RESOLUTION OF SERVICE OF SUPERVISION AND REGULATION OF THE FINANCIAL MARKET OF THE KYRGYZ REPUBLIC

of August 17, 2007 No. 1

About approval of regulations on the internal control obligatory for implementation by professional participants of the security market and the subjects of non-bank financial institutions representing data for the purpose of counteraction of financing of terrorism and to legalization (washing) of income gained in the criminal way

For the purpose of execution of provisions of the Law of the Kyrgyz Republic "About counteraction to financing of terrorism and to legalization (washing) of income gained in the criminal way" of July 31, 2006 the No. 135 Service of Supervision and Regulation of the Financial Market of the Kyrgyz Republic decides:

1. Approve enclosed:

- Regulations on the internal control obligatory for implementation by the professional participants of the security market representing data for the purpose of counteraction of financing of terrorism and to legalization (washing) of income gained in the criminal way;

- Regulations on the internal control obligatory for implementation by the subjects of non-bank financial institutions representing data for the purpose of counteraction of financing of terrorism and to legalization (washing) of income gained in the criminal way.

2. This resolution becomes effective after the official publication.

Approved by the resolution of Service of supervision and regulation of the financial market of the Kyrgyz Republic of August 17, 2007 No. 1

Regulations on mandatory internal control for implementation by the professional participants of the security market representing data for the purpose of counteraction to financing of terrorism and to legalization (washing) of income gained in the criminal way

1. General provisions

1.1. This provision is developed according to the Laws of the Kyrgyz Republic "About the security market", "About counteraction to financing of terrorism and legalization (about received in the criminal way" and other regulatory legal acts regulating activities of professional participants in the security market.

1.2. The purpose of this provision is determination of the minimum requirements on the organization of internal control by the professional participant, for the purpose of compliance with law of the Kyrgyz Republic about the security market and counteractions to financing of terrorism and to legalization (washing) of income gained in the criminal way.

2. Organization of internal control

2.1. Implementation of internal control concerning activities in the security market of the professional participant is assigned to the controller of the professional participant (further - the controller).

In case of combination by the professional participant of several types of professional activity in the security market the organization and implementation of internal control concerning different types of professional activity in the security market can be assigned to several controllers. In this case each controller shall conform to the requirements to the controller established in this Provision on the corresponding type of activity.

2.2. For goal achievement of internal control by the professional participant the structural division under the leadership of the controller can be created.

2.3. The controller is independent in the activities of other structural divisions of the professional participant. The position of the controller is taken on staff of the professional participant. Work as the controller shall be principle place of employment for the controller.

Direct supervision behind activities of the controller is exercised by the Board of directors of the professional participant. In case of absence of the Board of directors in the professional participant control of activities of the controller is exercised by sole executive body of the professional participant.

2.4. The controller is appointed by authorized body of the professional participant according to the procedure, established by the current legislation of the Kyrgyz Republic and constituent documents of the professional participant.

The controller is the deputy manager of the professional participant on position.

2.5. Professional participants shall have the Instruction about internal control (further - the Instruction) approved by the Board of directors of the professional participant. In case of absence the Instruction about internal control affirms as the professional participant of the Board of directors authorized body of the professional participant. The instruction shall contain:

- description of functions of the controller, its rights and obligations;

- procedure and terms of consideration of the arriving claims, addresses and statements;

- operations procedure of the controller in case of identification of offenses by it;

- form and terms of submission of reporting documents by the controller;

- procedure of internal control in branches of the professional participant (in the presence of the branches performing professional activity in the security market);

- responsibility of the controller in cases of non-presentation or untimely submission of reports of the controller to the board of directors and/or sole executive body.

The instruction may contain other provisions regulating implementation of internal control.

2.6. In the presence at the professional participant of the branches performing its functions in the security market or their part the controller of branch is taken on staff of each branch. In case of implementation of the professional participant of several types of professional activity by branch in the security market, accomplishment of functions of the controller of branch on different types of activities can be assigned to several controllers of branch.

The controller of parent organization of the professional participant can perform functions of the controller of branch if the number of the workers in staff of branch performing the functions which are directly connected with implementation of professional activity by branch in the security market, less than twelve.

The staff of branch of the professional participant performing activities for maintaining the register of owners of securities shall include the controller of branch irrespective of the number of the workers in the staff of branch performing the functions which are directly connected with implementation of professional activity by branch in the security market.

The controller of branch is appointed by authorized body of the professional participant, is independent in the activities of other employees of branch and submits to the controller of parent organization. The controller of branch informs the controller of parent organization and the head of branch on all revealed violations.

The reporting documents concerning activities of branch, the controller of branch represents to the controller of parent organization and the head of branch.

3. Requirements imposed to the controller of the professional participant

3.1. Person appointed to the controller's position shall conform to the qualification requirements established by authorized state body on the security market.

3.2. The controller of the professional participant performing activities only in the security market having no right to fulfill the job responsibilities which are not connected with execution of functions of internal control, except for risk managements.

The controller of the professional participant combining professional activity in the security market with other types of activity having the right to combine activities for implementation of internal control with implementation of the following functions:

- management of service of internal control (internal audit) of credit institution;

- accomplishment of the functions connected with implementation of internal control of managing company of investment funds, mutual investment funds and non-state pension funds (in case of combination by the professional participant of activities for management of securities with activities of managing company of investment funds, mutual investment funds and non-state pension funds);

- management of divisions of the legal entity which functioning is not connected with activities in the security market the controller in this case has no right to sign on behalf of the legal entity payment (settlement) and accounting documents, and also other documents connected with emergence of the rights and obligations of the legal entity, their implementation and execution;

The controller of the professional participant combining professional activity in the security market with other types of activity, the activities for implementation of internal control having no right to combine with management of division to which functions legal (legal) maintenance of activities of the professional participant belongs.

3.3. The controller of the professional participant has the right to be part of the committees and the commissions which are not regular structural divisions of the professional participant specially created by the professional participant. In this case the controller cannot be the head of such committee or commission.

The controller of the professional participant combining professional activity in the security market with other types of activity having the right to enter also into the committees or the commissions which are not regular structural divisions of the legal entity which field of activity is not connected with activities of the legal entity in the security market specially created by the legal entity.

4. Functions of the controller

4.1. The controller when implementing the activities performs the following functions:

4.1.1. Provides observance of requirements of the Instruction.

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