Compliance Department

An independent business unit, with the core responsibility to assist the Board and the Executive Management (Department) with compliance with the laws and directives of the regulatory authorities. The department oversees, throughout departments and branches; the adherence to the laws, stipulations and standards governing banking operations; especially the directives of the Central Bank of Iraq, the regulations related to countering money laundering and terrorism financing. The department also ensures compliance with the requirements of FATCA (Foreign Account Tax Compliance Act) of the United States of America.

 

Foreign Account Tax Compliance Act (FATCA), of the United States of America:

Enacted by the United States Congress * in 2010, the Foreign Account Tax Compliance Act requires foreign financial institutions to report to the IRS, information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. MBI is registered under the “Model 2 IGA” jurisdictions agreed between the Government of Iraq and the US Federal Reserve, as part of the Bank’s compliance process.

 

Countering Money Laundering and Terrorism Financing

MBI is committed to implementing the highest operational standards in relation to countering money laundering and terrorism financing; and has adopted a risk-alert policy where the Bank implements international standards such as the Wolfsberg Standards and the Financial Action Task Force (FATF). This compliance includes the “Know Your Customer” recommendations, conventional due-diligence and extra-ordinary precautions (according to risk assessment rating). The Bank’s general policy extends to knowing its customers well, reporting suspicious transactions; and keeping account transactions under observation across all branches.

 

Corporate Governance:

MBI implements a comprehensive protocol which meets the mandates of Corporate Governance, as prescribed by the Organization for Economic Co-operation and Development (OECD); the standards of prudential regulation of the Basel Committee, the directives of the Central Bank of Iraq, the Law of Trade; and the Law of Banks number 94 of the year 2004.

A Corporate Governance Guide was compiled and approved by the Board of Directors; and specialized committees were formed from the Board and the Executive Management – to contribute with ensuring the implementation of principles of transparency in management and administration; earning thus the trust of depositors and customers of the Bank.

MBI is committed to strict operating practices, dictating the principles of Integrity and Ethical Conduct throughout all of its business; as well as its interactions with shareholders, employees; and all of the Bank’s customers, competitors, and regulatory authorities. This maintains fairness and equal opportunity in competition, as the Bank regulates potential conflict of interest for members of the Board, the Executive Management, employees, shareholders, and other entities concerned. This includes the potential abuse of the Bank’s assets or facilities; or misconduct with related persons – all according to the internal instructions and regulations; and the directives of the Central Bank. The Bank aims to earn the trust of its customers by preventing and restricting conflict of interest; and regulating it in accordance with the policies adopted by the Bank. MBI also puts the necessary systems in place to use the assets and resources of the Bank to meet its vision and mission and to identify potential cases of conflict between personal interests, and the interest of the Bank and efficient management.

 

Policy Objectives:

This policy aims to institute the procedures concerning cases of conflict of interest pertaining to depositors, shareholders, members of the Board of Directors, the Bank’s committees, Chief Executives, employees, lenders, relevant audit entities, and governmental authorities – as needed; to whom this policy refers to, collectively and individually, as “Stakeholders”. This policy also aims to assist Stakeholders in dealing with cases of conflict of interest in accordance with the legal requirements; and in accordance with the Accountability and transparency principles adopted by the Bank in its operations.

 

The Concept of Conflict of Interest:

“Conflict of Interest” is defined to be any situation where the Bank, or an individual acting on the Bank’s behalf, has the potential opportunity to abuse the powers or authority afforded by the nature of their role or position, for personal gain. Conflict of interest emerges when the personal interests of individuals are at odds with the general interests of the Bank, in any form.

MBI acknowledges the fact that Stakeholders have personal interests and respects their privilege to take part in different activities – exclusive of when it stands in conflict with the general interests of the bank, in any form.

 

In the following we list examples of cases of conflict of interest, or may lead to such conflict:

  1. If a Stakeholder uses their position at MBI, or the information / opportunities afforded to them at the time when they are working at / for the Bank; to attain personal benefit or to facilitate benefits for a third party
  2. If a Stakeholder such as a member of the Board of Directors executes a decision or engages in a transaction or a purchasing operation for the benefit of another party with which they interest in
  3. If an employee and/or a relative of theirs, undertakes any performance for suppliers, sub suppliers, or competitors
  4. If a Stakeholder undertakes assignments, or is occupied / involved in activities that may compromise their ability to perform their duties for the bank objectively and efficiency
  5. If a Stakeholder, such as an employee, or one of his household members; achieve illegitimate gains in connection to the position they hold at the Bank
  6. If a Stakeholder such as a member of the Board of Directors, accepts financial reward against providing advice to another bank which competes with MBI, as in the nature of its business and operation resembles those of MBI
  7. The Bank’s Management and Stakeholders are obligated to always act to allow the interest of the Bank PRECENDENCE in all situations where conflict of interest is present, or is likely to be so – to the full extent possible given the respective conditions. Stakeholders must also refrain from influencing the Bank’s decisions towards any action that may result in possible conflict of interest; including to refrain from voting on any decision or matter that may be subject to possible conflict of interest. It also includes that the Stakeholder declare, and voluntarily so, any conflict of ineptest resulting from their association with the Bank – by following the manners and procedures set by this policy, and the relevant laws in effect in the Republic of Iraq.
  8. Facilitating, or recommending, the employment or promotion advantage at the Bank, for the benefit of relatives or friends.

Stakeholders are expected to refrain from interfering; and to allow the relevant procedure to be followed without biases or influences; neither direct nor indirect.

 

Jurisdiction of the Policy

This policy applies to the aforementioned Stakeholders as listed in the Corporate Governance Guide (depositors, employees, lenders, clients, members of the Board of Directors, shareholders, relevant auditorial and regulatory bodies and governmental authorities).

 

Situations of Conflict of Interest

All Stakeholders, as previously defined, are obligated to refrain from conducting any business with the Bank, if it may result in potential conflict of interest; except in accordance with the rules stipulate by this policy, and the laws and legislations of mandate in the Republic of Iraq.

 

Conflict of Interest falls under several categories:

a) Conflict of Interest in the case of Shareholders with voting rights:

  1. All transactions and contracts involving shareholders (owning of 5% or more shares of the Bank, directly or otherwise) and their relatives (up to the 4th degree family connections); are subject to the same terms that apply to transactions and contracts with the others.
  2. All transactions conducted with Shareholders (owning of 5% or more shares of the Bank, directly or otherwise) and their relatives; are to be declared according to laws and regulations.

b) Conflict of Interest in the case of members of the Board of Directors:

  1. A member of the Board is not to have any interest, direct or otherwise, in the business or contracts carried out for the benefit of the Bank; except after a dedicated approval to be obtained from the AGM according to the regulations set by the concerned authority.
  2. The member of the Board is to bring to the attention of the latter, any potential personal interest they may have in relation to the business or contracts carried out for the benefit of the bank. Such declaration shall be documented in the Minutes of the Meeting; and the member concerned with such declaration shall not be allowed to vote on any decisions related to the matter involved.
  3. The Chairman of the Board shall inform the AGM, when in convention, of the business and contracts which carry the potential of conflict of interest concerning any member of the Board. This announcement takes place according to the examination carried out by the Board of Directors, probing the potential competitive / competing actions or activities of the member of the Board. The Board conducts these verifications annually. A dedicated report from the legal external auditor shall accompany such reporting to the AGM.
  4. Members of the Board shall not engage or be involved in any conduct or activity which may compete with the interests of the Bank, except after a dedicated approval to be obtained from the AGM according to the regulations set by the concerned authority.
  5. The Board shall take into consideration the requirements of independence and the situations of conflict of interest as listed in the relevant statutes by the Iraqi Securities Commission; upon appointing financial advisors, legal advisors, and financial auditors.
  6. Engagement and participation in a competing / conflicting with one of the Bank’s activities shall include:
  • If the member of the Board establishes or acquires a stake which qualifies for voting rights in another company or establishment with an activity resembling one of the Bank’s activities
  • If the member of the Board accepts membership of the board of directors at a competing bank
  • If the member acquires a trading franchise, representation, or similar arrangement of the sort, be it publicly announced or otherwise

c) Conflict of Interest in the case of Executive Management and Bank Employees:

The Board of Directors must be notified of any external business activities pertaining to any member of the Executive Management or employee, and an approval from the board must be sought following declaration in accordance with the relevant rules and legal stipulations.

The executive director, manager, or employee shall be expected to take the matter up with the Managing Director, who will in turn consider the case and share their assessment and recommendation with the Board for a resolution.

d) Conflict of Interest in the case of Internal Auditors, External Auditors and Advisors:

  1. The Bank’s external auditors must be independent and impartial.
  2. Internal auditors function under the Audit Committee, while administratively reporting to the Bank’s Management. This maintains the independence and impartiality of the auditor and affords them the support necessary for the internal auditing function.
  3. The situations involving conflict of interest, and all relevant legal and regulatory stipulations; shall be taken into consideration upon assigning all financial advisors, legal advisors, and external auditors.

e) Conflict of Interest in the cases other Stakeholders:

All transactions and contracts executed with the Bank’s suppliers are subject to the same terms applicable to dealings with other parties, be it in terms of assessments, of in terms of fair conduct in execution, declaration, or reporting.

f) Additional Restrictions:

The following situations must be observed, in addition to the aforementioned; in relation to conflict of interest in the cases of members of the Board, the Bank’s Committees and Employees:

  1. Members of the Board, Committees and Employees are strictly prohibited from using (or putting into service) any Assets, Information or investment opportunities belonging to the Bank or to function / position they hold; to serve any personal interests of theirs, or to serve any other purposes which do not fall under the Bank’s activities and benefit. This includes Investment opportunities which fall under the Bank’s activities, or those which the Bank wishes to benefit of. This restriction also applies to a member of the Board who may resign such appointment with the intention to avail, directly or otherwise, of Investment opportunities which they have learned of during their membership of the Board, and the Bank wishes to benefit of.
  2. Members of the Board are strictly prohibited from voting on Board and AGM resolutions pertaining to the Bank’s business and contracts, if they have any interest, direct or otherwise, in those affairs.
  3. Members of the Board, Chief Executives, Managers and Employees are not to accept giftings from any person or entity which is conducting business with the Bank if such gifting can potentially result in conflict of interest. Symbolic tokens not exceeding $100 in value can be accepted so long that the Bank’s management is notified in a timely fashion and in accordance with the Professional Conduct Rules Circular.
  4. The Bank shall declare to the AGM and the general public and without any delay, all transactions and contracts which involve a value equivalent to or exceeding 1% of the Bank’s Total Revenues – as stated on the most recently ratified balance sheet.
  5. Members of the Board, must observe the following conduct as they notify the Board of possible conflict of interest:
  • They are not to take part in discussions, nor hear the Board’s deliberations around on the affair in which they may have interest, and shall limit their participation to answering inquiries and providing relevant information.
  • They shall refrain from voting on resolutions as soon as they have informed the Board of the situation. Votes shall nevertheless be cast anonymously at any point where the affair at hand involves the interest of Board member.

 

Confidentiality:

All information related to the Bank and its activities is considered CONFIDENTIAL and is not to be disclosed to any person or party.

Members of the Board of Directors are not to disclose any classified information pertaining to the Bank’s business, except at AGM’s – and they are not to put at use, the information they have access to by virtue of their membership, not for their own benefit, not for the benefit of a family member; nor for the benefit of any other party. Failing to observe this conduct is grounds for cessation of membership and claim for compensation.

 

Declaration of all Conflict of Interest situations:

All members of the Board and Bank Employees are obligated to declare and notify of their personal interests which fit the following descriptions:

  1. Any interest in an investment, or ownership in a commercial activity or establishment which performs any services for the Bank or receives benefits / services from the Bank.
  2. A commercial activity or establishment which provides, or seeking to provide, a banking related service.
  3. Any interest with a customer or with any other establishment which receives benefits / services from the bank.
  4. A commercial activity, customer or any other establishment in a position allowing it / them to benefit of any actions by the member of the Board or Employee.

All those who wish to seek membership of the Board of Directors must declare to the Board and the AGM, any of the situations considered to involve conflict of interest as officially decreed, including:

  • The presence of interest, direct or otherwise, in the business and contracts done for the benefit of the Bank
  • Contribution to any effort which may compete with the Bank’s interests or activities

 

Policy Execution and Breaches

The Audit Committee shall oversee the implementation of this policy by reviewing the situations, transactions, and contracts where conflict of interest is suspected.

The Committee shall report all breaches of this policy to the Board of Directors and recommend actions according to the Bank’s “Whistle Blowing Policy”.

 

Policy Review and Amendment:

This Policy comes into effect as of the date it is ratified by the Board of Directors. The Board shall review and amend the Policy as needed.

All amendments to this policy require an approval resolution by the Board.

 

Publishing:

This Policy shall be published on the Bank’s website to make it available to all the concerned parties; alongside other information methods which the Board may deem necessary.