The Financial System: Stability for Growth

6–8 June 2018, ST. PETERSBURG



    The financial market to get general guidelines

    CB, Moscow Exchange and Sberbank representatives are to discuss fair practices on the financial market. A roundtable devoted to in-house audit, in particular compliance procedures and development of professional judgment, will be held on 1 July, as part of the 25th International Financial Congress. One of the roundtable’s key topics will be developing unified standards for in-house audit by financial companies.  

    At the roundtable to be held on 1 July in St. Petersburg as part of the International Financial Congress, representatives of the main regulator, as well as strategically important financial institutions (including the Moscow Stock Exchange and Sberbank), will discuss approaches to organising in-house audits on the Russian financial market. The discussants will include: First Deputy Governor of the Central Bank of the Russian Federation Vasily Pozdyshev, Director of Banking Supervision Department of the Central Bank of the Russian Federation Anna Orlenko, Director of Insurance Market Department of the Central Bank of the Russian Federation Igor Zhuk, Head of the Main Office for Countering Malpractice in the Open Market of the Central Bank of the Russian Federation Valery Lyakh, the Director of the Legal Department of the Central Bank of the Russian Federation Alexei Guznov, Chairman of the Executive Board of the Moscow Exchange Alexander Afanasiev and Sberbank Senior Managing Director – Director of the Compliance Department Larisa Zalomikhina. One of the most important topics for the roundtable will be developing unified standards for building the system of in-house control, which will then be used by all companies on the Russian financial market.

    “Building effective in-house audit systems is an essential part of implementing the regulatory practice within Russian law based not only on bans on specific types of unscrupulous practice, but also on building the principles for conduct on the financial market”, says Head of the Main Office for Countering Malpractice in the Open Market of the Central Bank of the Russian Federation Valery Lyakh, Valery Lyakh. In his words, building “fences” of rules and standards shows malpractising participants clear conduct criteria and allows them to build new schemes for circumventing the existing bans. In this environment, regulation remains “reactive”, responding to common malpratices with new bans (higher “fences”). “The final result of introducing in-house audit services into the daily practice of financial institutions certainly creates obstacles to criminal plans, which come down to the financial institution refusing a ‘questionable’, ‘suspicious’ or opaque transaction”, he adds. According to Mr. Lyakh, one of the main directions in the work of compliance services must be to preclude involvement of an institution and its staff’s in unlawful activities, including insider trading, market manipulations, legalisation or laundering of criminal proceeds. It has been very relevant in recent years to ensure the credibility and fullness of financial statements submitted by financial institutions to the Bank of Russia.

    Implementation and refinement of in-house control systems, including compliance procedures, in non-credit financial institutions is one of the “Main Directions in Developing the Russian Financial Market in 2016–2018”. The latest version of this document was approved just a few days ago by the Board of Directors, Central Bank of Russia. The requirements on corporate management, where a major emphasis is placed on the risk management and in-house audit system, are contained in the Moscow Stock Exchange. Failure to comply with these requirements means the issuer cannot count on its securities being included on the top-level quotation list.

    “In recent years, more notifications of suspicious transactions have been submitted to the Bank of Russia, including signs and facts of insider trading and market manipulations. I’d also mention the higher quality of such notifications. For example, professional participants have become more careful in their analysis of substandard transactions conducted by their clients, informing on them only if their suspicions are not dispelled after in-house audits and due diligence”, comments Mr. Lyakh.

    The regulator reasons that, by developing the institute of in-house audit, including compliance practices (abiding by the code of corporate ethics, combating money laundering and financing of terrorism, regulating conflicts of interest, confidentiality compliance, the policies of “Chinese walls”, etc.), it will promote a significant increase in transparency of national financial institutes, this becoming one of the most important prerequisites for the Russian market investment appeal both at home and abroad.

     

    The 25th International Financial Congress “The Future of the Financial Markets” is organised by the Central Bank of the Russian Federation.

    Date and place: 29 June – 1 July 2016, St. Petersburg, Presidential Library