blowing Procedures (section 3.0) Below are the highlights of the procedures for whistle blowing based on the guideline: • The Board of Directors of banks and other financial institutions have the responsibility to implement a whistle blowing mechanism and set up a whistle blowing policy which shall be made known to employees, management, directors and other stakeholders. © 2014 KPMG Professional Services, a partnership registered in Nigeria, and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a swiss entity. All rights reserved. Newsletter December 2014 • • • The established whistle blowing procedures must encourage stakeholders to report malpractices by giving assurance of confidentiality. The whistle blowing mechanism shall include a dedicated hot-line or e-mail address and other electronic devices that can be used to anonymously report unethical practices. The Head of Internal Audit shall review reported cases and recommend appropriate action to the MD/CEO and shall take appropriate action to redress the situation within a reasonable time. Also, he shall provide the Chairman of the Board Audit Committee with a summary of cases reported and the result of the investigation. Whistle blowing is recognized as a very important tool that can be used to maintain checks and balances in banks and expose illegal practices being perpetuated. 2.3Protection of the Whistle Blower (section 4.0) The guidelines protect the whistle blower with the following measures: • • • • Banks and other financial institutions are required to keep the identity of the whistle blower confidential. Stakeholders are encouraged to disclose their name when filling their reports in order to make it more credible. However anonymous disclosures may be considered on discretionary basis. The individual making the report should exercise due care in reporting his concern, no action shall be taken on malicious allegations. No bank or other financial institution shall subject a whistle blower to any dismissal, redundancy, • • • termination, undue influence, duress, withholding of benefits, and any other act that may have a negative impact on the whistle blower. Where this occurs, the individual can make a complaint to the CBN. Banks and other financial institutions shall make quarterly returns to the CBN and NDIC on all whistle blowing reports and corporate governance related breaches. Banks and other financial institutions shall include a whistle blowing compliance status report in their audited financial statements. Banks and other financial institutions should review their whistle blowing policies every three years and notify the regulatory authorities on all such reviews. The key ingredient for whistle blowing is anonymity. A whistle blower would only be encouraged and empowered to make disclosures only on the assurance that adequate protection would be enjoyed. In the past, there has been insufficient protection for whistle blowers in Nigeria. It is hoped that when the Whistleblower protection bill is passed, whistle blowers would be duly protected from victimization and fear of intimidation. 3.Conclusion The guideline on whistle blowing is expected to assist in entrenching good corporate governance in Banks and other financial institutions. Their compliance with these will go a long way to demonstrate how seriously it takes adherence to codes of ethics and conduct. It is clear that with the right framework in place, whistle blowing would become the most important means of promoting good Corporate Governance in Banks and other financial institutions. Compliance with the guideline is mandatory for all banks and other financial institutions as they are expected to submit copies of their whistle blowing guidelines and quarterly compliance reports as appropriate. In addition, effective financial year ending 2014, the external auditors are expected to report to the CBN on an annual basis the extent of Banks and other financial institutions’ compliance with these guidelines. The implication of this guideline is that Nigerian banks and other financial institutions would need to proactively engage with their external auditors to agree scope of this assurance report based on section 17 and 18 of International Standards on Related Services (ISRS) 4400. For inquiries on the above, please contact: Ayodele Othihiwa T: 0803 402 0935 E: [email protected] Akinyemi Ashade T: 0803 402 0944 E: [email protected] Okunlola Kabir T: 08034020954 E: [email protected] Omolola Oloye T: 07034067923 E: [email protected] Interact with us on social media: /KPMG Nigeria @KPMG_NG /KPMG Nigeria www.kpmg.com/ng © 2014 KPMG Professional Services, a partnership registered in Nigeria, and a member of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a swiss entity. All rights reserved.
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