Internal Control System

Annual Report 2013
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# Internal Control System

The system of internal control put in place at Vnesheconombank is oriented towards ensuring enhanced effectiveness and efficiency of the Bank’s financial and economic activities, compliance with the legislation, legislative requirements established by regulators in various spheres of the Bank’s activities and rules set forth by Vnesheconombank’s internal regulatory documents.

The key structural element of the internal control system of Vnesheconombank is the Bank’s specialized unit, the Internal Control Service (ICS). The ICS is accountable to Vnesheconombank’s Supervisory Board and, in terms of its day-to-day activities, to the Chairman of the Bank. The Head of the ICS is appointed by the Supervisory Board of Vnesheconombank.

Central for the ICS’s activities is carrying out a continuous control (monitoring) of critical business processes. That embraces control over risks that arise in the process of the Bank’s lending and investment activities in financial markets, as well as over observing the provisions of regulatory documents defining the reserve formation procedure and functioning of the information systems.

Throughout 2013, the ICS carried out overall more than 50 audits, and comprehensive and thematic reviews at Vnesheconombank as well as its subsidiaries and affiliates. Vnesheconombank’s Internal Control Service also executes a continuous control over the efficiency and adequacy level of the measures undertaken by the Bank in order to eliminate any inconsistencies identified.

In 2013, the VEB Group Sustainability Report was audited by the ICS as well.

Upgrading the internal regulatory framework is viewed as one of the major preconditions for enhanced efficiency of the internal control.

### Upgrading the internal regulatory framework in 2013: major outcomes

- The methodology of monitoring the funds utilization within the framework of SME support comprehensive program and the methodology of monitoring the Bank’s activities in the capacity of an investment consultant for investment projects were developed. Furthermore, 21 methodologies related to control procedures over the Bank’s investment and financial activities were refined.
- The methodology to apply to control over notifying the authorized executive body on the inconsistencies identified within the framework of the depository activities was developed. Methodological recommendations related to control over observing the respective restrictions by the Bank when acting as the STMC in managing the funds of the insured citizens eligible for a term pension payment and the payment reserve resources were devised.
- A number of methodological documents in respect of auditing the activities of the Bank’s subsidiaries and affiliates, as well as scrutinizing the VEB Group activity reports were worked out.

A great emphasis was placed on upgrading the internal regulatory framework of Vnesheconombank’s subsidiaries and affiliates to develop uniform approaches to arranging internal control systems in the VEB Group.

As at 01.01.2014, the ICS staff had 7 permits from the Russian Ministry of Finance authorizing them to engage in banking audit activities and 1 certificate for engaging in general audit; 21 certificates from the FCSM/FFMS to engage in various activities in the securities markets; 1 ITIL certificate, 1 MBA diploma, 1 diploma of a professional accountant of the Institute of Professional Accountants and Auditors of Russia (IPAA) and one diploma in International Financial Reporting (DipIFR).

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