Financial Crime World

Banking Industry Best Practices for Compliance Emerge Amid Regulatory Risks in Russia

The Importance of Effective Compliance Practices

A recent study has highlighted the significance of effective banking compliance practices to prevent serious material and reputational damage, including license revocation. The cases of Russian and foreign banks, such as Barings Bank, Trust Bank (PJSC), BNP Paribas S.A., and others, serve as stark reminders of the consequences of non-compliance.

A Three-Level Protection System

To mitigate these risks and improve banking operations, experts suggest a three-level protection system comprising:

  • Internal Audit: to identify potential compliance issues
  • Compliance: to ensure adherence to regulatory requirements
  • Business Process Owners: to oversee daily business activities

This ensures independence and collaboration among stakeholders to effectively manage compliance risks.

Banking Compliance in Russia vs. the US

Banking compliance in Russia and the US differs significantly, with the former facing unique challenges due to its geography and economic situation. To address these disparities, recommendations include:

  • Elect qualified individuals: with a good reputation to bank management teams
  • Ensure sufficient compliance specialists: with competitive salaries
  • Conduct ongoing risk assessments: and timely mitigation measures
  • Establish increased requirements: for bank activities and employee behavior
  • Develop a comprehensive code of ethics: and internal policies

Implementing Best Practices in Russia

The study also highlights the importance of introducing a “hot line” system and holding employees accountable for violations of applicable law and internal policies.

In light of recent sanctions restrictions, experts emphasize the need for banks to improve their compliance practices in this area. This includes:

  • Reviewing cooperation with sanctioned persons: and corporate structure
  • Internal policy review: to avoid the risks of violating sanctions regimes and liability

Conclusion

Implementing these best practices is crucial for Russian banks to ensure compliance and avoid the severe consequences of non-compliance. By following these guidelines, Russian banks can reduce their risk exposure and maintain a strong reputation in the industry.