Baydeldinova T.A.
PhD doctoral student
of customs, fiscal and
environmental law
Al - Farabi Kazakh National University
General review of compliance control in banks of the Republic of Kazakhstan
The activity of second-tier banks in the Republic of Kazakhstan
is carried out on the basis and in accordance with the requirements of the Law
"On Banks and Banking Activity in the Republic of Kazakhstan" and
other legislation. Thus, in Kazakhstan it is allowed to establish banks whose
shareholders are non-residents of the Republic of Kazakhstan. According to the
Law, the bank with foreign participation is a second-tier bank, more than
one-third of the placed shares of which are owned, owned and / or managed:
a)
non-residents of
the Republic of Kazakhstan;
b)
legal entities -
residents of the Republic of Kazakhstan, more than one third of the placed
shares or stakes in the authorized capitals of which are in the possession,
ownership and / or management of non-residents of the Republic of Kazakhstan or
similar legal entities resident in the Republic of Kazakhstan;
c)
Residents of the
Republic of Kazakhstan who are agents of funds (trusted persons) of
non-residents of the Republic of Kazakhstan or legal entities specified in
subparagraph
There are a number of additional features for banks with foreign
participation in the creation, obtaining permission to create a bank, to obtain
a license to conduct banking activities, but in this article we will touch upon
the features, differences in the compliance function that are present in every
bank of the country, including number of banks with foreign participation. The
activity of second-tier banks in the Republic of Kazakhstan is carried out on
the basis and in accordance with the requirements of the Law "On Banks and
Banking Activity in the Republic of Kazakhstan" and other legislation.
Thus, in Kazakhstan it is allowed to establish banks whose shareholders are
non-residents of the Republic of Kazakhstan. According to the Law, the bank
with foreign participation is a second-tier bank, more than one-third of the
placed shares of which are owned, owned and / or managed:
a)
non-residents of
the Republic of Kazakhstan;
b) legal entities - residents of the Republic of Kazakhstan,
more than one third of the placed shares or stakes in the authorized capitals
of which are in the possession, ownership and / or management of non-residents
of the Republic of Kazakhstan or similar legal entities resident in the
Republic of Kazakhstan;
c)
Residents of the
Republic of Kazakhstan who are agents of funds (trusted persons) of
non-residents of the Republic of Kazakhstan or legal entities specified in
subparagraph.
There are a
number of additional features for banks with foreign participation in the
creation, obtaining permission to create a bank, to obtain a license to conduct
banking activities, but in this article we will touch upon the features,
differences in the compliance function that are present in every bank of the
country, including number of banks with foreign participation.
Compliance is the action according to the request or
indication; obedience (English compliance is an action in accordance with a
request or command, obedience). Compliance is compliance with any internal or
external requirements or standards. [1]
In foreign countries, there was an understanding about
the need for compliance and compliance functions in the bank long before the
introduction of this institution in Kazakhstan. For example, compliance in the
world practice began to acquire after writing the Basel principles on
compliance control, as well as a push in the development received after the law
"The Sarbanes-Oxley Act of 2002 (SOX)" (USA). It should also be noted
that compliance control in the banking sector of Kazakhstan officially appeared
only in 2006 after the introduction of the Instruction on the requirements for
the availability of risk management and internal control systems in second-tier
banks approved by the Resolution of the Board of the Agency of the Republic of
Kazakhstan on Regulation and Supervision of Financial market and financial
organizations from September 30, 2005 No. 359. At the beginning of the
development of compliance functions in banks, local banks did not fully
understand the importance of compliance control, Foreign experts were trained
to introduce this process into banks.
For any state it is attractive to have in the economy in
general, and in the banking sector in particular the presence of foreign
investors. Their presence in the country means that the world community regards
the country, and in our case Kazakhstan, as a stable economically and
politically developed state, in which it is safe to invest money. This also
means that Kazakhstan has the potential for economic development, particularly
in the banking sector, the investor expects to make a profit, foreign investors
have their own vision for development prospects, possibly presuppose the
existence of advantages over local banks.
The National Bank of the Republic of Kazakhstan, as a financial regulator of
banking activities, informs the population of Kazakhstan about existing banks
created with the use of capital of Kazakhstan entrepreneurs, and with foreign
participation, posting information on its official Internet resource, which can
be accessed via the link http: / /www.nationalbank.kz/?docid=3009&switch=russian.
At present, 33 second-tier banks operate in Kazakhstan, of which 12 are created
with the participation of foreign banks. A number of subsidiary banks are
represented on the financial market. Subsidiary banks in their name are obliged
to use the name of the parent organizations. Therefore, based on the names of
Kazakh banks, information on their shareholders becomes clear.
As a rule, shareholders of banks with foreign participation are large financial
corporations or financial institutions of any particular country. In
Kazakhstan, in the banking sector, such foreign financial institutions are
represented as parental organizations of second-tier banks with foreign
participation, such as:
Citibank N.A. (USA) - in JSC Citibank Kazakhstan, which
specializes in servicing large international corporate clients located in
Kazakhstan;
Al Hilal Bank (UAE) - in the Islamic Bank Al-Hilal, which is the only Islamic
bank in the country that carries out banking activities under the unique
standards of Islamic Sharia;
The National Bank of Pakistan (Republic of Pakistan) - in
JSC "DB" National Bank of Pakistan "in Kazakhstan, serving the
representatives of Pakistan, located in our country;
T.S. "Ziraat Bankasi" (Republic of Turkey) - in
JSC "Daughter Bank" Kazakhstan-Ziraat International Bank ",
cooperating with Turkish entrepreneurs and individuals;
Industrial and Commercial Bank of China Limited (PRC) -
in JSC "Commercial and Industrial Bank of China in Almaty", which
works with individuals and legal entities from China;
Shinhan Bank (Republic of Korea) - in JSC Shinhan Bank
Kazakhstan, servicing corporations and individuals from Korea;
JSC "Alfa-Bank" (Russia) - in the JSC DB "Alfa-Bank";
Bank of China (PRC) - in JSC DB "Bank of China in
Kazakhstan", also works with individuals and legal entities from China;
Home Credit and Finance Bank (Russia) - in DB Bank Home Credit JSC;
PJSC "Sberbank of Russia" (Russia) - in DB of
JSC "Sberbank of Russia";
PJSC "Bank VTB" - in the JSB JSC VTB Bank (Kazakhstan).
It should be noted that these banks accept servicing for all interested
individuals and legal entities, both residents and non-residents of the
Republic of Kazakhstan. But, apparently, due to the mentality, entrepreneurs
and individuals turn to those banks that can provide services in a certain
language, and who at a deeper level understand the needs of representatives of
individual states.
Also in November 2016, JSC "Altyn Bank" (JSC
"Halyk Bank of Kazakhstan" JSC) announced that Halyk Bank of
Kazakhstan JSC reached an agreement on attracting a strategic investor - one of
the largest financial institutions of the People's Republic of China China
CITIC Bank Corporation Limited and the sale of 60% of the shares of Altyn Bank
JSC (DB of Halyk Bank of Kazakhstan) owned by the People's Bank . [2] This means that soon another foreign investor will enter the banking sector
of the country.
However, to great regret, in November 2014 the financial market of the country
was left by such a large player as SB JSC HSBC Bank Kazakhstan (the parent
organization was HSBC Bank plc, UK) [3]. In June 2016, JSC SB RBS (Kazakhstan), the only
shareholder of the bank was Royal Bank of Scotland plc, was also acquired by an
entrepreneur from Russia [4].
All this testifies that in the banking sector of the
country there are periodic changes both in the direction of improvement with
the infusion of foreign capital into local banks and in the other direction
when foreign investors leave the Kazakhstani banking market.
Thus, foreign investors from many parts of the world are
represented in the Kazakhstani banking sector, and Kazakhstan's nearest
neighbors, represented by the major banks of China and Russia, are particularly
represented.
The presence of foreign financial institutions in the financial market of
Kazakhstan, in our opinion, positively affects both the banking business and
for supervisory purposes. On the business side, the economic aspects can be
positive moments: providing customers with banking products that may not yet be
represented in local banks, quality of service, information security and other
issues. From the supervision side, it may be useful to experience the
development and supervision of the banking sector in any foreign country from
which the investor is represented.
Responsibilities of the compliance control of DB of JSC
"HSBC Bank Kazakhstan" were clearly defined by the requirements of
the parent organization and divided into two components: the issues of
countering money laundering and terrorism financing (monitoring of sent
messages subject to financial monitoring, identification of suspicious
transactions, taking other measures to counter money laundering and terrorist
financing), and issues related to compliance with the requirements of the
National Bank of the Republic of Kazakhstan. The composition and staff of the
compliance department was also approved by the board of directors of the bank, the compliance controller was subordinate to
the board of directors, all available information regarding the situation in
the bank was brought to the notice of the bank's management. Thus, the bank's
leaders supported the compliance culture by assigning one of the key role to
the compliance control work.
As far as the author of this article is aware, approximately the same scheme
was used in JSC DB "RBS (Kazakhstan)".
Other experience of functioning of compliance control in
banks with foreign participation can also be introduced: the compliance
controller is subordinate to the board of directors, but there is no support
from the parent organization for the implementation and operation of compliance
control, compliance officers based on their experience and knowledge introduces
in the daily life of the bank internal control.
From this it can be concluded that parental organizations that are foreign
banks and having the appropriate compliance culture, the experience of its
implementation in their banks, intends in their image to implement the same
campaigns on compliance control in all their subsidiaries. First of all, in our
opinion, this is done with a view to facilitating the management of
subsidiaries, the use of unified approaches when analyzing a particular
situation in banks, and maintaining the bank's business reputation.
The situation with regard to compliance control is
slightly different in Kazakhstan banks, in which there is no foreign capital.
So, not in all local banks, the compliance controller is subordinate to the
board of directors, in local banks it can be subordinated to the board of the Bank,
which in our opinion can be regarded as a conflict of interest, since the
bank's board is called upon to take measures to eliminate the compliance risk
recommended by the compliance controller , he does not have the functional to
apply to the board of directors, this can be regarded as exceeding his official
powers. In the event that the compliance controller is subordinated to the
management board, the board at its level solves, including questions of
informing the board of directors about the true state of affairs in the
effectiveness of compliance control in the bank. In addition to this feature in
Kazakh banks without foreign participation in the function of compliance
control, which is the second line of defense, the bank's board can be transferred
not its inherent tasks, the issues of the units of the first line of defense.
For example, in Kazakhstan banks, the responsibilities of the compliance
controller may include not only control issues, but directly issues of
performance of any duties. In banks without foreign participation, compliance
is often associated only with the issues of combating money laundering and
terrorist financing. This can be explained by the fact that the bank's
management may underestimate or misunderstand the importance of the second line
of compliance risk, perhaps the bank's leaders do not fully understand the need
for this function in a bank that does not bring direct income to banking
activities, but is an additional obstacle to ways to solve business problems.
Thus, at present, the Rules for the formation of a risk
management system in second-tier banks approved by the Resolution of the Board
of the National Bank of the Republic of Kazakhstan No. 29 of February 26, 2014
provide for the possibility of subjecting the compliance controller to both the
board of directors and the board (its chairman). Also, the specified normative
legal act describes the functional of the compliance control unit, while it
does not stipulate that the fulfillment of other functions can not be entrusted
to the Compliance Control Division.
Thus, the National Bank, in its normative legal act,
provided for the right of banks to independently resolve issues of compliance
and functional responsibilities of the compliance control unit, including
compliance control activities, in our opinion, rendered "disservice"
to the banking sector, as the lack of a unified approach to the organization of
compliance control in all Kazakhstan banks allows banks to abuse this right and
not fully use the lever to minimize compliance risk. This skew may be
eliminated, in our opinion, by fixing clear requirements both for subordination
and for functional duties of the compliance controller function in all
second-tier banks. The introduction of this proposal, perhaps, will help to
eliminate the existing imbalances in banks on compliance issues.
1. Д.В. Малыхин Особенности организации комплаенс
контроля в российских банках // Методический журнал «Внутренний контроль в
кредитной организации». - #2009. base.garant.ru/5750020/ base.garant.ru/5750020/
http://www.altynbank.kz/ru/press.center/news/2016/November/249