During the last month I have taught ICA International Diploma in Compliance workshops in both Russia and Romania. The workshops in Bucharest were the first programmes we have delivered in Romania and as always it was extremely exciting to launch courses in a new country.
It was also very interesting to compare the development of compliance in Romania with that in Russia where ICA has been established now for over two years.
Both countries ran under a communist regime until 1990 when the fall of the Berlin Wall and subsequent collapse of Communism throughout Eastern Europe occurred. From that date there have been both similarities and key differences in the evolution of the financial services industry.
The first point to bear in mind is that it is only 22 years since the establishment of a free market in both countries, and the first decade was one of considerable turmoil, rapid growth and a confused regulatory environment across all industries. You only have to look at how the Oil and Gas industry in Russia was taken over by a handful of oligarchs to see what a dramatic time it was.
Due to this incredibly short time frame there are still many individuals in positions of authority within the financial services industry (and within the government authorities that regulate them) who grew up and began their careers under the communist regime. This is very evident in the extremely bureaucratic processes that still exist within the regulatory environment in both countries.
Another hangover from both the communist era and the immediate aftermath is the corruption levels. Having only been to Romania once I cannot comment authoritatively upon their current position, but I have been told by local compliance professionals that it remains a considerable issue. In Moscow however it is accepted that corruption is still ingrained within most aspects of both business and government activities and until this issue is addressed and resolved, effectively embedding regulatory compliance will probably remain an aspiration rather than an achievement.
Perhaps the most significant difference between the two jurisdictions is that Romania became a member of the EU in 2007. The requirement to comply with EU Directives has forced the pace of reform, but perhaps more significantly the economic benefits of EU membership have acted as a major influencer on the will to reform.
As ICA and ICT continue to expand operations in Eastern Europe it will be interesting to see how all of the ex-communist nations have adapted to the free-market and the demands of the global 21st century financial services industry.