Compliance risk management
The system of compliance risk management is designed to ensure that Sberbank Group’s operations comply with legal requirements and best practices in anti-money laundering and financing of terrorism (AML/FT), monitoring economic sanctions imposed by the Russian Federation, international organisations or individual states, preventing the use of insider information and price abuse in financial markets, managing conflicts of interest, anti-corruption effort, and compliance with other employee ethical conduct requirements. Now the Group is creating a common compliance risk management system across all subsidiary banks and affiliated companies. To this end, in 2013 we completed, in general, the formation of compliance management organisational structure at Sberbank, which is the heart of the Group’s compliance management system. We set up a standing Compliance Committee authorised to manage significant components of compliance risk.
Subsidiary banks and affiliated companies also continued to improve the organisational structure and the introduction of compliance risk management system across all business lines based on Sberbank’s unique methodological approach.
In 2014, we expect to complete the unification of compliance risk management principles and focus on developing and introducing automated compliance control systems.
Managing conflicts of interest and fighting corruption
In 2013, the bank adopted the Conflict of Interest Management Policy and Anti-corruption Policy. Based on these documents, Sberbank Group is committed to the principle of fair dealing when providing advice, or transacting with or on behalf of our clients, as well as the principle of zero tolerance in relation to any incidents of corruption.
The improvement of internal control procedures also contributed to toughening the fight with corruption-related crimes. We are strongly committed to detect incidents of corruption and apply strict administrative and disciplinary sanctions to those involved.
In 2014, implementing the Anti-corruption Policy and the Conflict of Interest Management Policy, the bank will continue integrating the mechanisms built in the bank’s operating procedures with the Group members.
Counteracting the legitimisation of the proceeds of crime (money laundering) and the financing of terrorism
In 2013, we continued to improve AML/FT and the system for counteracting financial crime. For this purpose, we updated Sberbank’s internal regulations, introduced changes to banking processes, and improved automated procedures to detect and monitor client transactions. In 2013, the bank continued the introduction of the automated system based on the Oracle Mantas platform. This system will make it possible to implement a unique system-based approach to the automated control of client transactions and carry out analytical procedures for the purposes of AML/FT.
BPS-Sberbank completed the introduction of the automated system designed to ensure a centralised control of client operations in order to detect suspect transactions that may be connected with money laundering or the financing of terrorism. DenizBank introduced the Audit Command Language platform that will enable the bank to raise the efficiency of monitoring and managing suspect transactions through modelling scenarios based on transaction data.
The concept of responsible financing is based primarily on social and environmental risks that are considered in lending and investment processes. This is a component of risk management system as social and environmental problems of borrowers may result in financial and reputation risks for financial institutions. The practice of responsible financing is new to the Group’s banks and now we lack a common policy in social and environmental risk management. In developing an approach to these risks the Group’s member banks are governed by national laws of the countries of operations and the maturity of financial markets.
Therefore, the level of regulation and the scope of application of social and environmental risk management procedures differ across the Group. At Sberbank, for example, the evaluation of the borrower’s unfavourable effect on society and environment is carried out within the quality analysis of the borrower. In addition, the bank’s rules prohibit financing of any projects related to pawn-broker or gambling business. DenizBank, BPS-Sberbank, and Sberbank Kazakhstan evaluate environmental risks related to projects that are financed from the funds provided by development banks (EBRD, EIB, and IFC). In addition, DenizBank requires from borrowers to provide environmental impact assessment in relation to project financing.
Sberbank Europe introduced a comprehensive system of environmental and social risk management comprising several components: environmental and social policies, environmental and social risk assessment procedures, and monitoring borrower’s compliance with applicable standards. This system covers all corporate clients of the bank including project and trade financing.