Compliance system

Work built on respect for the laws

Risk appetite: Inter RAO does not tolerate a single case of corruption or other willful misconduct that runs counter to the law

Inter RAO has created a compliance system comprised of corporate culture elements and values that aim to prevent any misconduct by Group’s employees, regardless of their position. The goals and objectives of compliance are defined in the Group’s Compliance PolicyApproved by a resolution of the PJSC Inter RAO Board of Directors dated December 20, 2018 (MinutesNo.236 dated December 24, 2018):

  • Minimize the risks of negative consequences associated with the imposition of corrective actions on the Inter RAO Group’s companies for the failure to comply with legal requirements, regulatory requirements, or the principles of ethical business conduct in the markets where the companies operate as well as generally accepted standards of business ethics
  • Doing business in compliance with the standards of the Group’s business ethics and values
  • Creating and introducing a culture of compliance at the Group’s companies
  • Analyzing and preventing situations in which it may be possible not to comply with legal requirements, regulatory requirements, or principles of ethical business conduct

Compliance processes

Antimonopoly compliance [GRI 206]

The Russian Federal Antimonopoly Service is authorized to monitor compliance with antimonopoly legislation and impose large fines, which may amount to hundreds of mlns of rubles taking into account the scale of the Group’s financial and economic activities. This dictates the critical nature of antimonopoly risks for the Company.

The main goal of antimonopoly compliance is to create conditions that motivate each Inter RAO employee to engage in self-control and self-discipline, thus making any antimonopoly violation virtually impossible.
Development of the antimonopoly compliance system

The Company has an Antimonopoly Compliance Commission that held 11 meetings in 2019. Antimonopoly risks only materialized at JSC Mosenergosbyt in 2019. The antimonopoly authorities issued 26 rulings against the company, imposing fines in the amount of RUB 13,487,000 (based on administrative cases that were initiated per decisions the antimonopoly authorities made in 2017-2018). [GRI 206-1]

Inter RAO plans to improve and develop the Antimonopoly Compliance System in 2020.

Identifying conflicts of interest

The Inter RAO Code of Corporate Ethics stipulates that all employees must report a potential or actual conflict of interest to the Conflict of Interest Management Commission and their immediate supervisor. No such complaints were recorded in 2019.


Existing regulatory documents governing the procedure for providing notification about a conflict of interest or the possibility of one occurring and the settlement procedure
CEO, members of the Management Board, heads of directly subordinate structural units, and Chief Accountant Regulation on the Procedure for Employees to Notify the Employer of a Conflict of Interest or the Possibility of Such a Conflict of PJSC Inter RAO dated April 28, 2016
All employees PJSC Inter RAO Code of Corporate Ethics Methodology ‘Informing Employers About Signs of Corruption Violations or a Conflict of Interest and the Review of Such Reports’ dated December 27, 2019

All notifications about a potential conflict of interest are recorded. In 2019, not a single notification was recorded.

The Company has developed a list of functions that are fraught with the risk of corruption and a list of positions that are potentially exposed to corruption risks. These lists are updated at least once a year. Officials holding positions on the list are subject to special monitoring by the HR Management and Organizational Development Unit, the Economic and Internal Security Unit, and the heads of their units to ensure they comply with high ethical standards, the requirements of internal regulatory documents on anti-corruption measures, including compliance with related prohibitions and restrictions, as well as measures to prevent and resolve conflicts of interest.

Functions involving the settlement of conflicts of interest are performed by the Conflict of Interest Management Commission, which was renamed the Anti-Corruption Action Commission in July 2019. The new regulation on the Commission adjusted its functions in an effort to enhance the effectiveness of measures to prevent and resolve conflicts of interest.

In 2019, the PJSC Inter RAO Conflict of Interest Management Commission held five meetings and the PJSC Inter RAO Anti-Corruption Action Commission held seven meetings during which a total of 18 issues were considered, including one related to the prevention and resolution of an employee’s conflict of interest at a subsidiary. Commissions at 17 subsidiaries of Inter RAO held meetings to address issues involving the settlement of a conflict of interest, in which 76 cases were associated with signs of a conflict of interest among company employees. In all 77 cases, the possible conflict of interest was resolved.

Anti-fraud and corruption [GRI 102-17, 205-1, 205-2, 205-3]

The Group makes every effort to prevent manifestations of corruption that may lead to the imposition of penalties or sanctions against the Group’s legal entities and officials or compromise its business reputation and diminish confidence among stakeholders.

The priority in the activities of the Company and its controlled entities is to preclude any possibility of precedents involving signs of corruption offenses and to maintain a sense of commitment to the highest ethical values among the Group’s employees.

Focus of the Board of Directors

The Board of Directors is regularly provided with reports on anti-corruption measures that have been taken and the effectiveness of the anti-fraud and corruption system.

In order to prevent corruption risks, Inter RAO has approved a unified Anti-Corruption Policy, created an Anti-Fraud and Corruption System that covers all of its businesses, established authorized commissions and working groups whose purview includes reviewing issues related to combating fraud and corruption and managing conflicts, regularly carries out procedures to identify and assess corruption risks after which it prepares a list of functions that are fraught with the risk of corruption and a list of positions that are potentially exposed to corruption risks, and regularly provides the Company’s Board of Directors with reports on anti-corruption measures that have been taken and the effectiveness of the anti-fraud and corruption system.

Mechanism for reporting cases of unethical and corrupt behavior [GRI 102-17]

Mechanisms for seeking consultations and reporting about unethical behavior are described in the Code of Corporate Ethics, Section 7

Obligation

Company employees as well as members of its Board of Directors, Management Board, or Revision Commission who have become aware of violations of existing legislation or the Code of Corporate Ethics that have occurred or could occur are required to immediately notify them in writing.

Employees are required to notify the Company about any incidents in which an employee may be inclined to commit a corruption-related offense or about violations that show signs of corruption by other employees, counterparties of the organization, or other persons of which the employee has become aware.

Notification procedure The procedure for submitting and the procedure for reviewing such reports are determined by the Methodology ‘Informing Employers About Signs of Corruption Violations or a Conflict of Interest and the Review of Such Reports’.
Confidentiality The person who submitted the aforementioned report/notification is guaranteed that the information received and information about the person will remain confidential.
Protection

The Company takes measures to protect any employee who notifies a representative of the employer, prosecution authorities, or other state bodies about violations of current legislation that have occurred or could occur.

The procedure for protecting workers who report corruption is determined by the appropriate methodology.

Consultation The Code of Corporate Ethics stipulates that if an employee or member of the Company’s Board of Directors, Management Board, or Revision Commission has any questions about compliance with anti-corruption legislation and standards or if this individual is unsure about whether he/she is taking the correct decision or action, the individual should consult with the appropriate unit.
Hotline The Company has a Hotline that is designed to collect and process information about any signs of fraud, theft, or corruption at the Group. The Internal Audit Unit processes the information received using this information resource. If necessary, an internal investigation is carried out based on the results of the analysis.

Improving the system

The following internal documents were drafted and updated in 2019:

  • The Regulation ‘Anti-Corruption Action Commission,’ which serves as a corporate standard for all Inter RAO companies
  • The Order ‘On Prohibiting Gift-Giving by Employees and the Exchange of Business Hospitality Signs’
  • The Order ‘On the Approval of the List of Internal Regulatory Documents to Be Reviewed by PJSC Inter RAO Employees upon Concluding an Employment Contract’
  • Order ‘On the Approval of the Rules for PJSC Inter RAO Employees to Comply with Anti-Corruption Principles When Interacting with Foreign Officials and Officials of Public International Organizations’
  • ‘Procedure for Employees to Report a Gift Received in Connection with their Official Position or the Performance of Their Official Duties’
  • Methodology ‘Informing Employers About Signs of Corruption Violations or a Conflict of Interest and the Review of Such Reports’
Anti-corruption training [GRI 205-2]
Employee training
Country, region Managers (staffing chart) Specialists and employees
Number of people trained in the anti-fraud and corruption program in 2019 % of employees of this category Number of people trained in the anti-fraud and corruption program in 2019 % of employees of this category
Russia 341 6.7 846 4.0
Georgia 1 0.6 2 0.3
Moldavia 0 0.0 0 0.0
Total for Group 342 6.2 848 3.8

Awareness-raising and training [GRI 205-2]

When hiring new employees, the HR Management and Organizational Development Unit provides them with a fundamental awareness of the main provisions of the Anti-Fraud and Corruption Policy.

The Economic and In-House Security Unit conducts briefings to train all newly hired employees about the practical implementation of the requirements of internal documents on anti-fraud and corruption.

Heads of the Company’s structural units periodically inform their employees about the requirements of anti-corruption legislation and the measures taken by the Company to combat corruption. In addition, when employees engage in functions that are fraught with corruption risks, they are given an additional explanation of the legislative requirements of the Russian Federation and internal policies with respect to the specific situation at hand.

The Company’s employees are trained at specialized training centers with the involvement of external consultants in order to maintain and enhance their knowledge and skills in countering corruption.

Preventing corruption in cooperation with partners and counterparties [GRI 205-1]

Inter RAO’s Anti-Fraud and Corruption Policy minimizes the risk of dealing with counterparties who may be involved in fraudulent schemes and/or corrupt practices or may tolerate corrupt practices. This principle is implemented by verifying that the Group’s counterparties have their own anti-corruption procedures or policies and are willing to comply with anti-corruption requirements, include the relevant sections in contracts, and provide mutual assistance for ethical business conduct and the prevention of fraud and corruption.

The Group verifies counterparties in terms of their reliability and to make sure there is no conflict of interest before deciding whether to start or continue business relations with them.

In order to ensure the transparency of Inter RAO’s financial and economic activities and to avoid conflicts of interest in the execution of Orders of the Chairman of the Government of the Russian Federation No. VP-P13-9308 dated December 28, 2011 and No. VP-P24-1269 dated March 5, 2012, work is being performed to study information on the ownership chain of counterparties, including ultimate beneficiaries. During the reporting period, the Group reviewed data on the beneficiaries of more than 12,000 counterparties of its companies for more than 20,000 contracts. The results of this work are sent to the Russian Ministry of Energy on a monthly basis. The Russian Ministry of Energy has not provided any objections concerning the documents that were submitted.

Identification of fraud and corruption cases [GRI 102-17, 205-3]

Official probes are conducted into cases involving signs of fraudulent or corrupt activities that have been identified. During the reporting period, 528 such probes were carried out. The probes found a violation of the requirements of internal regulatory documents, as a result of which 600 employees of the Group’s companies were held accountable.

In two cases, a court found that crimes had been committed (two employees of the Inter RAO Group’s companies were prosecuted in 2019).

Number of complaints, cases of corruption found, and amount of damage averted [GRI 205-3]
2017 2018 2019
Hotline
Total number of hotline calls 163 248 383
Share of calls related to corruption in the total volume of calls received by the Group’s hotline 11% 6.9% 5.7%
Cases of corruption and fraud detected
Total cases of potential risk of corruption or fraudAn updated methodology is used to calculate the indicator, which does not allow for providing similar information for 2017 in connection with the use of criteria that were not taken into account in 2017. x 699 528
Total number of confirmed cases of corruption or fraud 2 2
Total number of employees dismissed or punished for confirmed cases of corruption or fraud 2 2
Total number of agreements terminated with suppliers after confirming their involvement in corruption practices (if such cases occurred) 0 0 0
Total number of business partners with which the Group did not re-sign contracts due to corruption or fraud 0 0 0
Amount of damage averted
Monetary damage to the Group that was prevented as a result of anti-corruption actions and measuresThe method used to calculate the indicator does not allow for the provision of similar information for 2017 and 2018 due to the use of criteria that has not been previously considered., RUB thousand х х 402,660

Reports filed with law enforcement agencies regarding economic damage

In 2019, the Group’s companies sent 1,452 queries to law enforcement and regulatory authorities. Based on these materials, 37 criminal cases were initiated in 2019, including one criminal case against an employee of a company of the Inter RAO Group due to an offense committed in the course of his official duties with formal elements of a crime under Article 159 (fraud) of the Criminal Code of the Russian Federation.

Three convictions were handed down in criminal cases previously initiated by companies of the Inter RAO Group. Two of them were related to former employees of Inter RAO in connection crimes of a fraudulent and corrupt nature (Article 204 (commercial bribery) and Article 159 (fraud) of the Criminal Code of the Russian Federation). The other conviction was for the head of a management company due to the failure to pay for utility resources (Article 315 (failure to abide by a court sentence, court decision, or other judicial act) of the Criminal Code of the Russian Federation).