Control Functions

Compliance and Anti-Money Laundering

As a licensed conventional wholesale and listed bank, SICO has put in place comprehensive policies and procedures to ensure full compliance with all relevant rules and regulations of the Central Bank of Bahrain (CBB), the Bahrain Bourse, and other regulatory authorities. The department is responsible for the supervision and management of compliance issues for SICO and its subsidiaries. In keeping with Basel and CBB guidelines, the bank has established an independent Compliance Department, which acts as the central coordinator for all matters related to regulatory reporting and other requirements. The department is also responsible for ensuring compliance with CBB regulations for anti-money laundering (AML) and counter-terrorism financing (CFT), which are managed by a designated Money Laundering Reporting Officer (MLRO) and Deputy MLRO. During 2019, SICO remained compliant with the latest regulatory requirements of the CBB and the Bahrain Bourse. An overview of SICO’s corporate governance framework, plus a report of key developments during the year, are covered in the Corporate Governance Review section of this annual report.

Risk Management

SICO’s independent Risk Management department is responsible for establishing the risk management framework for SICO and its subsidiaries and appropriate risk guidelines to assist the bank in achieving its strategic and business objectives. The department provides leadership, direction, and coordination in implementing the risk management frame-work across the entire organization. This entails a systematic process of identifying, assessing, and mitigating the principal business risks facing SICO by establishing appropriate controls to manage these risks and ensuring that appropriate monitoring and reporting processes are in place. During 2019, Risk Management continued to play a pivotal role in ensuring that SICO remains strong, methodical, and consistent in the face of economic uncertainty. An overview of SICO’s risk management framework, plus a report of key developments during the year, are covered in the Risk and Capital Management section of this annual report.

Internal Audit

SICO has a well-established independent Internal Audit function that reports directly to the Board Audit Committee to provide independent and objective assurance over the adequacy and effectiveness of the Bank’s governance, internal controls, and risk management processes. Its scope and role are defined and approved by the Audit Committee.

During 2019, the department met quarterly with the Audit Committee and presented the results of internal audits performed in line with the Board-approved risk-based internal audit plan. As outlined by the approved audit plan, key operational business, and management processes and divisions, including the subsidiaries, SICO Fund Services Company (SFS) and SICO Financial Brokerage UAE were audited/reviewed. Internal Audit also carried out spot check reviews on an ad-hoc basis covering various areas based on Management’s request, with the results being presented to the Senior Management/Audit Committee.

During the year, based on new regulations relevant to Internal audit issued by the CBB in 2018, the Department worked towards enhancing its facilities, capabilities, and practices in line with the new regulations. The department has also procured an internal audit management software, which will be implemented in 2020, updated its policy framework (internal audit charter and manual), and established additional audits and processes. Throughout the year, the Department also assisted management with inputs and reviews at various stages for a number of the Bank’s additional projects.

Financial Control

The Financial Control Department, which comprises of the Accounting and Reporting Unit (ARU) and the Internal Control Unit (ICU), is responsible for all aspects of accounting and internal controls at SICO. ARU is responsible for ensuring the Bank’s financial accounts and regulatory reporting are in good order, while ICU is responsible for ensuring that SICO’s daily operations run smoothly in a risk-free and compliant manner. ICU is closely involved in contingency planning/disaster recovery testing and plays a coordinating role between other control functions, SICO’s IT division, and various business lines.

During 2019, ARU produced MIS and regulatory reports and prepared consolidated financial statements in accordance with international accounting standards. Additionally, it made sure any and all relevant regulatory requirements were complied with in a timely manner. The division also successfully implemented all required changes to accounting and reporting standards as well as various new reporting requirements set by regulatory authorities in 2019.

Following the introduction of a value-added tax (VAT) in Bahrain, both ARU and ICU played a key role in ensuring relevant frameworks were set and implemented throughout SICO to comply with VAT. ICU in particular ensured the Bank has complied with regulatory requirements to issue tax invoices, that it filed tax returns in a timely manner, and that VAT was paid on a periodic basis.