1. Financial Regulatory
Compliance:
Global Leading Practices and
Reputational Risk
Vladimir Berezansky
EY FIDS Moscow
26 October 2015

2. Page 2
KYC & On-Boarding: Enhanced Risks
Financial
regulators in all
jurisdictions are
demanding
enhanced levels of
compliance,
transparency and
responsiveness
Tendency for
thresholds and
metrics defining
minimally acceptable
Compliance to
ratchet upward
continuously
Complexity and
redundancy of
KYC, on-boarding
procedures
escalate
operational costs,
time and energy
Responding to these
pressures, some
banks take a
maximalist approach
toward requiring
supporting
documentation – i.e.,
padding the KYC files
New measures and requirements
imposed by financial regulators that
were designed to reduce KYC / on-
boarding risks for licensed entities
have had the opposite effect:
Exposure to regulatory / reputational
risk has never been higher.
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3. Page 3
KYC: Financial Regulators Tighten the
Screws
EU Fourth AML Directive
Reflects and enforces the trend
of increasingly invasive regulatory
oversight and control:
• Requires more detailed
corporate identification
documentation;
• Applies to all EU legal entities
(including companies) –
meaning,
NO GRANDFATHERING
FinCEN
Is proposing changes to BSA
«to clarify and strengthen
customer due diligence
requirements» for FIs, including:
• Explicit DD requirements –
i.e., not only «What?» but
«How?»
• New regulatory requirement to
identify the beneficial owner of
corporate (legal entity)
customers
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4. Page 4
Pillars of Robust Financial Regulatory
Compliance
Corporate
Governance
Global Control
Room/Information
Barriers
Three Layers
of Defence
Training:
Induction,
Required,
Periodic
Surveillance
and
Monitoring
Culture of
Compliance/
Tone from
the Top
Anti-
Bribery/Anti-
Corruption
Controls
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5. Page 5
Full-Service Bank: Corporate Governance
Third-Party Due
Diligence (Vendor &
Supplier Vetting)
Training
Systems
Monitoring &
Surveillance
Compensation Committee
Internal Audit
BOARD OF DIRECTORS
Corporate Secretariat
Conflict Clearance
Committee
CEO
CRO HR CFO COO
General
Counsel
CCO CIO
Risk
Management
HR LegalOperationsFinance Compliance
IT
Board-
Level
‘C-level’
Executive
Board
Cross
(Interdepartmental)
functions
Operations
‘Back
Office’
Investor Relations Marketing & Communications
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6. Page 6
Full-Service Bank: Segregated Front Office Activities
Board
CEO
Retail Leasing
Investment
Banking
Wealth
ManagementCorporate
Private
Banking
Trade
Finance
Custody/
Depositary
Asset
Management
Equities Sales &
Trade
FICC Sales &
Trade
Proprietary
Trading Desk
Corporate
Finance
Structured
Products
Capital Markets:
Debt & Equity
Bank 2 Bank
Research
Credit
Risk/Research
‘Public’ Side:
no PMSI
‘Private’ Side:
PMSI
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7. Page 7
International
► Financial Action Task Force – FATF
Recommendations
► Wolfsberg Group AML Principles &
Questionnaire
► United Nations Convention against
Corruption (UNCAC)
Regional
► EC – Fourth Anti-money Laundering
Directive
► Markets in Financial Instruments Directive –
MiFID
► European Securities and Markets Authority –
ESMA
► European Market Infrastructure Regulation –
EMIR
Global Leading Practices: Sources of Authority
& Guidance (1)
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8. Page 8
Global Leading Practices: Sources of
Authority & Guidance (2)
National/Domestic
• Regulatory Authorities –
e.g., SEC, FCA, PRA, FINMA,
(former FSFM) and central banks
(Fed, BoE, ECB, RCB)
• Self-Regulatory
Organisations – e.g., ABA, BBA
SBA, ARB, NAUFOR
• «Self-Accrediting»
Collegial Bodies – ACAMS,
ICA, ECA
Leading Practices
Various sources of
authority/ voluntarily
adopted & implemented
May be implemented as a
tool (point of reference) to
mitigate risk
May be adopted as a
distinguishing factor /
hallmark
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9. Page 9
► Bank Secrecy Act (1970)
► Foreign Corrupt Practices Act
(1977)
► Patriot Act (2001)
► Sarbanes-Oxley Act (SOX)
(2002)
► Foreign Account Tax
Compliance Act (FATCA)
(2010)
► Dodd-Frank Act (2010)
Highly Influential Foreign Regulatory
Regime: USA
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10. Page 10
Highly Influential Foreign Regulatory
Regime: UK
► Terrorism Act (2000)
► Proceeds of Crime Act (2002)
► Money Laundering Regulations
(2007)
► Bribery Act (2010)
► FCA Handbook, PRA Handbook,
PRA Rulebook (2013)
► Counter-Terrorism and Security Act
(CTSA) (2015)
► AML Guidance issued by the Joint
Money Laundering Steering Group
(JMLSG)
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11. Page 11
Russia’s Financial Regulatory Regime (1)
№ of
document
Type of
regulation Full name Date
86-FZ Federal Law On the Central Bank of the Russian
Federation (Bank of Russia)
10 July 2002
395-1 Federal Law On Banks and Banking Activity 02 December 1990
39-FZ Federal Law On the Securities Market 22 April 1996
181-F Federal Law On Using State-issued Securities of
the Russian Federation for
Increasing Bank Capitalization
18 July 2009
115-FZ Federal Law On Counteracting the Legalisation
(Laundering) of Income Generated
from Criminal Activity and the
Financing of Terrorism
07 August 2001
273-FZ Federal Law On Counteracting Corruption 25 December 2008
224-FZ Federal Law On Counteracting the Improper Use
of Inside Information and Market
Manipulation
27 July 2010
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12. Page 12
Russia’s Financial Regulatory Regime (2)
№
Type of
regulation Full name Date
№262 Russian Central
Bank Regulation
On Identifying Clients and Beneficiaries of Credit-issuing
Organizations in order to Counteract the Legalization
(Laundering) of Income Generated from Criminal Activity and the
Financing of Terrorism
19 August 2004
№242 Russian Central
Bank Regulation
On Organizing the Internal Control Function at Credit-issuing
Organizations and in Banking Groups 16 December 2003
№375-P Russian Central
Bank Regulation
On Requirements of the Rules for the Internal Control Function
at Credit-issuing Organizations in order to Counteract the
Legalization (Laundering) of Income Generated from Criminal
Activity and the Financing of Terrorism
02 March 2012
№375-P Appendix to
Regulation of the
Bank of Russia
Indicators (Red Flags) of Suspicious Transactions
02 March 2012.
№321-P
Russian Central
Bank Regulation
• On Procedures for Credit-issuing Organizations to Use in
Reporting to Regulatory Authorities on Information Designated
in the Federal Law
• On Counteracting the Legalization (Laundering) of Income
Generated from Criminal Activity and the Financing of
Terrorism
29 August 2008
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13. Page 13
► USD 25 billion — Five banks 2012, for alleged foreclosure
processing abuses
► USD 13 billion — JPMorgan Chase 2013, for claims over
residential-backed mortgage securities
► USD 9.3 billion — Thirteen banks 2013, for alleged
foreclosure abuses
► USD 9 billion – BNP Paribas 2014, sanctioned countries list
violations
US Banking Regulatory Fines
► [USD 8.5 billion — Bank of America – June 2011, settlement reached with group of
mortgage bond holders]
► USD 2.6 billion — Credit Suisse AG – May 2014, for conspiracy to aid tax evasion
► USD 1.9 billion — HSBC 2012, for deficiencies in anti-money laundering controls
(largest BSA fine ever)
► USD 1.5 billion — UBS 2012, for manipulating interbank lending rates including LIBOR
► USD 1.4 billion — 10 Wall Street firms 2003, for conflicts of interest between Research
and IB functions
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14. Page 14
► GBP37.7 mln. Barclay’s Sep 2014, for insufficiently proper segregation of client funds
► GBP28 mln. Lloyd’s Dec 2013, for ‘serious failings’ in systems & controls governing
financial incentives to sales staff
► GBP205 mln. Rabobank Oct 2013, for misconduct relating to LIBOR
UK Banking Regulatory Fines
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15. Page 15
Conclusion
To create an operational environment that anticipates
and identifies likely regulatory enhancements;
To position itself to respond rapidly and cost-efficiently
in order to implement change driven by the regulator
and/or the market;
To reap the tangible benefits of developing and
maintaining a reputation among regulators and in the
market for robust compliance.
1
2
3
In a rapidly changing financial regulatory environment,
global leading practices position a bank have:
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16. ► Leader, Compliance Practice, Assurance, Fraud
Investigation & Dispute Services (FIDS) Group
► Joined EY in 2013, based in EY CIS Moscow office
► Education/Background – Bachelor’s (Linguistics),
Columbia University (New York); Juris Doctorate
(JD), international private law, Washington College
of Law, The American University (Washington, D.C.),
► Federal District (Washington, D.C.) Bar (license)
► Russian broker-dealer license (1,0 Certification)
► Regular speaker at conferences, graduate (business
& law) schools; meetings with financial regulators
► Languages spoken – English, Russian, French &
German
► Nearly twenty years work experience in Russia / CIS and Baltic
Republics, Cyprus, Switzerland and London financial markets
► Compliance practice includes:
► review & analysis of Russian/CIS banking, financial
and corporate Compliance infrastructures;
► due diligence on Russian/CIS cross-border holding
structures;
► gap analysis and similar (e.g., dashboard)
assessments of internal policies & protocols as
measured by global best practices, US / UK
regulatory standards, and local regulatory
requirements;
► review adequacy & effectiveness of corporate
governance mechanisms (Board structure, Board
committees and Director / Officer authorisations,
internal policies & protocols, etc.)
► prepare Russian/CIS entities for scrutiny by capital
markets (ratings agencies, potential counterparties,
investment and/or acquisition targets) and/or
private investment entities (funds, family offices)
► Prepare banking & financial clients for relevant Anglo-
American & EU regulatory regime compliance, including UK
Bribery Act, FCPA, Dodd-Frank / EMIR and FATCA
► Extensive network of contacts & working relationships with
regulators, SROs, banks and regulated securities market
entities in Russia / CIS, Baltic Republics, Switzerland, Cyprus,
London, New York and Washington, D.C.
Place
image
here.
Refer to
guidelines
Vladimir Berezansky
Leader, Compliance Practice
Assurance | FIDS
Tel.: +7 495 287 6537
Cel: +7 985 773 4176
Email: vladimir.berezansky@ru.ey.com
CV - Vladimir Berezansky
Background Professional experience
Skills
► Develop and implement Western-quality Compliance
programs primarily for Russian / CIS banks,
investment firms and affiliated group / holding
structures
► Comprehensive due diligence – AML / KYC,
regulatory and reputational risk – and corporate
governance analysis, including restructuring
recommendations
► Develop confidential dossiers on key Russian / CIS
officers and directors, including PEPs and senior
managers of state-owned enterprises