The Methodological Instrumentarium for Assessing Compliance Risks of Financial Monitoring of Banks

• Published in: Bìznes ìnform (Multilingual ed.) Vol. 11; no. 514; pp. 296 - 309
• Main Authors: Chmutova, I. M., Bezrodna, O. S., Nechyporenko, D. I.
• Format: Journal Article
• Language: English
• Published: Research Centre of Industrial Problems of Development of NAS of Ukraine 01.11.2020
• Subjects: banks; compliance risk; compliance system; financial monitoring; influence measures; operational risk
• ISSN: 2222-4459; 2311-116X
• DOI: 10.32983/2222-4459-2020-11-296-309

The article examines the essence and directions of identification of compliance risks of banks. The criteria for assessing compliance risks of financial monitoring of banks are purported to be: the level of development of the compliance system; experience in applying influence measures to banks by the NBU for violation of the requirements of legislation in the field of prevention and counteraction to money laundering and financing of terrorism (in the form of written warnings and fines); operational risk level and staff turnover. The defined directions of assessment include result factors (taking into account cases of risk materialization) and the factors that make the compliance function implementation process uncertain. The sequence and methodological instrumentarium for assessing compliance risks of financial monitoring of banks are presented, which provides for: formation of a database for analytical research by means of digitization of data (using coefficient approach and binary characteristics method); consolidation of the results of computation of indicators for the integral assessment of the researched phenomenon (by building up a composite indicator by means of the weighted amounts method). Based on information on the activities of individual banks, which during 2014-2020 belonged to the category of systemically important, practical approbation of the developed methodological instrumentarium was carried out. Recommendations on minimization of compliance risks of banks in the field of financial monitoring are formed, including: improvement of intrabank control systems; ensuring uninterrupted work and thorough training of staff; introduction of operational algorithms of actions to identify the reasons for their involvement in the processes of money laundering; using a risk-oriented approach to test business functions; introduction of effective monitoring systems and expansion of the list of compliance risk management instruments.