Regulation of Compliance Functions in Finnish Banks - Potential Implications to Banks' Legal Departments

Jyrki Manninen, Senior Legal Counsel, Nordea Bank Finland Plc, Finland
Jussi Pelkonen, General Counsel, Evli Bank, Finland

In the Finnish banking industry, there are practically two different basic models to organize a compliance function: • a legal department is also responsible for a compliance function or • a compliance function is organized either as an independent compliance department or as part of some other department than a legal department, for example, as part of a risk management department. In this article, we explore what are current regulatory requirements on compliance functions in Finnish banks and what potential implications those requirements have especially in relation to banks’ legal departments. We conclude that the regulation brings along a need to distinguish legal tasks from compliance tasks regardless of the organisational model chosen. The separation of legal and compliance functions to different organisational units makes this distinction even more important in practice. We also conclude that, due to the independency requirement of a compliance function, placing a compliance function within a legal department creates a need to make sure that it suits to in-house counsels’ traditional advisory role and their remuneration principles. Furthermore, placing a compliance function within a legal department may also lead to a need to consider to what extent the activities of the legal department should be subject to internal auditing. And finally it also, in a way, brings the department under the scrutiny of the financial supervisor.

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Finland Regulation Banking & Finance November 2010 Vol. 4, No. 13, Autumn 2010

Jyrki Manninen

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Mr. Jussi Pelkonen, LL.M, M.Sc (accounting), is a general counsel at EvliMr. Jyrki Manninen, LL.M, M.Sc (finance), is a senior legal counsel at Securities Law Finland, unit of Nordea Group Legal. He joined Nordea in 2008, after seven years as a legal adviser at Capital Markets Department and Market Supervision Department of the Finnish Financial Supervisory Authority. Nordea Bank Finland Plc is a wholly owned subsidiary of Nordea Bank AB (publ), the listed parent company of the Nordea Group. Nordea is the largest financial services group in the Nordic and Baltic Sea region and one of the five largest listed Nordic companies.

Jussi Pelkonen

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Mr. Jussi Pelkonen, LL.M, M.Sc (accounting), is a general counsel at Evli Bank Plc, Corporate Finance. After joining Evli’s Corporate Finance-unit in 1999, he has been acted as an analyst and sales responsible director prior to be appointed as general counsel, corporate finance. Evli Bank Plc, founded in 1985, is one of the leading investment banks in Nordic and Baltic Sea region. Evli operates in two business areas: Investment Banking and Wealth Management.

Nordea Bank Finland Plc

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Evli Bank

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Finland Regulation Banking & Finance November 2010 Vol. 4, No. 13, Autumn 2010