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 by the CBB, the BHB, and other regulatory authorities. 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 2021, SICO remained compliant with the latest regulatory requirements by the CBB and BHB. An overview of SICO’s corporate governance framework, as well as a report of key developments during the year, are covered in the Corporate Governance Review section of this annual report.

Risk Management

SICO’s Risk Management Department is responsible for establishing the risk management framework 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 framework 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, as well as ensuring that appropriate monitoring and reporting processes are in place. The Bank has established a risk management function that is independent of its risk-taking (business units) functions and reports directly to the Board Audit, Risk and Compliance Committee. During 2021, Risk Management continued to play a pivotal role in ensuring that SICO remains strong, methodical, and consistent in the face of economic uncertainty. The department also carried out updates of all the relevant risk management frameworks in light of the changes in business, and it also ensured compliance with the applicable regulatory requirements. An overview of SICO’s risk management framework and the governance structure 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, Risk, and Compliance Committee that provides 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 Board Audit, Risk and Compliance Committee (BARCC).

During 2021, the department met quarterly with the BARC 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 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/BARCC. In support of the Bank’s strategy and initiatives in the acquisition and integration of SICO’s Saudi Subsidiary, SICO Capital, the department is also working with relevant management teams in KSA on their activities for the establishment of internal audit arrangements at SICO Capital.

During the year, the department fully revised and updated its policy and procedure framework and Charter, and it is also working on its newly implemented internal audit management software. The department also significantly enhanced and made changes to internal audit reporting and formats.

Throughout the year, the department also assisted with various consulting assignments, contributing with inputs and reviews at various stages for a number of the Bank’s additional projects, such as the update of policies and procedures for Asset Management and middle office, and software implementation projects, such as for SFS etc., all while keeping adequate safeguards in place in line with IIA standards.

Financial Control

The Financial Control Department, which comprises the Accounting and Reporting Unit (ARU) and the Internal Controls and Value-Added Tax (ICU and VAT) Unit, is responsible for all aspects of accounting, VAT, and internal controls at SICO. ARU is responsible for ensuring the Bank’s financial accounts and regulatory reporting standards are in good order. The ICU and VAT unit is responsible for all aspects of complying with VAT regulations as promulgated by the National Bureau of Revenue in the Kingdom of Bahrain. In addition, the unit performs key internal control functions across the various finance and accounting tasks that are in place.

During 2021, ARU produced MIS and regulatory reports and prepared consolidated financial statements in accordance with international accounting standards. ARU also adapted itself in a seamless and efficient manner to changes in the working styles as warranted by the COVID-19 situation. Paperless processing of payments was introduced, electronic authorization was put in place, and uninterrupted working from home was carried out in a highly effective and productive manner. The regulatory requirements of additional reporting and disclosures that were warranted to explain the effects of the COVID-19 pandemic were successfully implemented.

The ICU and VAT unit continues to play a key role in ensuring relevant frameworks were set and implemented throughout SICO to comply with VAT. The unit in particular ensured that the Bank 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, with amendments to regulations and requirements being handled in a timely fashion. Necessary changes to the systems and processes were carried out to address the increase to the VAT rate in the Kingdom.