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 Central Bank of Bahrain (CBB), the Bahrain Bourse (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 2022, SICO remained compliant with the latest regulatory requirements by the CBB and BHB. 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 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; and 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 2022, Risk Management under the leadership of the newly appointed Chief Risk Officer continued to play a pivotal role, 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 the light of the changes in business and also ensured compliance with the applicable regulatory requirements. An overview of SICO’s risk management framework along with 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 & Compliance 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 Board Audit, Risk & Compliance Committee (‘BARC’).

During 2022, 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 certain aspects of subsidiaries such as SICO Capital KSA and SICO Financial Brokerage UAE were 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.

Supporting the Banks strategy and initiatives in the integration of SICO’s Saudi Subsidiary SICO Capital, the department is also working with relevant local management.

During the year, the department fully revised and updated its policy and procedure framework and charter, and successfully underwent an external quality review with only minor recommendations for enhancement. The department also significantly enhanced and made changes to internal audit reporting and formats. The department also assisted with various consulting assignments.