Risk Management

Russian Agricultural Bank understands that risk is inherent in every material business activity that the Bank undertakes. Russian Agricultural Bank has established an ongoing process for identifying, evaluating and assessing, controlling and mitigating risks faced by the Bank. The process also includes enhancing the Bank’s internal control system to accommodate changes in either the business environment or regulatory guidelines.

The comprehensive approach to risk management adopted at Russian Agricultural Bank assumes that the Bank’s risk management system is regularly reviewed with respect to compliance with business development and international best practices. This allows the Bank to maintain an appropriate risk-reward balance.

The goal of the Banks’s Risk Management Policy is to ensure that the aggregate risk undertaken by the Bank does not exceed levels set in accordance with approved strategic tasks. The priority is to ensure the maximum preservation of assets and capital by minimizing risk exposure, which can lead to unforeseen losses.

The Bank’s Supervisory Board approves the in-house risk management policy and is generally responsible for creating and monitoring the functioning of the Bank’s risk management system. Decisions relating to significant risks also fall within the limits of its authority. The Audit Committee assists the Supervisory Board in the oversight of the overall effectiveness of the risk management and internal controls system.

The Bank’s Management Board monitors functioning of the risk management system, approves documents and procedures for identifying, evaluating, and determining the risk tolerance level, and the selection of response actions - acceptance, limitation, re-allocation, hedging, and avoidance - and the monitoring thereof.

Day-to-day risk management is carried out by the Bank’s Management Board, the Chairman of the Management Board, and special collegial bodies and groups, as well as by certain internal divisions and officials within their authorities.

The Risk Management Department and the Risk Control and Assessment Services in the Bank’s branches are responsible for risk evaluation and control and carry out their functions independently from business units. The Risk Management Department is responsible for implementing the principles and methods for identifying, evaluating and monitoring financial, as well as operational, risk, including at the branch level.

The Bank’s authorized bodies review the Bank’s performance on a regular basis, and approve and adjust measures to identify and minimize negative consequences at an early stage.

Anti-Money Laundering and Terrorism Financing Policy

Based on Russian laws and regulations, as well as international recommendations, Russian Agricultural Bank is committed to complying with strict anti-money laundering principles and requires the same from its management team and employees.

Russian Agricultural Bank has established and operates a system of specialized internal controls based on Financial Action Task Force (FATF) recommendations, the Basel Committee on banking supervision and Wolfsberg principles. These principles underscore the Bank’s Anti-money Laundering and Terrorism Financing (AML/FT) Policy.

To upgrade risk management efficiency and maintain its strong business reputation, the Bank’s management team circulated its adopted anti-money laundering policy and guidelines, which were designed to prevent, detect and combat money laundering and terrorism financing, at all internal divisions, branches and additional offices.

The Bank carries out regular staff trainings to provide the necessary skills necessary to implement anti-money laundering policies and to counteract terrorism financing.

The Bank has implemented the “Know Your Client” (KYC) policy to identify clients a priori. The criteria for evaluating the risk level for a client’s potential involvement in legalizing proceeds from criminal activities (more commonly known as money laundering) and terrorism financing are set by the Bank’s Internal Control Rules. If the Bank considers the risk to be high, it will closely monitor all transactions within that particular client’s accounts.

All information received during client identification and disclosure and beneficiary identification is regularly updated, as data changes occur, or depending on the risk level for a client’s involvement in legalizing proceeds from criminal activities (money laundering) and/or terrorism financing.

When establishing account relationships with a partner bank, Russian Agricultural Bank inquires whether the correspondent bank has implemented anti-money laundering and anti-terrorism financing procedures, including: client identification. In cases in which the partner bank has not implemented these measures, the Bank will refrain from establishing correspondent relationships with that particular institution.

Russian Agricultural Bank does not establish or maintain correspondent relationships with non-resident banks that have no permanent governing bodies in the countries in which they have been registered.

On a daily basis, Russian Agricultural Bank monitors all operations via a special automated banking system and, in accordance with Russian legislation, forwards information about transactions that are subject to anti-money laundering control to the Federal Financial Monitoring Service.

If a party, either an individual or legal entity, performing a banking transaction is known to be involved in extremist activities, the Bank will suspend this party’s operations.

Adhering to the Bank’s AML/FT Policy is compulsory for all employees at both the Head office and the branch level.

The Bank’s effective risk management and optimized security system standards meet the highest anti-money laundering standards and enable the Bank to identify, analyze and assess potential threats and to undertake appropriate measures to avoid these risks.

Russian Agricultural Bank will proceed with elaborating on new supervisory tools, and will regularly participate in procedural reviews and conduct personnel training programs throughout the branch network and the Head office, which was designed to raise personnel awareness. These measures will further ensure the Bank’s compliance with AML/FT policies.