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Compliance with IFRS, Shariah Standards and Banking Regulations Ensures Transparency and Efficiency
The financial sector of Kyrgyzstan has been taking significant steps to ensure compliance with international financial reporting standards (IFRS), Shariah standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and local banking regulations. A recent review has revealed that several commercial banks in the country have implemented effective internal control systems, which are crucial for maintaining transparency and efficiency.
Internal Document Regulation
The reviewed banks have established an internal document regulating accounting records and entries, ensuring daily recording of transactions and reflecting each operation of the bank. Additionally, they provide regular reporting on their financial position, coinciding with the data in personal accounts, especially those related to deposits, loans, foreign exchange operations, and other transactions.
Reconciliation and Documentation
The banks have implemented a system of reconciliations by employees not involved in the authorization process or financial statement preparation. This ensures accuracy and completeness of records. All bank operations are documented, allowing for monitoring from inception to completion or current state. Confirmation of all operations is also provided through primary documents, with changes tracked through relevant records.
Continuous Monitoring
The reviewed banks have implemented a continuous monitoring system, which includes:
- Conducting measures to prevent, detect, and eliminate violations and errors in employee actions and systems.
- Assessing internal control risk by considering factors such as employee competence and honesty.
- Fulfillment of business recovery plans using backup automated systems and/or devices, including critical systems supported by external service providers.
- Eliminating shortcomings in employee activities and system operations.
Internal Audit, Risk Management, and Compliance
The reviewed banks have established a strong internal audit function, risk management system, and compliance-control services reporting to the Board of Directors. These functions operate on a regular basis, ensuring effective risk management and compliance with regulatory requirements.
Compliance-Control Service
For purposes of effective compliance control, each bank has created a Compliance-control service, which is responsible for developing a compliance program (plan), conducting periodical checks, training staff, and assisting the Management Board in compliance risk management. The head of the Compliance-control service reports to the Board of Directors on a regular basis.
Conflict of Interest Avoidance
To avoid conflicts of interest, the functions of the head of the Compliance-control service do not include management of business lines, employees generating risks involved in risk management, accounting and financial reporting, or internal audit services.
By implementing these measures, commercial banks in Kyrgyzstan have demonstrated their commitment to transparency, efficiency, and compliance with international standards. This ensures a stable and reliable financial sector, supporting economic growth and development in the country.