INTERNAL CONTROL AND AUDITINTERNAL CONTROL AND AUDIT

VTB Group’s internal control and audit functions operate in compliance with international best practices and applicable legislation in the countries where the Group operates. The system is guaranteed the necessary independence by the way its parts function together and by its reporting structure.

The VTB Group Management Committee established an Internal Audit Coordination Committee as well as a Coordination Committee for Compliance and Internal Control aimed at preventing money laundering and the financing of terrorism.

VTB Group’s internal control system ensures:

efficiency of VTB Group’s and VTB Bank’s activities

effective management of assets and liabilities (including asset integrity) and risks

reliable, complete and timely financial and management information and reporting

information security

compliance with legislation, regulations, rules and standards

no involvement on the part of the Group and its employees in unlawful activities

Main objectives of vtb group’s internal control functions

  • to independently assess the effectiveness of the internal control and risk management systems, accounting reports, business processes and the activities of departments and individual employees, and also to assess the economic expediency and effectiveness of operations and transactions;
  • to verify the reliability of internal control over automated information systems, and also to verify the methods used to secure property;
  • to monitor key risk areas and risk control mechanisms, with a view to identifying shortcomings in the internal control system and emerging risks, and to creatinge mechanisms to prevent these risks;
  • to develop recommendations to improve the efficiency of systems, processes, procedures, transactions and activities by the Group’s structural units and employees;
  • to communicate with external regulatory bodies and external auditors.

VTB Bank’s internal control system

Monitoring of the internal control system is carried out on an ongoing basis by management and employees of the Bank’s structural units, as well as by the Internal Audit Department.

Audit Committee

The Audit Committee operates as part of the structure of the Supervisory Council in order to facilitate the effective performance of the functions of the Supervisory Council in the area of control over the Bank’s financial and economic activities. More detailed information on the composition and activity of the Audit Committee can be found in the section Corporate Governance / Supervisory Council / Supervisory Council Committees.

Internal Audit Department

The Internal Audit Department provides direct support to the Bank’s governing bodies to ensure that VTB Group works efficiently and effectively. The Internal Audit Department monitors internal control systems, conducts audits and provides impartial recommendations for improving banking operations and control procedures.

The Internal Audit Department is an independent structural unit of VTB Bank and operates under the direct supervision of the Supervisory Council. The Supervisory Council approves the Internal Audit Department’s work plans and monitors their implementation, reviews the Internal Audit Department’s reports on the results of audits and on monitoring of the internal control system, and also reports on the implementation of the Internal Audit Department’s recommendations to address previously identified issues.

The Internal Audit Department’s organisational structure comprises a number of units responsible for auditing the lending process, non-credit business processes, regional divisions, digital auditing of processes and information technologies, as well as auditing within the Group. To improve the effectiveness of the monitoring of the internal control system in the Bank’s regional branches, the structure of the Internal Audit Department includes dedicated internal control teams at the branch level.

In 2020, the Internal Audit Department conducted 27 scheduled audits and control measures, including 17 audits of various activities within the parent company and 10 audits of operations in Bank branches. In addition, as part of its ongoing monitoring, Internal Audit Department staff members conducted 707 thematic audits at the branch level.

In addition to conducting audits and monitoring the Bank’s internal control system, the Internal Audit Department’s priority is operational oversight as well as the coordination and maintenance of the same level of practice and competencies in terms of internal audit within subsidiaries. In 2020, the Department carried out 11 control measures related to the Group’s subsidiary companies and banks. The Internal Audit Department also regularly analyses reports on the work of Group companies’ internal audit services.

To enhance the level of professionalism and improve the exchange of experiences, on-the-job training is provided for staff from the internal audit services within Group companies, including the involvement of VTB Group functional coordinators.

The Internal Audit Department liaises with the Audit Committee and independent auditors, providing information on the internal control system and reporting any shortcomings during the audit period.

The Audit Committee conducts an annual evaluation of the effectiveness of the internal audit process. In 2020, the results of internal audit activities for 2019 were recognised as fully consistent with the established purpose and objectivesMinutes No. 169 of the Bank’s Supervisory Council Audit Committee dated 31 March 2020..

The Internal Audit Department has developed and is implementing an Internal Audit Quality Assurance and Quality Improvement Programme, which covers all aspects of the internal audit function.

According to the Regulation on the Bank’s Internal Audit Department, the Department’s activities are subject to a regular external independent assessment at least once every five years. The last time an external independent assessment of the Bank’s internal audit function was carried out was in 2019 by PwC. Assessments are conducted to determine the degree of compliance of the Bank’s internal audit function with international professional standards, recommendations and requirements of the Bank of Russia and the Federal Agency for State Property Management. International internal audit standards were developed in light of the extensive experience of the world’s leading financial and non-financial organisations, and they are among the most important universally recognised guidelines on internal audit. The assessment concluded that VTB’s internal audit function is fully compliant with international standards and the Internal Audit Code of Ethics. The high level of maturity of the Internal Audit Department was noted in terms of its objectivity, professionalism and use of advanced approaches and technologies.