Governance and the Role of the Compliance Officer
Regulators do not just assess a payment institution’s business model at the point of licensing; they place significant weight on the strength of its governance arrangements, both at authorisation and throughout the life of the licence. A well-structured governance framework is often the difference between a smooth supervisory relationship and a difficult one.
The Management Body
The Central Bank of Cyprus expects a payment institution’s management body to collectively possess the knowledge, skills and experience needed to understand the firm’s activities and the risks it faces, and to be able to challenge management decisions effectively rather than simply rubber-stamping them.
Three Lines of Defence
Many well-governed payment institutions structure their internal control environment around three lines of defence: operational management responsible for day-to-day risk controls, an independent risk and compliance function overseeing those controls, and internal audit providing independent assurance over the whole framework.
The Compliance Officer’s Role
A dedicated compliance officer, with sufficient seniority, independence and resources, is expected to monitor the firm’s ongoing compliance with its regulatory obligations, including AML/CFT, safeguarding, conduct and reporting requirements, and to have a clear reporting line to the board or management body, not merely to business management.
Board Oversight of Risk
The management body should receive regular, substantive reporting on compliance and risk matters, and should be able to demonstrate genuine engagement with these issues, rather than treating compliance reporting as a routine formality.
Getting Governance Right From the Start
Building a proportionate but genuinely effective governance structure from the outset, rather than adding it retrospectively once the regulator raises concerns, tends to result in both a smoother authorisation process and a more resilient business over time.
Enalian advises payment institutions, e-money institutions and fintech businesses on licensing, authorisation and ongoing regulatory compliance in Cyprus. If you are exploring a PSP or EMI licence, or need support with an existing authorisation, our team can help. Get in touch with our team to discuss your specific circumstances.
This article is provided for general informational purposes only and does not constitute legal, tax or regulatory advice. Regulatory requirements are subject to change; readers should seek specific advice on their circumstances before taking action.
