Maintaining Compliance in the Former Soviet Union



By Sascha Matuszak
Reporter, SCCE|HCCA

It’s been almost three decades since the fall of the Iron Curtain, and yet, doing business in the former Soviet Union can still be very challenging and exciting. The majority of the nations that make up the current Commonwealth of States which largely replaced the USSR, are emerging economies eager to participate in the global economy; there are opportunities in every sector, from energy to services to IT.

With all of that opportunity come risks. All eleven CIS nations have their own very specific, local conditions, and most attempts to unify the region under one economic rubric—be it a free trade agreement or some other economic alliance—have shattered against the geopolitical realities of a very complex part of the world. That means the rules governing, for example, bribery, contracts, and labor are often one thing in Kazakhstan, another in Moldova, and something quite different in Armenia and Russia.

“Compliance in the CIS region requires double the efforts from management in their implementation of controls and ethical principles,” said Alexander Pisemskiy, Executive Director at the CSI Group, which specializes in antifraud solutions and corporate investigations in emerging economies across the world.

International Compliance vs. Local Compliance

Not only must companies operating in the CIS adhere to their own compliance policies, but they must also thoroughly vet subcontractors, partners, and candidates for key and high-risk positions, while also maintaining control from headquarters and ensuring strict compliance with the local bureaucracy. A tiny slip-up can become really costly.

“If a foreign company considers potential legal proceedings, proper documentation of all business operations, results of investigations and internal reviews are required,” said Pisemskiy. “We witnessed many cases, when foreign companies had unsuccessful claims because of the absence of a signature on one of the documents or misspellings in the data collection protocol.”

One issue to keep in mind is the different perspectives local CIS companies have on compliance in general. Foreign companies may be accustomed to an extensive compliance program with an extensive bureaucracy behind it; they may move slower and more methodically, and be willing to lose business if it means remaining compliant. Foreign companies take the long view that compliance today will avert fines tomorrow. Local CIS companies don’t have the same luxury. They have to move very fast and cannot afford to lose even the slightest opportunity. Compliance for a fast-moving, smaller, and aggressive CIS-based company must also be a profitable part a growing business, rather than an investment against future costs.

A Compliance Officer’s Many Hats

Maintaining compliance and ethics in business cultures of emerging economies, such as in the CIS member and associate states, highlights the many responsibilities that international compliance officers face on a daily basis. Navigating the different regulations and rule sets is only one aspect of the job; CCEOs have to also consider supply chain and staffing concerns, local business culture and how it meshes with their own company’s culture, and be able to communicate with multiple levels of bureaucracy. It’s a tall order.

CSI Group’s Alexander Pisemskiy recommends international companies keep in mind the following points in order to be both compliant and successful in the Russian and greater CIS markets:

  • One size doesn’t fit all. Adopt your international policies and compliance procedures to local reality, and make the required efforts to implement them.
  • Know your partners and employees. Corruption and conflicts of interests cause significant damage and risks for any company. Better to overestimate these risks and implement effective controls than to spend money for investigators and fines.
  • Develop the channel of communication between employees, counterparties, and the compliance manager to report issues and consult. In many cases, the breach of policy or law is done without intention, because the person did not know how to act in a particular situation.
  • Automate controlling functions to minimize the human factor effect and the resources required for keeping the finger on the pulse of compliance risks levels. Draw your attention to local automated solutions in the areas of vendor mass screening, compliance hotline outsourcing, and tender process integrity—they’re way more focused on the local needs and requirements.

Pisemskiy and Executive Director Alexander Khaki will discuss these issues and more during their presentation, “Conducting Effective Compliance Investigations in Russia and CIS,” at SCCE’s 6th annual European Compliance and Ethics Institute in Frankfurt on March 26th. For more information about conferences, visit or contact us at +952.933.4977