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MECHANISMS FOR INCREASING THE EFFECTIVENESS OF THE COMPLIANCE
CONTROL SYSTEM TO PREVENT CORRUPTION IN COMMERCIAL BANKS
Zikirov Khurshid Hasan ugli
Chief Specialist of the Anti-Corruption Compliance Department of Turonbank JSCB
Annotation:
this article explores the international experience of the complaense control system
to combat corruption in commercial banks. In particular, special attention is paid to the basic
approaches, methodology and regulatory requirements used in the banking and financial systems
of developed countries. The article developed practical recommendations for commercial banks
in our country by analyzing the role of international standards and artificial intelligence
technologies in improving the efficiency of the complaence control system. These
recommendations are significant in that they are aimed at ensuring the transparency of
commercial banks and further improving their reputation in the international arena. The reason is
that banks are an important part of the economy of each country, and its stability and efficiency
are decisive for economic development and financial security. Also, allowing cases of corruption
in the banking industry leads not only to the illegal consumption of financial resources, but also
to a decrease in confidence in the financial system in society. Corruption reduces the
transparency of banking activities, undermines the legitimacy of financial transactions, and
ultimately has a negative impact on economic stability. Therefore, it is important for the
sustainable development of the economy that the Prevention of corruption in the banking system
is defined as an important task, effective measures are carried out in this area.
Keywords:
corruption, banks, complaence control, international standards, artificial intelligence,
kleptocrats, “whistleblowing”, AML, transparency, risk, digitization.
The fight against corruption in our country is recognized as one of the priorities of state policy.
Especially since the financial sector is considered one of the relatively high-visibility sectors of
corrupt risks, drastic measures are being taken in this direction by the state. In particular, in
recent years, ensuring transparency in the financial and banking system of Uzbekistan, reducing
corruption risks and implementing a management system in accordance with international
standards have become an urgent issue. The risk of corruption in the activities of commercial
banks is associated with factors such as lending, public procurement, human resources policy,
conflict of interest and poor internal control mechanisms. In this regard, the effective
implementation of the complaence control system not only ensures the stable functioning of the
bank, but is also an important factor in increasing investment attractiveness and customer
confidence.
The internal control system against corruption (“komplaens-control”) is an effective system that
ensures the organization of the activities of state bodies and organizations and banks in
accordance with international standards, laws and other regulatory legal acts in the field of anti –
corruption, carries out a number of preventive measures such as timely detection of corruption
risks and conflicts of interest and their elimination, reporting violations Compliance units in
banks play an important role in controlling corruption risks that may arise as a result of non-
compliance with legislation, internal regulations, and other regulatory and international standards.
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The main goal is to prevent corruption in the banking system and coordinate the management
system based on international standards. In this case, relying on the legal analysis of the banking
legislation of the Republic of Uzbekistan, the law “on Combating Corruption”, central bank
guidelines and FATF recommendations and comparative analysis of positive aspects of the
experience of complaence in the banking system of foreign countries, it becomes clear that all
the above-mentioned mandatory and recommendation norms can further increase the
effectiveness of
Corruption in the international arena is a global problem and requires global solutions. Frank
Vogl, a member of Transparency International, believes that it is banks that should be the line of
Defense for the flow of illegal cash. The reason is that large corrupt individuals are particularly
in need of banks, which seek ways to keep safe and secret the money they have been orrring in
criminal ways through corruption. All major banks in the world, located in the West, have their
own compliance policies in this regard (AML - anti-money laundering). Banks are central
players that allow money laundering along with auditors, real estate brokers, art dealers, financial
advisers and lawyers. They are today's suppliers and sustainable reform of complex systems of
illegal financing, which is possible only when they operate, replacing the culture of maximizing
short-term profits with a culture that serves the interests of society. The voluntary actions of all
banks, indeed all transnational corporations, are essential to counter the greed of today's
kleptocrats (kleptocracy is a system of plundering the state funds of the ruling class for their own
personal interests).
The World Bank Group has also been working for over 20 years to reduce the negative
consequences of corruption in its client countries. The World Bank is taking a more integrated
approach against corruption, seeking to improve the transnational nature of corruption and the
mitigation and Prevention of vulnerabilities in client countries in addressing the illegal financial
flows they cause. In doing so, the World Bank is building on approaches that have come to
fruition in practice, along with an increased focus on certain areas to address new corrupt
problems and opportunities. In particular, strengthening the transparency of interested ownership
and combating illegal financial flows, reducing corruption in the management of Public
Procurement and contracts, strengthening institutions of responsibility and the rule of law, and
applying innovation in the use of data and technology. The main thing is that the banking group
works at the country, regional and global level to create capable, transparent and accountable
institutions and to develop and implement anti-corruption programs, relying on the latest tools
and innovations. The activities of the World Bank Group around sustainability and changing
outcomes help state and non-state participants form the competencies necessary to implement
policies and practices aimed at improving outcomes and strengthening public integrity. In
general, the World Bank places particular emphasis on the approach of its clients to combating
corruption and their compliance with international standards in projects it finances.
According to research from the University of Cambridge and the University of Texas at Austin,
international anti-corruption regulations are not being followed by banks and other financial
organizations around the world. In particular, on the basis of the analysis, I must take into
account that, firstly, banks have components, but the efficiency is low – in some banks only the
form is operating, and in practice the mechanism of deep assessment of corrupt risks is
insufficient. Secondly, the cooperation between internal control and audit is slow – as a result,
the possibilities of early detection of corrupt situations are limited. Thirdly, the legal and moral
culture of employees is not enough – the human factor is playing a decisive role in preventing
corruption. Fourth, foreign advanced experiments are not sufficiently used-for example, the
whistleblowing system is just being formed in banks, and there are not enough specific indicators
on this. Fifth, risk maps on corruption in banks have not been fully developed.
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Based on the results obtained, it is advisable to propose the following mechanisms for the
effective implementation of the Anti-Corruption System in commercial banks:
The introduction of a risk-based approach is the assessment of the risk of corruption in each
banking structure and the construction of risk maps;
Regular training for employees - organization of mandatory training courses on compliance,
conflict of interest, and corruption prevention;
Strengthening "Whistleblowing" mechanisms-improving mechanisms for anonymous
notification channels and employee protection;
Digitalization and further increase in transparency-reduction of the human factor in lending,
public procurement and other processes;
Strengthening the cooperation of internal audit and complaence departments – implementation of
a unified monitoring system;
Compliance with international standards is the re – development of internal anti-corruption
policies based on recommendations from FATF, Basel Committee and OECD (Organisation for
Economic Co-operation and development).
As a conclusion, the complaence control system in commercial banks is an important tool in
reducing corrupt risks, strengthening the trust of customers and investors. To improve its
effectiveness, it is necessary to take a risk-based approach, improve staff skills, widely introduce
digitization and transparency, as well as develop internal procedures in accordance with
international standards. As a result, banks not only create an environment free from corruption,
but also make a significant contribution to the financial stability of the country.
When analyzing the stability of a banking system of a large international sample, we can see that
factors such as the Anti-Corruption System, the inflation rate, transparency and the adoption of
International Financial Reporting Standards directly depend on their effectiveness. The results
show that high anti-corruption ratings support the idea that the banking system is associated with
high stability. It is also found that the relationship depends on the level of inflation in the country
and the level of protection of investors at the country level. Furthermore, corruption can have an
internal marginal effect when banks are in a corrupt environment, given that the fight against
corruption has a stronger impact on financial stability. Currently, the country's commercial banks
are being digitized. Digitization of commercial banks dramatically reduces the risk of corruption,
but strong control, transparent legislation, and ethical culture are also required to completely
eliminate it. Banks are making it possible for customers to use their services through their mobile
applications or an internet banking system. At the same time, as a result of the use of digital
technology in the banking system, service is being automated. The main thing is that suspicious
transactions are quickly detected through artificial intelligence and” big data " Analysis. In doing
so, banks can use AML/CFT (combating money laundering and terrorism financing) systems
more strongly. I must insist that each commercial bank has its own automated banking system. It
is through this system that commercial banks can achieve very positive results, using the
komplaens control system and mechanisms to improve its efficiency in practice. In particular, if
it is possible to integrate the necessary data bases into these automated banking systems, the
complaence control system and its effectiveness will be further increased. The main thing is to
develop the necessary technical tasks along with qualified programmers in the automated
banking systems of banks and put it into practice. As a result, when the necessary data bases are
integrated into the automated banking systems of banks, the complex management system with
the help of blockchain and artificial intelligence technologists serves as an important tool in the
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effective functioning of banks on the basis of international standards.
REFERENCES:
The Law of the Republic of Uzbekistan on Combating Corruption (as amended) is a key
document for studying the foundations of state policy and legislation.
https://www.transparency.org/ — Transparency International — the official website and reports
of the international anti-corruption organization.
https://anticorruption.uz — the official website and analytical data of the Anti-Corruption
Agency of the Republic of Uzbekistan.
https://www.worldbank.org/en/programs/anticorruption-for-development
—
World
Bank
Reports on Anti-Corruption — World Bank analyses and recommendations on combating
corruption.
OECD Anti-Bribery Convention — The Convention against Bribery of the Organization for
Economic Cooperation and Development.
https://www.cmi.no/publications/3134-anti-corruption-reforms-challenges. Fjeldstad, O.H. and
Isaken, J. 2008. Anti-corruption Reforms: Challenges, Effects and Limits of World Bank Support.
Washington DC: Independent Evaluation Group (IEG), World Bank (IEG Working Paper no. 7)
78 p.
https://knowledgehub.transparency.org/assets/uploads/helpdesk/Successful_anticorruption_
reforms.pdf. Marie Chêne, Transparency International 2015. Successful anti-corruption reforms.
