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Know your employee - the principle of bank risk management

The effectiveness of bank risk management, especially reputation risk, depends to a large extent on who manages the bank risk and who is involved in banking transactions and other transactions.

Therefore, it is recommended that the credit institution pay due attention to the implementation of the principle "Know your employee", which provides certain verification standards for hiring employees, as well as control over recruitment and placement of personnel, clear criteria of qualification and personal characteristics of employees with regard to the content and volume of work performed and the measure of responsibility.

In order to comply with the principle of "Know your employee," it is recommended that the credit institution (bank) provide for:

  • qualification requirements for employees according to the nature of their activities;
  • Develop and communicate to each employee a document (e.g. job description) regulating job duties, rights and responsibilities;
  • Communicate professional ethics principles to all employees in a timely manner;
  • Measures to ensure that bank secrecy is respected and that employees do not exceed the limits of their authority;
  • Requirements for maintenance by employees of primary accounting documents, reporting, compliance with the rules of document circulation;
  • General rules for the use, storage and transfer of service information by employees in banking transactions and other transactions in accordance with their duties;
  • inadmissibility of hiring and election to the Board of Directors (Supervisory Board) of the credit institution of persons who do not meet the requirements to business reputation established by internal documents of the credit institution, as well as the legislation of the country;
  • Training (retraining) of employees with clarification of the requirements of the law old, internal documents, including on the procedure of carrying out banking transactions and other transactions and their inclusion in accounting, on management of banking risks, on counteracting legalization (laundering) of proceeds of crime and financing of terrorism;
  • Training and training of employees with clarification of approaches to study and identification of clients, and in cases of necessity with clarification of regulatory legal acts of countries of location of non-resident clients, foreign branches, subsidiaries and dependent organizations of the credit institution (training and training of employees on counteracting legalization (laundering) of proceeds of crime and financing of terrorism is carried out according to the procedure defined by the central bank of the country;
  • Non-participation in decisions on banking transactions and other transactions of employees interested in their execution by the credit institution;
  • Encouraging employees to provide information to the credit institution about the participation of the employees themselves or their close relatives (defined as such by the legislation of the country) in the capital of legal entities that are clients and counterparties of the credit institution;
  • control of observance by employees of the established official duties and internal schedules (regulations);
  • non-inclusion of representatives of legal entities - unscrupulous competitors;
  • Collection and analysis of information on cases of violation by employees of labour discipline, legislation of the country or manifestation of unjustified interest in confidential information.