Compliance and Regulation in Russian Finance: A Look at the Central Bank’s Role
In the complex world of Russian finance, compliance and regulation are key components that help ensure the stability and integrity of the market. The Central Bank of the Russian Federation (CBR) plays a pivotal role in overseeing the compliance and supervisory programs of various financial institutions. In this article, we examine the requirements for these programs, the role of gatekeepers and directors in maintaining regulatory standards, and more.
Compliance Programs and Requirements
The CBR has established regulations to guide internal control and risk management for various market participants. The bank assesses the systems of all Russian banks annually, providing recommendations for improvement. For other regulated entities, the CBR continuously monitors their internal control and risk management practices as part of its consistent supervision.
Gatekeepers: Vital Players in the Regulatory Structure
In the battle against money laundering and other financial crimes, compliance is on the forefront of the regulator’s agenda. Almost every regulated entity must appoint an anti-money laundering officer. These appointments, including those for:
- Chief operating officers
- Board of directors members
- Management board members
- Chief compliance officers
- Chief accountants
are subject to either CBR approval or notification. With a rigorous vetting process, the CBR strives to maintain business reputation and qualification standards for these essential figures.
Directors’ Duties and Liability
Directors of financial services firms hold significant responsibilities towards their companies. Obligations go beyond their general corporate duties and include:
- Organizing risk management and internal control systems
- Safeguarding financial institutions
- Adhering to Russian law, care standards, and exercising skillful and diligent judgment
When breaches occur, directors may face consequences, including:
- Civil, administrative, and criminal sanctions
- Liability for any financial losses caused by their actions or omissions
Private Rights of Action
Violations of the CBR’s rules and regulations can result in damages and losses for private individuals. These injured parties may file a claim through the Financial Ombudsman Service. However, before proceeding to court, a claimant must first submit their grievance to the Financial Ombudsman Service.
Standard of Care for Customers
The CBR is committed to upholding strict standards to protect retail customers from harm. Financial services firms must adhere to guidelines such as:
- Mandatory disclosure of information
- Prohibition of additional services solicitation
- Fair contract conclusion
- Clear communication and support during contract performance
Contraventions can result in penalties for the offending entity. Damages prescribed by the Financial Ombudsman Service may be claimed by affected customers.
Rule-Making Process
New rules shaping the financial services industry undergo consultation before adoption. The public consultation process begins with draft laws and draft by-laws being published on the CBR’s website. The regulator collects and analyzes all feedback, which may be implemented or rejected, and shares the results with the public. Engagements in face-to-face consultations or written comments from market participants are also encouraged. These collaborative efforts are essential for a dynamic regulatory landscape adapting to the financial services industry’s unique challenges.