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Legal risk

Legal risk means the risk of loss to the credit institution due to the following internal and external factors:

Internal factors of legal risk include:

  • non-compliance of the credit institution with the legislation of the country, including on identification and study of clients, identification and identification of beneficiaries (persons to the benefit of clients), constituent and internal documents of the credit institution;
  • non-compliance of internal documents of the credit institution with the legislation of the country, as well as inability of the credit institution to bring its activities and internal documents into compliance with the changes of the legislation in a timely manner;
  • inefficient organization of legal work leading to legal errors in the activity of the credit institution due to the actions of employees or management bodies of the credit institution;
  • Violation by the credit institution of the terms of the agreements;
  • The credit institution does not adequately address legal issues in the development and implementation of new technologies and conditions for banking and other transactions, financial innovations and technologies.

External factors of legal risk include:

  • imperfections of the legal system (lack of sufficient legal regulation, contradictions of the legislation of the country, its exposure to changes, including with regard to imperfections in the methods of state regulation and (or) supervision, incorrect application of the legislation of a foreign State and (or) norms of international law), inability to resolve certain issues through negotiations and, as a result, the application of the credit institution to the judicial authorities for their settlement;
  • violations by clients and counterparties of the credit institution of the terms of the agreements;
  • finding of credit institution, its branches, affiliated and dependent organizations, clients and contractors under jurisdiction of various states.


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