Termination of mandate of consumer credit cooperative SRO consisting of participants of Ponzi scheme

On 28 December 2017, the Bank of Russia decided to terminate the status of the Interregional Credit Cooperative Union OPORA KOOPERATSII, a self-regulatory organisation in the financial market consolidating consumer credit cooperatives (CCC SRO).

Members to this SRO were 20 of 22 consumer credit cooperatives participating in a large-scale Ponzi scheme that operated in several Russian regions. The supervision of the Bank of Russia Microfinance Market Department revealed that in this scheme consumer credit cooperatives were used with unlawful purpose aimed at providing formal legitimacy to the Ponzi scheme and their control by the self-regulatory organisation was apparently unsatisfactory. As a result of its on-site inspections, the Bank of Russia banned the consumer credit cooperative from raising monetary funds, admitting new members and issuing loans. Based on the materials provided by the regulator, the Ministry of Internal Affairs of Russia initiated a criminal case, searched and detained the participants of the criminal group.

The Bank of Russia revealed in the operations of the SRO Interregional Credit Cooperative Union OPORA KOOPERATSII violations of the Federal Law ‘On Self-regulatory Organisations in the Financial Market’ and Bank of Russia regulations, repeated instances of failure to meet the deadlines of Bank of Russia queries, as well as the provision of unreliable information and failure to provide information to the Bank of Russia.

The institution of self-regulation in the system of proportional supervision in the microfinancing market serves the interests of professional participants of different market segments. Meanwhile, the most important function of a SRO is to control operations of its members. ‘Currently self-regulatory organisations are challenged with establishing an efficient risk-based control system aimed at preventive and off-site supervision,’ said Ilya Kochetkov, Director of Bank of Russia Microfinance Market Department. ‘SROs should also focus on hiring high-skilled and professional personnel who perform controlling function, as the improper fulfilment of these functions by self-regulatory organisations elevates risks for financial consumers.’