Internal Audit Group
The structure of the internal audit and compliance functions including its role, mandate/authority, and reporting process
To ensure its independence, the Internal Audit Group (IAG) reports functionally to the LANDBANK Board-delegated Audit and Compliance Committee (AC Com) and administratively to the President and CEO.
The IAG plays a key role in assisting the LANDBANK Board of Directors, through the AC Com, in the discharge of its corporate governance responsibilities (1) by performing an independent and objective evaluation/assessment of management controls and operations performance, including technology risk management processes and IT controls; and (2) by determining the degree of compliance with laws, regulations, managerial policies, accountability measures, ethical standards and contractual obligations. It covers an appraisal of the plan of organization and all the coordinated methods and measures, in order to recommend courses of action on matters relating to operations and management controls. Moreover, in compliance with international standards, internal auditing also add value to LANDBANK’s operation by evaluating its risk management and governance processes.
As provided for in the IAG Charter, with strict accountability for confidentiality and safeguarding records and information, IAG is authorized to have unrestricted access to any Bank documents, records, properties, personnel, and information technology assets pertinent to carrying out an engagement and is relatedly authorized to require any personnel of the audited units to supply information and/or explanation as needed; and have discussions with any personnel of the auditable units during reasonable office time.
The results of its assurance services, consulting services, special/fraud audits and other services aim to draw attention to any breakdown in internal control or significant issues so that (1) remedial action may be undertaken; (2) improvements in procedures and systems to prevent waste, extravagance and fraud are recommended; and (3) appropriate system of controls and other accounting and operational matters are advised. The IAG also provides periodic reports on the internal audit activity’s purpose, authority, and responsibility, as well as performance relative to its plan including significant risk exposures and control issues, fraud risks, governance issues, and other matters needed or requested.
The IAG is also responsible for reporting to Senior Management and the AC Com on the internal audit activity’s Quality Assurance and Improvement Program, including results of internal assessments (both ongoing and periodic) and external assessments conducted at least every year and every five years, respectively, including the status of compliance on the agreed corrective actions/plans on unresolved audit issues.
The review process adopted by the LANDBANK Board to ensure effectiveness and adequacy of the internal control system
The AC Com’s primary purpose is to provide assistance to the LANDBANK Board in fulfilling its oversight responsibilities over the Bank’s reporting policies, practices and control, internal and external audit functions.
The IAG reports to the AC Com the results of its assurance services, consulting services, special/fraud audits, and other services to ensure that Senior Management is taking necessary corrective actions in a timely manner to address any weakness, non-compliance with policies, laws and regulations, and other issues identified by auditors.
The AC Com holds its meetings at least once a month to ensure the effectiveness and adequacy of the internal control system and that risks are properly managed. On top of the discussion and notation of the regular reports of the IAG and the Compliance Management Group, the Committee also deliberates on various issues and concerns related to the Bank’s existing internal controls, potential breaches and vulnerabilities and likewise recommends ways and measures to strengthen internal controls and manage risks. The business units that fail in the audit are also required to present to the AC Com the status/action taken on audit’s recommendations to address internal control breaches or related plans.
The minutes of the meetings of the AC Com are confirmed by the LANDBANK Board.
The AC Com held 15 meetings in 2019 with an average attendance of 94.79%.
The Committee is composed of the following:
Dir. Atty. Jesus V. Hinlo, Jr. (Chairman)
Dir. Atty. Jaime L. Miralles (Vice Chairman)
Dir. Virgilio DV. Robes (Member)
Dir. Nancy Irlanda Tanjuatco (Member until April 10, 2019)
In 2019, the IAG completed a total of 522 audit engagements or 124% of its target composed of 507 business units, application systems, and processes including ICAAP validation, risk measurement model validation, outsourced systems, and system development advisory while the remaining 15 comprise the audit of non-System Development Life Cycle projects, Eurogiro, Business Continuity Management Plan, Information Security Program, Related Party Transactions, and IT Drills. The IAG also performed confirmation of private deposit accounts. The IAG actively participated in the closure of 25 Overseas Filipino Bank branches and the eventual transfer of assets and liabilities to LANDBANK.
Enhancements to the Audit Command Language scripts, policies, and other audit tools were also undertaken by IAG to ensure the high quality of audit and to adapt to the complex and dynamic changes in the organizational environment.
The IAG also serves as the Secretariat to the Board-level Audit and Compliance Committee and to the management-level Accountability Assessment Committee.
For 2020, IAG shall continue to conduct risk-based internal audit of various business units, IT systems and processes, risk models/ICAAP document validation. Also included in the IAG’s major plans and programs for 2020 are the use of big data through data analytics, conduct of continuous auditing via Enterprise Fraud Management System, conduct of desk audit, and implementation of limited and focused scope audit. These initiatives are strategies of IAG to continue the value-adding services in response to the growing network of the Bank. IAG also hopes to acquire and implement an Audit Management System within a Governance, Risk, and Compliance System, which aims to automate the audit planning, fieldwork reporting, and monitoring of audit resources and findings, and to provide valuable inputs to the Compliance Management Group and Risk Management Group for the governance, risk, and compliance convergence.
Risk Management Group
The Risk Management Group (RMG) is an independent unit that performs the oversight function for all major risk areas of the Bank: credit, market, liquidity, operational, IT risk, information security, and consumer protection, among others. RMG is administratively under the President and CEO but functionally reports to the Risk Oversight Committee.
RMG has seven Bank Units namely, (1) Business Risk Management Department, (2) Credit Risk Management Department, (3) Treasury Risk Management Department, (4) Enterprise Risk Management Office, (5) Information Security and Technology Risk Management Office, (6) Credit Policy Formulation and Review Unit, and (7) Investment and Loan Committee Secretariat and Support Unit.
Aside from the managing risks for the Bank, RMG also performs risk assessment functions for the Bank’s subsidiaries and ably supports the Bank’s Steering Committee for the Internal Capital Adequacy and Assessment Process (ICAAP) by providing assistance in the preparation of the annual ICAAP Document submitted to the BSP. It spearheads the development and enhancement of the ICAAP framework utilizing stress testing tools and scenario analysis.
Trust Banking Group
In 2019, the LANDBANK Trust Banking Group (TBG) was able to maintain its Asset Under Management (AUM) level amounting to P319 Billion, as well as its 5th spot in the Trust Banking Industry. It also achieved 124% of its 2019 net income target. In order to strengthen its compliance and risk management practices, TBG has migrated to its new Trust Banking System. The new system allows TBG to proactively monitor and manage all risks related to trust operations which ultimate redounds to the benefit of its clients.
In its effort to provide convenience to its retails clients, TBG launched the Unit Investment Trust Fund Auto-Invest facility. This allows UITF clients to automatically contribute to their existing UITF account by authorizing TBG to debit their nominated LANDBANK deposit account and purchase units on a regular basis.
Meanwhile, TBG started to adopt in 2019 a new financial reporting for financial instruments of its trust funds and other managed funds from Philippine Accounting Standards (PAS 39) to PFRS 9, in compliance with the requirements of BSP Circular No. 1023.
TBG sees a sustained growth in its income with the roll-out of plans and programs that will enhance customer service and improve operational efficiencies.
In the area of enhancing customer service and internal processes, TBG will be launching its i-Invest Program that will allow UITF clients to make additional subscriptions to their existing UITF account using the Bank’s Mobile Banking Application (MBA). TBG will also implement its electronic Financial Reporting to provide better customer experience, increase TBG’s efficiency in reporting to clients and regulators, and support the Bank’s efforts to minimize the cost of doing business.
In 2020, TBG also plans to launch its Bangko Sentral Registration Document (BSRD) service, which will provide non-resident investors the facility to register their peso-denominated portfolio investments as required under the BSP regulations.
Compliance Management Group
The Compliance Management Group (CMG) oversees the implementation of the Bank’s Compliance Risk Management System which is designed to identify and mitigate risks which may erode the franchise value of the Bank such as risks of regulatory sanctions, material financial loss or loss to reputation the Bank may suffer as a result of its failure to comply with laws, rules, related self-regulatory organization standards, and codes of conduct applicable to its activities.
Said risk may also arise from failure to manage conflict of interest, treat customers fairly, or effectively manage risks arising from money laundering and terrorist financial activities.
CMG has two departments, namely: Regulatory Compliance Department and Anti-Money Laundering Department responsible for the implementation of LANDBANK Compliance Program and Money-Laundering and Terrorist Prevention Program Manual, respectively. CMG is headed by the Chief Compliance Officer (CCO) who functionally reports to the Board of Directors through the Audit and Compliance Committee (AC Com).