One of the leading experts on compliance, Chief Director of Compliance and Management of PASHA Bank, Chairman of the Compliance and Anti-Money Laundering Working Group at the Azerbaijan Banks Association, Anar Karimov, has given an interview to Trend about how the compliance area is developing in Azerbaijan and what prospects are opening up for companies implementing this function.
Not so long ago, such areas of company development as corporate governance, audit, internal control and compliance functions seemed to be something radically new and not fully mastered. However, amid increased economic turbulence in the world, including against the backdrop of the coronavirus pandemic, the above tools, in particular the compliance function of companies, increasingly began to come to the fore.
- What is the compliance function in the modern world and what business problems does it help to solve?
- Compliance in its original meaning implies a special set of various initiatives, one way or another aimed at preventing actions contrary to the current legislation through daily monitoring of all areas of the company's activities. The basis of the compliance function of any organization is, first of all, the construction of effective corporate business ethics and strict observance by the company's team of the requirements and norms of the current legislation.
This area can be conditionally divided into two components: the internal direction, which is responsible for monitoring the implementation by the company and its employees of internal rules, regulations and requirements, and the external one - regulating compliance with laws, various kinds of regulations and procedures of both national and international nature, in which the principles of activity of any company are spelled out in detail. Compliance also guarantees the protection of the rights of consumers, including shareholders and other interested parties. In general, the compliance function deals with issues such as adhering to appropriate standards of market conduct, managing conflicts of interest, proactively protecting against abuse of office by company personnel, treating clients fairly and ensuring conscientiousness in advising clients.
In Azerbaijan, compliance functions have become increasingly relevant in recent years. Besides, the number of companies employing compliance specialists grows every year.
- For which sectors of the economy are the introduction of a compliance system more relevant and necessary?
- Compliance must be present in all spheres of the economy, without exception. But first of all, it should affect the activities of financial market players. Refusal to apply compliance approaches in the activities of financial institutions can potentially lead to various negative and even force majeure circumstances, when, for example, depositors in banks can simply lose their investments, and the client business is left without financial and consulting support.
- How responsibly do financial institutions in Azerbaijan relate to the implementation of the compliance approach in their activities?
- It’s necessary to understand that companies that anyhow affect the development of the country's economy are obliged to realize that a balanced compliance approach and the implementation of an appropriate set of measures can not only prevent an organization from possible risks but also affect the profitability and success of its activities, bring considerable economic dividends. These companies are just banks - active participants in business development.
PASHA Bank was one of the first to use the compliance function in the financial sector in the early 2010s, which is the flagship of the most advanced experience and international practices in the market. Recently, all 26 banks operating in Azerbaijan have begun to show an active interest in this area. The corresponding staff is expanding, and specialists of this profile are sent to trainings abroad, where they can get acquainted with the best international experience in this area on the spot.
In general, this professional direction in Azerbaijan is still very immature and is at the stage of active formation and elimination of existing shortcomings. So, a coordination council and specialized working groups have been created under the Cabinet of Ministers of Azerbaijan, the main task of which is to increase the compliance culture in the country, its corresponding rating in the international arena.
- How has the coronavirus pandemic changed the compliance function principles?
- The pandemic and the quarantine restrictions that followed it affected almost all business segments and affected, in particular, the compliance functions of banks both throughout the world and in Azerbaijan.
For example, the risks of possible cyberattacks and other negative actions from the outside have increased because clients of financial institutions began to use more digital services.
In this regard, the compliance function was aimed at more effective control for the daily operations and the maximum prevention of any incidents.
The demand for foreign currency has increased in the Azerbaijani foreign exchange market since March 2020. This was followed by the establishment of a limit on the sale of currency by the currency market regulator (Central Bank of Azerbaijan), which could potentially increase the risk of speculation in the local market.
As a result, the responsibility of the staff involved in the compliance sector has increased to prevent such negative cases, who are authorized to analyze the foreign exchange earnings, as well as to reveal suspicious transactions. As a result of the effective work, the activity of speculators in the market was suppressed.
- What are the prospects for the development of the compliance sector in the local market in the coming years?
- The modern course of economic development shows that the main role in the success of the business is played by trained personnel, advanced technologies and the functions of competent supervision over the activity and compliance with all national, international norms and requirements.
All these conditions directly affect not only the profitability of the business but also the international reputation of the brand itself.
I would like the banks and the rest of the business to attract more employees who will work in this difficult but interesting sphere and invest in their professional development in the future.
I am glad that the interest in the compliance sphere in Azerbaijan has been recently growing and this applies not only to the big companies and organizations but also to the companies engaged in small and medium-sized businesses, which is important.
All this will increase the business transparency and Azerbaijan's international rating in terms of creating conditions in the country for sustainable business development and increasing the inflow of foreign investments.
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