The Bank of Jamaica, BOJ, is urging the institutions it regulates to ensure that their internal audit systems are robust and well-resourced.
In the wake of allegations that the seepage of funds from Stocks & Securities Limited, SSL, may have been ongoing without detection for 13 years, BOJ Governor Richards Byles said the central bank will be stepping up its requirement that the internal audit function be upgraded in the institutions under its regulatory umbrella. That includes commercial banks, mortgage banks, merchant banks, money services firms, microfinancing companies, credit unions, and soon, investment banks and securities dealers, pension funds and fund managers, and insurance companies.
“It must be very capably staffed. It must have the freedom and rights that the internal audit function should have, and it must be of the highest quality in these financial institutions,” said a press release quoting Byles, who was addressing the opening of the International Financial Reporting Standards workshop hosted by the Institute of Chartered Accountants of Jamaica last Friday.
Referencing the SSL issue as a teaching moment, Byles said it was a reminder that micro issues are equally important in ensuring a healthy financial ecosystem of stability and economic growth.
“I think that for us as regulators, it underscores the absolutely crucial role of having a robust and capable internal audit function in every financial institution, and it is important that the internal audit function is restored to its place, or primacy,” the BOJ governor said.
Byles’ call comes in the wake of the Stocks & Securities Limited fraud investigation; heavy criticism of the Financial Services Commission, FSC, the regulator of non-bank financial companies; and the announcement that the central bank would be taking over FSC’s regulatory portfolio – a transition that is expected to be finalised within 18 months to two years.
Last week, Byles met with staff of the FSC, and on Wednesday, February 1, central bank officer Major Kerron Burrell was seconded to the FSC to act as executive director, replacing Everton McFarlane, who resigned after heavy criticism over the mishandling of SSL.
Burrell’s role as chief prudential officer in the BOJ Financial Institutions Supervisory Division will be taken over in the interim by Decoda Martin, who has worked with the central bank for 14 years.