In the name of God - Refah Bank...as Samim system and Tablet Bank as one of the newly designed...

Refah Kargaran Bank’s Annual Report

2016 - 2017

In the name of GodThe Compassionate, The Merciful

ContentsChapter 1

Refah Kargaran Bank’s General Information ................................... 5

Chapter 2Performance and Market Report ..................................................... 15

Chapter 3Refah Bank’s Financials (Fiscal year 2016-2017) .......................... 33

Chapter 4Risk and Compliance Profile .......................................................... 39

www.refah-bank.ir

Annual Report 2016-2017 5Refah K. Bank


Statement of the C.E.O.In the name of God, the Compassionate, the Merciful

Refah Kargaran Bank obtained great achievements in 2016-17 under the blessings of the Mighty God and by the support and continuous efforts of the managers and the staff. The obtained achievements will hopefully lead to a prosperous future for the bank and we‘ll do our best to continue this trend in the upcoming years as well. The existing potentials and talents in the Bank have brought about great opportunities to move towards fulfillment of the macro-strategies of the government. These measures include allocating credit facilities for preserving, stabilizing and creating jobs, allocating credit facilities to SMEs, supporting and financing national projects and plans.

Subsequent to JCPOA and the opportunities set forth, Refah K. Bank could resume international banking activities and present a desirable volume of foreign exchange operations and transactions while establishing correspondent banking relations with more than 130 banks worldwide which led to a considerable increase in the Bank’s foreign exchange activities.

As well, in the previous fiscal year, great achievements have been gained by Refah K. Bank in supporting the country’s healthcare system. We believe that Refah K. Bank is Iran’s most important and most involved bank regarding health care; this is our strategy and will be followed up seriously. Allocating credit facilities for establishing and equipping hospitals and medical manufacturing, factoring and contributing financially for paying some part of the debts of hospitals are amongst the bank’s measures in supporting the country’s health care system.

In the meantime, effective steps were taken regarding electronic banking by innovative novel services such as Samim system and Tablet Bank as one of the newly designed products in Iranian banks’ market, while creating and developing various electronic banking-related systems for customers being individuals or legal entities.

Along with the bank’s main activities and monetary operations, social responsibilities have been crucial to Refah K. Bank in a way that playing the role of the country’s sole social bank, great contributions towards implementing macro projects of the country were achieved while binding to follow up this trend in its macro strategies.

We believe in the importance of human resources and we are fully confident that our working staff are committed, professional, young, educated and industrious and have achieved prestigious ranks in banking knowledge as well as sport Olympiads of the country while they are also pioneers in administrative soundness. This is considered as our precious asset and will hopefully drive us to a better elevated position in Iranian Banking Sector.

The ultimate goal of the Bank’s management and staff is to reach fast, easy and secure access of customers to banking services and products. We all do our best to satisfy three million pensioners and the retired workers of the Social Security Organization who receive their banking services through Refah K. Bank, all our customers being individual and legal entities, the shareholders and the people from different walks of society.

We believe in the bright future ahead and we hope that Refah K. Bank could play an important role along with macro-economic objectives of Islamic Republic of Iran under full responsibility and commitment as ever.

Mohammad Ali Sahmani

Annual Report 2016-20178 Refah K. Bank

Organizational Chart

Committees Advisors

General Director of Surveillance

Internal Audit Department

Board of DirectorsSecretariat Department

Public Relations Department

Anti-Money LaunderingDepartment

Banking Affairs & Affiliated Companies’ Protection Department

IT & Documents’ Protection Department

Director of Support Affairs

Corporate Banking Department

Supply Department

Private Banking Department

Retail Banking Deputy Management

Construction Engineering Department

Real Estate Department

Director of Supervision

Director of Design & Planning

Director of Credit Affairs

Director of Legal Affairs Director of International Affairs

Director of Informa-tion Technology

Inspection DepartmentOrganization & Methods Improvement Department

Credit & Plans Survey Department

Collecting Debts Department

Foreign Exchange Operations Department

Modern Services Department

Risk & Compliance Department

Research & Planning Department

Planning & Credit Supervisory Department

Claims & Legal Department

Foreign Department

IT Development Department

IT Support Department

Director of Financial Affairs

Director of Tehran Regions’ Affairs(Region1)

Director of Region 2

Director of Region 3

Accounting Department

Treasury Department

Accounting of Management & Banking Information

Department

Investment & Assemblies Affairs Department

Training & Knowledge Development Department

Staff Welfare Department

Human Resources Department

Selection Section

Technical, Physical & Protection Department

Personnel SurveillanceDepartment

High Committeeof Audit

High Committee of Risk Management

General Assembly

Board ofDirectors

Managing Director (CEO)

Deputy of

Managing Director

Deputy of Managing Director in Executive

Affairs

Deputy of Managing Director in Corporate &

Private Banking

Deputy of Managing Director in Financial &

Support Affairs

Deputy of Managing Director in HR &Investment Affairs


About Us

HistoryThe Privatization Trend Based on Article 39 of the country’s budget law of 1959 and article 38 of the Social

Insurance Organization, the first general assembly of Refah K. Bank’s founders was held aiming to invest and exploit workers’ insurance premiums and with the presence of the Minister of Commerce, the Minister of labor and CEO of the Social Insurance Organization. Accordingly, Refah K. Bank was established with the paid-up initial capital of IRR 400 Million out of the resources of the said organization and registered under number 7453 dated 17/08/1960 and officially started its banking activities on 26th of March 1961 in its two newly established branches of Tehran and Isfahan.

Subsequently, according to the National Banking Law, being approved in 1979 by the Islamic Republic of Iran Revolutionary Council, Refah K. Bank was also nationalized and became a governmental bank with all its shares being owned by the Government. Years after and precisely in 1993, according to the Administrative Council’s decision, the shares of Refah K. Bank were rendered and ceded to the Social Security Organization while preserving its legal entity identity and maintaining its financial and administrative independency. Thus, based on the Bank’s general assembly approval on 22/09/2001, the legal entity identity of Refah K. Bank was changed into a public joint stock and a non-governmental public owned company and the new Articles of Association was compiled and then approved in 72 articles and 13 notes.

Above all, the Bank’s capital was also increased from IR Rials 895 billion to IR Rials 4,000 billion. Upon accomplishing related formalities in 2011 and assets reassessment procedure and having received authorization from Central Bank of the Islamic Republic of Iran (C.B.I.) , the bank’s capital was then increased from IR Rials 4,000 billion to IR Rials 10,326 billion and was registered by the Department of Corporations and Non-commercial Institutes in Tehran. In 2013 then, the Bank’s capital was increased to IR Rials 23,326 billion out of shareholders’ cash deposits and was registered accordingly.

Therefore, Refah K. Bank is considered as a non-governmental bank since the said date in compliance with the privatization act. Our main and sole shareholder is the Social Security Organization (S.S.O) and its affiliated companies which are prominent holdings active in different sectors such as commercial, pharmaceutical, petrochemical, transportation, construction and some other industrial and economic fields as well.

It’s not secret to anyone that the Social Security Organization is a public non-governmental organization in Iran acting as the biggest social insurer covering more than 40 million individuals through its insurance and expanded healthcare network.

Among the affiliates of the S.S.O. is the Social Security Investment Company (SSIC) called SHASTA which is the largest investment company in Iran and owns 10% of Tehran Stock Exchange in value through its listed portfolio and Refah K. Bank serves as the sole financial arm of this famous Iranian body, enjoying great financial support of the S.S.O.


The Structure of Our Shareholders

The Social Security Organization (S.S.O.) and its affiliates

Companies Percentage of shares

Social Security Organization %16.07

Social Security Investment Company %10

Saba Ta’min Investment Company %10

Sadr Ta’min Investment Company %10

Siman Ta’min Investment Company %10

Ta’min Transportation & Civil Investment Company %13.86

New Industries of Ta’min Management Company %10

General Industries of Ta’min Investment Company %10

Hamoon Shomal Investment Company %10

Bank Clerks’ Preferences Shares %0.07

Total %100

Along with the approval of the Bank’s new Articles of Association and the privatization plan

and ownership status, the increase in the volume of activities and rendering distinguished services appeared and business holdings of Refah K. Bank have been established in

So, it is quite evident that , Refah K. Bank has a history of over five decades in extending banking services to the public being from various categories of individuals and corporates countrywide. Refah K. Bank stands amongst the six major Iranian commercial Banks. At present (figures related to the fiscal year 2016-17) , Refah K. Bank operates through its 1050 local branches and has 9959 young and educated personnel who are of high academic degrees and capabilities. Refah K. Bank has proved itself as a leading and prominent financial institution offering novel services in local/foreign currency nationwide and internationally.

Refah K. Bank in a glance

Total Number of Human Resources 9959

Total Number of Branches 1050

Total Resources I.R.Rials 488,208,835,739,841

Total Uses I.R.Rials 467,318,708,241,944


the form of different corporations, specialized in diverse related businesses, such as commercial, IT, exchange, etc., the most important of which are the following: • Refah Pardis Commerce Development Co.• Refah Bank Stock Brokerage Co.• Refah Bank Exchange Co.• Refah Pardis IT Development Co.• Refah San’at Pardis Trade Co.• Refah Pardis Service Co. (Khadamat Gostar)• Refah Pardis Constructional Development Co.• Iran Building Projects Management Co.• Refah Farazan Hadaf Insurance Brokerage Co.

Our Vision

Our Mission

Refah Kargaran Bank will be identified as the symbol of extending distinguished services among other Iranian banks in the year 2021.

Continuous effort to extend state-of-the-art financial services to the society

Objectives, Plans and Strategies of Refah K. Bank in 2016-2017Macro Objectives:

• Increasing total resources by emphasizing on low cost resources,• Managing resources and uses by maintaining optimum limit of uses while allocating credit facilities covering lawyer’s fee,• Decreasing claims especially doubtful ones,• Increasing the bank’s income especially commission based and non-profit sharing incomes,• Enhancing efficiency resulting from the Bank’s investment,• Decreasing expenses with no value added,• Increasing key indices of performance per capita in proportion to the number of the employees and branches (promoting effectiveness and efficiency of Refah Bank’s human and financial resources).

Main Strategy“Turning into a Customer-Centric Organization”


Business Strategies• Focusing on activities in main markets of business model (health chain ,energy, transportation, Social Security Organization and Social Security Investment Company), • Developing international banking services,• Meeting novel needs of the society (related to the existing and potential customers),• Continuing Organizational Right Sizing,• Improving the compensation system,• Promoting the quality of the performances of the bank’s affiliated companies,• Improving banking-financial soundness (according to the national and international standards of CAMELS and BASEL 2 and 3), • Developing managerial potentials on hierarchal basis, • Enhancing efficiency of the bank’s units,• Commercializing banking services and products based on the Information Technology innovations, • Developing new methods of Islamic financing (non-resource-centered).

CustomerCentric

Focusing on main target markets

Expanding international banking

services

Developing performance

quality of subcidiary companies

Meeting novel needs of the society

for the existing and potential

customers

Organizational right sizing

Promoting banking-finnacial

soundness

Developing managerial potentials

Developing new methods of Islamic banking financing

Commercializing banking products and

services

Enhancing units› efficiency

Reviewing compensation

systems

Refah K. Bank’s Main Bbusiness Strategies


Some of the most important components and expected schedules proportionate to strategies:

• Financing projects related to the Bank’s target markets and concluding MOUs in the field of health chain, energy, transportation, social security organization and SSIC (Social Security Investment Company) group,• Resuming international banking through the establishment of correspondent banking relations by stepping into foreign markets, • Upgrading core banking systems and establishing customer-centric branches and units,• Providing infrastructure and required international standards for connecting to international payment networks,• Updating “ICT Master plan” document and implementing related projects,• Implementing the Bank’s integrated data base “Data Warehouse”, • Applying BI (business intelligence) and data mining approaches for analyzing customers’ behavior, detecting fraud, etc.• Implementing CRM (customer relationship management) projects,• Active presence in virtual media and social networks,• Planning, implementing and upgrading Corporate and Private banking systems and establishing related departments,• Optimizing the branches’ networks,• Developing subsidiary companies, • Improving earnings’ indices and capital return rate of the Bank’s subsidiaries while improving their managerial structure,• Conforming to health patterns in national and international levels,• Rightsizing and improving the Bank’s stock portfolio,• Optimizing credit facilities sub-systems,• Increasing the Bank’s capital,• Increasing absorption of resources and the Bank’s commission-based income,• Micro financing the cooperation of the Welfare Organization,• Establishing partnership plan for profit and loss, • Financing projects related to IT infrastructures of subordinated companies of the Ministry of Cooperation , Labor and Social Welfare and the Social Security Organization,• Outsourcing the provision of information technology infrastructures

Future plans:

•Turning into a customer centric organization,• Cumulative Financing through issuing different types of bonds,• Providing consultative solutions to customers through novel services of corporate and private banking in order to increase commission-based incomes,• Developing social banking and financing economic projects in line with decreasing


Preserving Human Dignity

Customer-oriented Approach

Creativity and Innovation

Continuous Improvement

Our Values/ Ethical Codes

poverty and inequality,• Flexible presence in target markets attractive for investment,• Developing the possibility of rendering secure services on smart phones,• Re-designing organizational structure through optimal distribution,• Rendering services proportionate to customers’ needs through creating organizational affiliation,• Optimizing centralized data bases in order to access right and on time data for effective decision making,• Aligning non-continuous payments with performance evaluation patterns,• Expanding international banking through initiating and developing correspondent banking relations with international banks.


A report on Iran’s economic status in 2016-17The fiscal year 2016-17 encountered a particular circumstance due to the implementation

of JCPOA and removal of sanctions on one hand and executing the Sixth Plan of Development on the other. Removal of sanctions was followed by some merits such as the possibility of increase in manufacturing, oil export, decrease of transactional costs, possibility of entering into international markets , etc. which played important roles in increasing economic growth in the fiscal year 2016-17. This can be considered as an important factor since reaching an average economic growth of 8 percent has been defined as the essentials of the Sixth Development Plan.

One of the special achievements of JCPOA was, in fact, the creation of a favorable circumstance for international trade specially in selling oil. According to related statistics, oil export reached the favorable level of 2.5 barrels daily. Total revenue of country in 2016-17 was estimated to 57.4 Billion US Dollars while a considerable increase in exporting non-oil items was also evident. In the fiscal year 2016-17, country’s total non-oil export was around 129,648,000 tons for the value of 43,930 Million US Dollars which showed a 38.06% and 3.54% increase in both weight and value respectively in comparison to the previous year. In the same period, the country’s import level decreased in weight by 4.99% and increased in value by 5.16%.

Economic macro indices also improved in some aspects. I.R.Iran’s economic growth in 2016-17 was 8/3% considering oil and 6.3 disregarding oil factor while the same statistics in the previous fiscal year were much lower in both calculations. This actually reveals the fact that JCPOA created great potentials with a considerable increase in producing and selling oil which helped this trend. In the fiscal year 2016-17, different sectors of economy bloomed as well (increase in agriculture by 5%, industry by 11.3%, and service by 7.1% in comparison with the previous year).

Iran’s EconomyImport/Export

Major Growth

Oil

Trade Ties

Economy in Bloom

Great AchievementsInternational Markets

JCPOA

Banking Industry


One of the reasonable achievements was in fact reducing the inflation rate. According to C.B.I.’s statistics, the inflation rate reached 9.5% in May 2016-17 while it was 11.9% for the similar period last year. However, despite the economic boost in the fiscal year 2016-17, the status of employment was still unfavorable while unemployment rate showed the high rate of 12.5%. Indeed, the existence of a relative economic calm was the most important achievement of the year.

International market and foreign exchange activities also benefited from outcomes of JCPOA and experienced low fluctuations in foreign exchange rates which was a positive event for domestic manufacturers and Iranian traders. In return, housing sector passed the fiscal year 2016-17 in an approximate depression and without any noticeable changes. In capital market as well, despite the existence of some factors such as relative transparency, positive sudden shocks, lack of sufficient triggers, ambiguities and uncertainties, no noticeable growth was detected. Tehran stock exchange also experienced a 3.7% decrease in comparison to the previous year. It must also be noted that pharmaceutical and automobile industries showed a better performance indeed.

It must obviously be taken into consideration that some important issues such as lack of effective demand, banking system problems, high interest rates and lack of oil incomes more or less existed in the year 2016-17. However, as reiterated previously, by increasing oil export, on one hand and the lack of effective demand on the other the issue was somehow indemnified. Furthermore, some measures were taken by the Central Bank of Iran for removing problems related to the banking system which included decreasing interest rates, implementing banking system improvement plan, strengthening the bank’s supervision role, monetary policy making, increasing allocation of credit facilities, etc.

Another flourishing aspect was enhancing tourism industry which took place in 2016-17. According to statistics, I.R.Iran is amongst 10 tourist destination countries and has


great potentials. In the fiscal year 2016-17, more than 6 million tourists visited I.R.Iran which has increased in comparison with the previous year. This finally led to earning 8 Billion US Dollars from tourist incomes. In the same year Iran and Turkey signed tourism MOU for enhancing in-between relations.

Foreign investment and fundraising also experienced positive measures in the fiscal year 2016-17. The government target was 7 Billion US Dollars which reached a desirable level of 12 Billion US Dollars after JCPOA . In the meantime some finance master agreements were concluded for financing economic projects for 50 Billion US Dollars.

Furthermore cooperation grounds have been paved in commercial activities with European countries and some MOUs were concluded in the field of finance, mutual investment, joint venture, banking cooperation,etc.

A Report on the Status of Refah K. Bank in Iran’s EconomyThe banking system has a very special role in Iran’s economy and serves as the most

important pillar while owning a great part of the society’s liquidity leading them towards productive and stable employment. This system can indeed distribute facilities amongst the society’s different sectors in line with meeting economic objectives especially resistive economy. The banking system indeed flourished in the year 2016-17 regarding resistive economy and made effective measures amongst which financing SMEs is much considerable. In the same manner, Refah K. Bank also made acceptable performance regarding meeting the objectives of resistive economy such as allocating credit facilities for supporting manufacturing, extending knowledge-based services, supporting low incomes and empowering them, investments in productive sectors, etc. and at the same time supported manufacturing and entrepreneurship as its priorities in order to make use of the utmost available resources for meeting investors’ demands.


It’s worth mentioning that the net balance of the Bank’s expenditures at the end of the fiscal year 2016-17 increased by 26% in comparison with the previous year. This means that the bank finely concentrated on active participation in financing different economic sectors in a way that during the fiscal year 2016-17, 5.5% of the total manufacturing value of different industries such as oil, gas, petro chemistry, automobile production, power plant, steel, cement, etc. was financed by Refah K. Bank. Indeed the most part of financing activities are related to the automobile industry ( 20% ) and to pharmaceutical industry ( 13%).

Refah K. Bank also allocated 4,492 Billion I.R.Rials to SMEs to remove liquidity difficulties of such entities. Meanwhile, 401,869 Billion I.R.Rials was allocated to different sectors of economy such as agriculture, industry and mine, housing and construction, service and commerce.

On the other hand, Refah K. Bank allocated special credit lines to the Social Security Organization in order to pay its debts and remove its liquidity difficulties. Due to the close ties and mutual cooperation existing between the bank and the S.S.O., Refah K. Bank encounters customers from all walks of life including physicians, health care responsible, academic staff and pensioners and renders services to them. One of the main strategies of the bank is supporting health industry and thus in the fiscal year 2016-17, “Salamat Mehr” project was implemented country-wide in order to allocate financial and credit facilities to physicians benefitting lower interest rates and longer extended repayment/refund periods.

The outcomes of JCPOA were indeed one of the most crucial achievements of the year 2016-17 followed by positive consequences and appropriate economic potentials. However generally speaking, expanding international relations requires full compliance with approved standards and this was to some extend achieved in the fiscal year 2016-17 and could resume international banking by re-connecting to SWIFT and establishing correspondent banking relations.

In this connection correspondent banking relations were established with banks worldwide and customers’ requests regarding trade finance activities were met. Furthermore, some changes occurred in the structure of the bank and as per standard requirements, Risk & Compliance department was established, Refah K. Bank’s AML/CFT policies were compiled and released.

Refah Bank’s Market Share (Local Market/Local Currency)According to official reports from the Central Bank of Iran (C.B.I), Refah Bank’s total

resources at the end of the fiscal year 2016-17 allocated 3.8% of the total banking system resources which was then 12,728,364 Billion Rials.

It is worth saying that Refah Bank’s market share for activities in local currency amongst the country’s 6 major commercial banks (for the total value of 5,813,032 Billion Rials) at the end of the fiscal year 2016-17 was 8.24% .


International BankingObviously, one of the most important events of the year 2016-17, was the positive

and effective consequences of JCPOA which took place in early 2016 and after the removel of the sanctions and reconnection to SWIFT. Therefore, the main objective of the International Division of the bank is benefitting from this crucial event in order to create a proper correspondent network and to have better involvement in international markets. In this connection and owing to JCPOA achievements, SWIFT reconnection and communications with correspondent banks, Refah Bank’s correspondent network has been expanded and new phases were created in banking relations and correspondent banking relations initiated in European and non-European countries. Subsequently international payment became possible through the opened accounts for extending foreign exchange international activities through utilizing different banking instrument. This could lead to a proper market share in international banking affairs.

Furthermore, due to the importance of complying with international standards, rules and regulations, compliance issues were taken into account with more care and therefore AML/CFT forms were completed and sent in line with approved standards.

It must be noted that although sanctions were removed in 2016-17, however there were still some obstacles which affected international financial communications but in spite of all these difficulties and hindrances, the international performance of Refah K. Bank showed a considerable increase both in number and volume in the year 2016-17. Following tables will indicate the fact and shows the increasing trend.


Summary of Foreign Exchange Activities in 2016-17 (Trade Finance Report):

As the above table fully indicates, there has been a significant growth in the volume of foreign exchange activities after JCPOA which led to the maximum level of trade finance activities in the fiscal year 2016 - 2017 due to integration of Iran to global market.

Total Foreign Exchange Activities Trend in the last five years:

Documentary Credits CollectionsOutgoing Payment

OrdersIncoming Payment

OrdersLetter of

Guarantees

No. Amount No. Amount No. Amount No. Amount No. Amount

1090 851,101,728.12 50 82,821,742.44 2758 700,831,175.47 110 79,626,696.85 9 3,130,903.85

90/000/000

80/000/000

70/000/000

60/000/000

50/000/000

40/000/000

30/000/000

20/000/000

10/000/000

0

Documentary Credits Collections Outgoing Payment Orders Incoming Payment Orders Letter of Guarantees

2016 - 2017 2015 - 20162014 - 2015 2013 -20142012 - 2013

1,732,.703,.400.73645,529,826.94494,008,268639,193,380.06614,649,097.80

2/000

1/800

1/600

1/400

1/200

1/000

800

600

400

200

0 Am

ount

-Mill

ion

Dol

lars

2016 - 2017 2015 - 20162014 - 2015 2013 -20142012 - 2013


Some of the Bank’s achievements regarding foreign exchange activities in 2016-17:

• Expanding correspondent network through exchanging RMA with correspondent banks in European and non-European countries and opening correspondent accounts

• Establishing and equipping SWIFT system in selected branches nation-wide• Communicating 19,266 and 3,598 messages in SWIFT and SEPAM systems respectively• Reorganizing the structure of human resources in foreign exchange section of

branches and updating the knowledge through holding related courses and seminars • Mechanization of all foreign exchange units of the Bank

Refah Bank’s main services and products in foreign currency and in international banking:

In order to meet customers’ satisfaction and for the purpose of expanding and diversifying the range of renderable services in line with regular and electronic banking services, Refah Kargaran Bank is progressive in offering international Foreign Exchange services as well. Enjoying professional experts and conforming to international standards, Refah Kargaran Bank extends different types of services in foreign currencies in the form of accounts, documentary credits, payment orders, guarantees, etc. some of which are briefly presented hereunder:

• Buying and selling Foreign Exchange banknotes and payment orders with competitive rates,• Issuing and receiving payment orders (Outgoing & Incoming) • Opening Different Kinds of Foreign Exchange Accounts • Issuing and accepting different Kinds of documentary credits • Registering Bills of Exchange • Issuing Different Kinds of Foreign Exchange Guarantees • Allocating Foreign Exchange Facilities • etc.


Information TechnologyAs standard definitions, Information Technology (IT) is the application of computers to

store, study, retrieve, transmit and manipulate data or information often in the context of a business or other enterprise. Information technology indeed is an inseparable part of the Banking industry as a fundamental infrastructure. Banking system has become highly competitive today. To be able to survive and grow in the ongoing changing market environment, banks must go for the latest technologies and update their infrastructures. Refah K. Bank indeed is not an exception regarding this fact and constantly enjoys the benefits of information technology as an instrument of cost reduction and effective communication with customers and implements reliable techniques and internet as an important medium for rendering banking products and services. In the changing and evolving IT environment, Refah K. Bank has slowly shifted from traditional banking towards modern banking by devising state of the art banking services, entering into new markets and products, using online electronic banking, mobile banking, internet banking, etc.

Giving reference to the above preface and in line with Refah K. Bank’s main strategies, the IT Directorate while enjoying state-of-the-art technology and updated and


knowledgeable personnel has enhanced the IT portfolio of the bank aiming to reach full core banking through concluding cooperation contracts with outsourced specialized companies who are capable of rendering IT and consultative services.

In this connection brief information is presented hereunder to introduce some of the achievements of the IT Directorate in Refah K. Bank which consists of different IT departments working in specialized fields such as hardware, software, security, novel services, etc. and related figures are given hereunder for the fiscal year 2016-2017.

IT achievements in 2016-17 can be analyzed in four sections namely Electronic Banking, Softwares (branches) and special services, Softwares (departments), Infrastructure, Training and Security and constantly some of the bank’s IT main measures and achievements in 2016-17 are the following items:

• Establishing novel systems and sub-systems such as Refah K. Bank’s tablet bank system, private financial management system, mobile bank (Android and IOS version), on-line transaction system, etc.

• Updating internet banking application• Participating in social media in mobile banking• Purchasing 387 ATMs and replacing 478 inefficient AMT country wide• Establishing internet connection in more than 800 branches• Enhancing infrastructures in online and card services banking (software/hardware)• Decreasing the level of failed transaction from 2.9% in 2015-16 to 1.4% in 2016-17• Designing special softwares for the bank’s branches and departments • Updating server trusted zone through enhancing security,• Updating internet bank’s system infrastructures, etc.

Comparative Table of E-Banking Services in a 3 Year Trend

Title 2014 - 2015 2015 - 2016 2016 - 2017

Number of Points of sale (POS) 278,085 252,654 254,114

Number of Issued payment cards 14,242,022 17,394,535 21,165,741

Number of ATMs 2,165 2,653 2,989

Number of Internet payment gateways 211 461 630

Number of on-line accounts 15,363,718 19,235,017 21,697,965

Number of Internet bank active customers

234,722 312,163 426,392

Number of Mobile bank active customers

127,512 298,249 532,999


Human Resources

Human resources are considered as the most valuable asset of any organization and in fact, any organization’s success and achievements rely on its personnel’s consent and capabilities. Therefore HR management in Refah K. Bank considers to be remarkably important trying its best to benefit from the potentials of staff in line with the bank’s strategic objectives.

Here are some of Refah K. Bank’s measures in 2016-2017 regarding HR :

1) Analyzing the Bank’s jobs in headquarters (departments)The first step in an optimum HR management is analyzing jobs through scientific

approaches with applicable functions. This will provide the ground for planning HR, recruitment, HR performance management, training, development, etc. Subsequently and after getting required approvals from the Board of Directors, job’s ID cards were compiled and were then implemented in related systems in Refah K. Bank. This enabled clarified job descriptions for every single personnel of the bank and thus a better planning for their career path management. Meanwhile, from the beginning of the fiscal year 2016-17 the second phase of the plan has been initiated in order to analyze jobs in headquarters and to compile jobs ID.

2) Analyzing the Bank’s personnel competencesIn the first phase of the plan, the bank’s competences profile was identified and

compiled based on TC260 standard. In the next phase some special plans such as identifying strategic jobs, counting peer jobs and identifying core competences project were launched.


3) Revising evaluation forms for all jobs (Staff’s Performance Management Plan)Staff’s performance management plan was executed in some departments in order to

analyze every single staff’s role in the bank and its influence and compatibility with the bank’s specified mission and strategies.

4) Developing evaluation and development centerEvaluation and development center has been reviewed and optimized in order to

evaluate personnel for managerial and senior positions to improve meritocracy plans to reach the objectives of the bank.

HR Distribution in Refah K. Bank in 17-2016

Job Category Female Male Total

Banker 1310 4204 5514

Executive/administrative 5 113 118

Executive/service 0 483 483

Expertise 315 857 1172

Managerial 218 2454 2672

Total 1848 8111 9959

Training

Refah Bank’s Training programs in 2016-2017Today, “Training” is considered to be an efficient investment and a key factor in

development amongst pioneering organizations and if planned properly it could lead to a significant economic output. Conducting effective training programs in such organizations requires creative thinking, novel models and approaches as well as modern established mechanisms. Thus, training is a leading measure which results in great achievements such as added value in individual level, performance enhancement in organizational level and boosting efficiency increase in its national level. Owing to the importance of training and considering the above mentioned introduction, Refah K. Bank’s Training Department adopted a method in which the Bank has turned into a learning organization and thus is complied with training programs and developing measures in line with the Bank’s macro strategies.


Some of the main measures conducted regarding Training in 2016-17

General Programs:

1) Extending the validity of ISO 10015:1999 standard certificateMoving towards quality management standards will lead the organizations to move in a

proper path. Accordingly, after annual evaluation carried out by SGS Company, Refah K. Bank’s ISO 10015 certificate was extended at the end of 2016-17 due to its compliance with required criteria and its corrective measures.

2) Implementing the project of leading training coursesProfessional instructors and their method of instructions are two important factors

influencing the process of learning and acquiring knowledge. By implementing such leading project, a unique mechanism was planned and the selected instructors administered some exams and conductive and technical interviews were held.

3) Achieving the first rank in banking specialists’ Olympiad of the Banking System’s staff

By participating 2349 personnel of the Iranian banking system, the first banking specialist Olympiad was administered and 250 per-sonnel of Refah K. Bank who were identified and volunteered could achieve the first rank among 14 participating banks.

4) Compiling training identity proof for all the jobs in branches, departments and regional offices according to the related job descriptions

Training requirements of person-nel were identified in accordance with structural coordinates of each separate job and positions. Ac-cording to the job identity proof designed by the HR Department, training identity proof was com-piled and employed in the Bank.


5) Knowledge Management Knowledge management project was being implemented in Refah K. Bank in order to

share the acquired knowledge and create added value for the personnel. For initiating such project some measures were taken such as preparing the related

instructive pamphlet, conducting an instructive channel in social media of the Bank , holding general training courses, conducting BSC scoring , performing expertise interviews, organizing knowledge management team, etc.

6) Utilizing state-of-the-art communication tools in training process Electronic training is an important aspect of training since using computer, internet, etc.

and utilizing these training tools, will increase the level of consent in staff while it creates an equal opportunity for training. In this connection, a number of electronic training courses were held and web-conference method was also organized for the staff’s on-line training. In the meantime some training materials were posted through virtual networks in the form of training texts, films and voice messages.

Training and Developing Programs: Refah K. Bank’s targeting is scheduled in accordance with BSC criteria, therefore to

move in line with implementing the Bank’s strategies, BSCs are analyzed and thus points for improvement are identified. In this connection and for complying training courses with the Bank’s general objectives, the training package of BSC was devised; executed and training packages were specified.

The following table shows Refah K. Bank’s held training courses in 2016-17 based on 4 standard training parameters which gives an indication of the concept of training on a quantitative basis.

Person/hourPerson/course Title of courses Number ofcoursesCourse type

22731279323108Basic

758311931743General

25844277312106Managerial

300351359061711363Professional

356509426652231620Total


Number of Units and Departments in 2016-17:

Number Bank’s Units

1050Branches

13Booths

287Special Services Units

18Special Services Booths

33Branches’ Affairs Departments

35 departments and 1 Deputy Management Headquarters

12Managerial Departments

Refah Bank’s Branches Network

Optimizing the Bank’s location of branches unit:According to the defined policies and strategies, the bank conducted closing, merger or establishing branches in special locations in 2016-17. Optimization committee of branches was also established in order to reach the specified objectives as follow:1. Decreasing administrative and personnel costs,


2. Agility in organizational chart,3. Expanding virtual banking services through novel banking services and products,4. Implementing modern banking such as private and corporate banking, 5. Increasing income and decreasing the number of branches with loss,6. Selling surplus properties.

Honor Gallery, Achievements and Strategic Measures in 2016-17Awards and Achievements in 2016-2017:• Appreciation by the Ministry of Industry, Mine and Trade for active participation in the national work group of facilitating and removing manufacturing obstacles, • Standard certificate in training management “ISO 10015” from “SGS” international institution,• Acquiring the 16th rank among IRAN’s top 100 companies regarding indices such as profitability and performance, efficiency, export , liquidity , debt and market based on the declaration of Industrial Management Organization,• Being listed among the 10 pioneer companies in 2016-17 according to the declaration of Industrial Management Organization,• Nominating tablet banking software of the Bank as a creative service in the first national festival of innovation for Iranian best product,• Achieving first rank of Iran’s academic Olympiad of the banking system, • Introducing core system of financial management “SAMIM” as an innovative product,• Receiving special statue of the 11th congress of Iran’s general surgeons society for the effective presence and services in health care industry,• The supporting bank in the field of health-care, • Achieving 2nd rank of performance management among organizations under supervision of Ministry of Cooperation, Labor and social Welfare.


CSR (Corporate Social Responsibilities)Corporate social responsibility is the voluntary compliance of social and ecological responsibility of companies. It is actually a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.Over the last years an increasing number of companies worldwide started promoting their Corporate Social Responsibility strategies because the customers, the public and the investors expect them to act sustainably as well as responsibly. Due to the important role of shareholders and beneficiaries in a financial entity, Refah K. Bank has also considered this important concept and is responsible in its surrounding society so that Refah K. Bank has put an important priority on its CSR.Some of the Bank’s measures regarding CRS include the following:• Contribution to construct Medical Sciences Universities in different provinces of the country• Financial contribution to build and construct schools and training/educational sites in different provinces of the country• Financial contribution to different festivals and conventions in various fields such as medical, educational, pharmaceutical, • Financial contributions to purchase ambulance for hospitals and medical science universities • Concluding MOUs with outsources entities or organizations such as constructions companies, univesities, funds, healthcare centers, etc.


Balance sheet Refah Kargaran Bank (JSC)

Fiscal Year ending on March 20th, 2017 Figures in Million I.R. Rials

19/03/201620/03/2017Note Assets

Million I.R. RialsMillion I.R. Rials

10,911,84510,854,30610Cash assets (balance)

2,988,9201,967,45711Claims from Banks and other Credit Institutions

9,751,47518,029,94612Claims from the Government

323,870327,62313Allocated Credit Facilities and claims from governmental individuals

290,920,476384,874,56314Allocated Credit Facilities and claims from non-governmental individuals

35,911,47957,911,00815Investment ( in stock exchange and other securities )

7,078,7849,643,18016Claims from subsidiary companies

36,035,70841,231,33417Other Receivable Accounts

10,895,81412,553,35418Fixed Tangible Assets

244,231325,76219Intangible Assets

44,531,26752,075,20220Legal Reserve

5,150,3379,026,17921Other Assets

454,744,206598,819,914Total Assets

7,151,06115,180,59855-1Customers’ L/C Commitments

13,929,51817,592,33655-2Customers’ L/G Commitments

479,120412,31455-3Customers’ Other Commitments

909,018582,54255-4Managed Funds and the like


Balance sheet


19/03/201620/03/2017NoteLiabilities and Shareholders’ Equity


6,140,56923,996,77523Dues to Banks and other Credit Institutions

99,247,342119,783,62624Customers’ Deposits

151,66124,10525Payable Shares Interest

00------Debt Securities

100,000026Performance Tax Reserves

7,985,39823,534,98827Reserves and Other Dues

2,849,3374,707,95128Staff’s Service Termination benefits and Retirement Commitment

116,474,307172,047,445------Total Liabilities before Equity

301,065,449389,454,63929Investment Deposit Owners Equity

417,539,756561,502,084Total Liabilities

Shareholders’ equity

23,326,00023,326,00030 Capital

16,674,00016,674,00031Current Capital Increase

00------Up on Stock

968,777985,78432Legal Reserve

13,87013,87033Other Reserves

00------Re-evaluation of Assets’ surplus

00------Foreign Exchange Conversion Difference

(3,778,197)(3,681,824)------Accumulated Profit (Loss)

00------Treasury Shares

37,204,45037,317,830------Shareholders’ Equity Sum

454,744,206598,819,914Total Liabilities and Shareholders’ Equity

7,151,06115,180,59855-1Bank’s L/C Commitments

13,929,51817,592,33655-2Bank’s L/G Commitments

479,120412,31455-3Bank’s Other Commitments



Refah Kargaran Bank’s (JSC)

Profit and Loss Statement Fiscal Year Ending on March 20th, 2017

19/03/201620/03/2017

Million I.R. RialsMillion I.R. RialsDescription

62,283,657

(55,627,142)

71,113,36734Credit Facilities, Deposits and Securities Income

(57,438,022)40Deposits’ Interest Expenses

6,656,51513,675,345Credit Facilities and Deposits’ Net Income

1,867,006

(1,753,555)

3,366,48441Commission Income

(2,792,278)42Commission Costs

113,451574,206Net Commission Income

6,569,776

602,457

0

6,503,77835Investments’ Net Profit

326,39243Foreign Exchange and Dealings’ Net Profit

0---Other Operational Incomes

7,172,2336,830,170Total Operational Incomes

1,150,845

(12,770,125)

(1,281,583)

(545,075)

(624,835)

460,03144Net Other Incomes and Expenses

(16,897,139)45Administrative and General Expenses

(2,318,795)46Doubtful Debts Expenses

(1,502,949)47Financial Expenses

(707,487)48Amortization Expenses

(128,573)113,382----Profit Prior to Tax

0026Tax on Income

(128,573)113,382Net Profit

57Profit Per Share

65Base Profit Per Share

Balance sheet


19/03/201620/03/2017NoteLiabilities and Shareholders’ Equity


6,140,56923,996,77523Dues to Banks and other Credit Institutions


151,66124,10525Payable Shares Interest

00------Debt Securities

100,000026Performance Tax Reserves

7,985,39823,534,98827Reserves and Other Dues

2,849,3374,707,95128Staff’s Service Termination benefits and Retirement Commitment

116,474,307172,047,445------Total Liabilities before Equity

301,065,449389,454,63929Investment Deposit Owners Equity

417,539,756561,502,084Total Liabilities

Shareholders’ equity

23,326,00023,326,00030 Capital

16,674,00016,674,00031Current Capital Increase

00------Up on Stock

968,777985,78432Legal Reserve

13,87013,87033Other Reserves

00------Re-evaluation of Assets’ surplus

00------Foreign Exchange Conversion Difference

(3,778,197)(3,681,824)------Accumulated Profit (Loss)

00------Treasury Shares

37,204,45037,317,830------Shareholders’ Equity Sum

454,744,206598,819,914Total Liabilities and Shareholders’ Equity

7,151,06115,180,59855-1Bank’s L/C Commitments

13,929,51817,592,33655-2Bank’s L/G Commitments

479,120412,31455-3Bank’s Other Commitments



Refah Kargaran Bank

Statement of Cash Flow (Fiscal year ending on 20/03/2017)19/03/201620/03/2017Description

Million RialNotesOperational Activities

46,063,61258,662,382Interest for Financial Credit Facilities

00Interest for Securities

1,753,5553,366,484Commission

2,549,254644,274Interest for depositing

1,491,9471,040,386Interest for Investments

238211Other Operational Incomes

2,238,190457,196Other Incomes

Paid in Cash for:

(54,702,849)(55,644,249)Interest of deposits

(1,867,006)(2,792,278)Commission

(1,786,501)(3,296,723)Financial Expenses

00Other Operational Expenses

(143,315)(386,000)Tax on Income

(4,402,875)2,051,683Incoming Cash (Outflow) out of Operational Activities before Changes in Assets and Operational Debts

Cash Flows out of Changes in Assets and Operational Debts:

Net Increase (Decrease) in debts and deposits

4,012,20016,780,574Dues to other banks and financial institutions


00Securities

(555,285)15,032,505Reserves’ Operational Portion and other debts

63,360,53268,296,013Investment Deposit Owners’ Equity

00Payable interest to termed deposits

Net Increase (Decrease) in Assets

1,523,7191,025,727Claim from banks and other credit institutions

(1,446,284)(8,287,213)Principal Amount of Dues from the Government

00Principal Amount of Allocated Facilities and Dues from the Governmental Individuals

(70,428,825)(97,615,093)Principal Amount of Allocated Facilities and Dues from the non-Governmental Individuals

(7,265,893)(8,859,051)Investing in Stocks and other Securities

(1,640,000)(323,215)Claims from Subsidiary and affiliated Companies

(9,492,757)(20,581,549)Other Receivable Accounts

(8,455,308)(7,543,935)Legal Reserves

(1,205,378)(214,836)Other Assets’ Operational Portion

(5,788,859)(21,753,789)Cash Flows out of Changes in Assets and Operational Debts

(10,082,170)(19,702,106)53Net Cash Flow Entering (Exiting) out of Operational Activities

Investment Activities

0(3,619,729)Paid Funds for Purchasing Tangible Fixed Assets

33,2171,986,924Received Funds for Selling Tangible Fixed Assets

(2,957,936)(81,899)Paid Funds for Purchasing intangible Fixed Assets

12,252368Received Funds for Selling intangible Fixed Assets

00Paid Funds for Purchasing Non-operational Properties

00Received Funds for Selling Non-operational Properties

(2,912,467)(1,714,336)Net Cash Inflow (Outflow) from Investing Activities

(12,994,637)(21,416,442)Net Cash Inflow (Outflow) before Financing Activities

Financing Activities

16,674,0000Increase in Current Cash Capital

00Trading Treasury Shares

00Funds out of Shares’ Spending

(103)(127,556)Paid Shares’ Interest

021,160,067Receiving Financial Facilities

(985,000)0Paying back the Principal Amount of Credit Facilities

15,688,89721,032,511Net Cash Inflow (Outflow) from Financing Activities

2,694,260(383,931)53Net Increase (Decrease) in Cash Funds

7,615,12810,911,845Cash Fund Balance at the beginning of the Fiscal Year

602,457326,39243Impact of Foreign Exchange Rate Changes

10,911,84510,854,30653Cash Fund Balance at the end of the Fiscal Year

2,366,28211,108,62454Non-cash Transactions


Directorate of Supervision Affairs

1) Risk and Compliance The banking industry, playing the most important role as an economic entity, constantly confronts

a variety of challenges. Some factors such as increasing completion amongst banks, strengthening controlling policies from C.B.I., some internal and external inconsistency and the beneficiaries’ expectations create risks for the present and future status of active banks in a way that the subject of risk and its management have always been considered by banks. In the same manner, Refah K. Bank has also established its Risk Management Department in 2011 as per the C.B.I. instructions. Risk & Compliance Department as the bank’s executive module of the high committee of risk and board member and in line with providing necessary requirements for implementing Basel principles has been established in order to implement risk management system in the bank and for the purpose of identifying main risks and report them to its high committee. In compliance with the bank’s organizational chart, this department is under the management of the Supervision Directorate.

Pro

cess

S

truc

ture

O

bjec

tives

& S

trat

egie

s

High Committee of Risk Management

Generalassembly

Board of Directors

Managing Director

Deputy of Managing Director Deputy of Managing Director

Directors (Regional) Directors (Headquarters)

Director of Supervision Affairs

Risk & ComplianceDepartment

Deputy of Financial Risk

Liquidity risk

Risk Coordinator

Risk Culture

Credit risk Market risk Operational risk Compliance risk

Deputy of Compliance Risk

Identification Analysis Confronting with riskAssessment


• Risk Management SystemAs a part of corporate governance , risk management includes the bank’s objectives and main

strategies, different organizational levels such as board members, high committee of risk, supervision directorate, risk officers, risk management process and risk culture.

• Codes of ConductRefah K. Bank is established upon the trust of public and its beneficiaries’ beliefs. Such trust is the

outcome of transparency, soundness and the culture of risk management in which the staff, directors and the board members of the bank do believe and adhere to. The bank’s fame is an invaluable asset, in which a slight flaw, even to the least degree of importance, has never been acceptable for any reasons. Therefore, as the old and developed family of Refah K. Bank, we feel obligated to comply with the following principles in order to keep the bank’s popularity, soundness, trustworthiness, fame in performing our legal duties, social responsibilities with reliance on culture, beliefs and the principal values for the development and improvement of our services countrywide and internationally:

1. We perform risk culture throughout different organizational levels.2. We consider the identification, analysis and continuous control of risks as the duties and

responsibilities of staff at different organizational levels,3. We assume risk as an inseparable part of our decision-making process,4. We take measures in the framework of our bank’s risk appetite and do not deviate from the

defined limits,5. We support logical risk-takers within the framework of the bank’s risk appetite,6. We take responsibility for some measures which are not carried out in compliance with the bank’s

values and risk appetite,7. We define three lines of defense and assume our cooperation with the internal control and risk

management units as a value,


8. We evaluate risk culture systematically,9. We share all the existing risks, emerging and the unexpected ones throughout the bank,10. We consider failure as a potential source of learning and publish the bank’s risk position through

competent communication channels,11. We provide training courses for all staff to developing risk efficiency,12. We consider risk acceptance as a key factor in designing compensation,13. We assume knowledge of key risks and risk management as an important skill and consider it

as an efficiency factor in job promotion,14. We determine the staff’s authorities and responsibilities,15. To prevent reputation risk , we are bound to comply with all the rules and regulations, national

and international standards and requirements in the framework of the Islamic Republic of Iran.16. We screen latest changes in rules, regulations and standards and inquire any probable

ambiguities,17. We are bound to the duties and responsibilities devised in the framework of internal instructions

and bylaws and assure being complied with them,18. We continuously analyze the degree to which national and international rules and regulations

are closely met,19. We pay attention to the processes and procedures of customer identification and are loyal to it.20. We make necessary measures regarding the identification of suspicious activities, money-

laundering and terrorism financing.In the meantime, some of the measures and achievements regarding risk and compliance issues

in 2016-2017 are as follows:

1- Credit Risk ManagementCredit risk management has the function of controlling risks related to credit issues, determining

policies, calculating credit risk indices and studying credit portfolio risk. Some of the most important measures consist of:

1-1- Identifying credit risk policies and strategies


1-2- Identifying the limits of credit authorities according to different organizational levels1-3- Credit rating processes 1-4- Identifying criteria for receiving securities for those items exposed to credit risk1-5- Evaluating the amount of the required capital to cover the credit risk1-6- Calculating Recovery Rate and Loss Given Default1-7- Assessing the quality of the securities in line with credit risk management1-8- Calculating bank expected loss during different periods1-9- Observing and supervising debts in different periods

2- Liquidity Risk ManagementLiquidity risk management is one of the main challenges of the banking industry which should be

managed and controlled properly. Some of the measures in this field are the following:2-1- Identifying liquidity risk management policies and strategies 2-2- Controlling liquidity crisis and performing related tests 2-3- Forecasting the volume of resources and uses 2-4- Duration of resources and consumptions2-5- Analyzing interest rate risk2-6- Calculating the ratio of NSFR (Net Stable Funding Ratio)2-7- Calculating the ratio of LCR (Liquidity Coverage Ratio) the basis of “BASEL3”2-8- Concentration risk

3- Market Risk ManagementMarket risk is due to lack of trust in the receivables related to the portfolio of dealings which is the

result of fluctuation in the market status such as the assets price change, the interest rates and the market liquidity. Therefore, managing market risk is carried out with the aim of constant analysis of market status and the effects in the bank using methods like value at risk, risk assessment, simulation, and technical analysis. Some of the most important measures are the following:

3-1- Implementing policies and procedures for Market Risk Management3-2- Evaluating market risk and the required capital for hedging


3-3- Investigating and analyzing macro-economic variables3-4- Investigating and calculating value at risk of the portfolio3-5- Investigating and analyzing foreign exchange portfolio3-6- Performing crisis tests and analyzing sensitivity3-7- Investigating global risks3-8- Presenting continuous weekly and monthly reports related to risks and paralleled markets

4- Operational Risk ManagementOperational risk management is carried out with the aim of identifying and evaluating risks related

to processes and methods executed by human resources, internal systems, external events and information technology. During operational risk management process, all employees are responsible to identify and report the operational risks related to their responsibilities. The most important measures which have been done in this field consist of:

4-1- Identifying and analyzing risks through trial and error (FMEA)4-2- Implementing preventive policies to avoid intentional and unintentional HR mistakes4-3- Implementing preparation methods for confronting and forecasting crisis 4-4- Calculating the required capital to cover the credit risk4-5- Calculating process of banking soundness indices and benchmarking with successful banks

5- Compliance Risk ManagementFor managing such risks, the issue of compliance with the issued circulated instructions of the

C.B.I. and other supervisory bodies are managed and observed. Compliance officer must then report to the C.E.O.. Some of the most important measures as follows:

5-1- Preparing monthly compliance risk report5-2- Establishing committee of circulars5-3- Preparing compliance risk software5-4- Holding regular compliance risk committee meeting 5-5- Getting the approvals of the esteemed board members5-6- Investigating the conformity and compliance of internal circulars with those issued by the C.B.I.

and other existing rules and regulations


6- Customizing Risk Management SystemConsidering the fact that the main part of risks arise from inappropriate measures and decisions

made by the staff which cause loss, implementing risk management culture is being practiced in Refah K. Bank through training employees and notifying them through the bank’s informative systems. Some of the related measures are as follow:

6-1- Identifying risk and compliance codes of conduct 6-2- Continuous weekly /monthly notification of guidelines, risk circulars / indexes to employees

through the bank’s intranet6-3- Holding educational courses for personnel

Number of personnel trainedTraining hours

149611968

2- InspectionThe banking system is exposed to variety of risks, instability or even crisis. Thus by looking at

some global banking crisis, the necessity for implementation of new controlling approaches as well as preventive measures for banks becomes important. Amongst such effective approaches in preserving stability and soundness are internal controlling and supervisory systems which can lead to more efficiency. Achieving the targets through the determined road maps, abiding to rules and principles, trusting reporting systems, increasing administrative soundness, preserving properties and finally financial stability will be very important in the future of the banking relations.

Some of the duties and assignments of supervisory bodies in banks include performing just and on-time measures for eliminating and preventing any error or inefficiency, performing amending measures while assuring of the compliance with rules and regulations and thus the Inspection Department of the bank is responsible for providing and implementing supervisory policies and managing inspection activities in provinces to meet the utmost benefits of the shareholders. In this connection the Inspection Department has carried out the following measures during 2016-2017:

• Holding inspection conventions, • Visiting provincial departments and

branches regularly,• Reporting any probable financial

violation of staff • Following up the Bank’s claims• Supervising the Bank’s systems

and processes • Conducting constant non-physical


(on-line) supervisions and controls on high risk entities • Cooperating and presenting expertise consultation to other departments for implementing the

Bank’s plans and projects• Managing issues related to HR, risk and compliance committee, administrative soundness

committee, banking commissions,…

3- Internal Audit• Basel committee has determined a new version of corporate governance in banks in order to

strengthen public supervision. In this connection, the Audit Department executed the project of “Implementing the reporting system for auditing”. By implementing such project and by inserting information of previous years to the said system, comparing the statistical reports for analyzing the components of internal controls as well as rating operational risk of units and personnel will be easily reportable.

• Complying with the C.B.I. circulars and directives, the Internal Audit Department has been established as the secretariat of the Bank’s Audit Committee. Accordingly, 8 regular sessions were held in the fiscal year 2016-17 by this nominated committee after the appointment of its new members.

• Due to the fact that as per article 5 of Internal Auditing in Basel principles published 2012, each bank must possess an audit charter to determine the position, objectives and authorities of auditing and to improve efficiency of auditing, therefore at present the draft for such charter is going to be prepared and is under investigation by the board members.

4- Anti-Money Laundering Strategies regarding Anti-Money LaunderingBy deploying the road map and the operational plan of the Country’s Supreme AML Council,

the project of managing anti-money laundering among banks and financial institutions has been compiled in 2011 and subsequently the Anti- Money Laundering Department of Refah K. Bank has


officially established and commenced its activities on 27/02/2012. The necessities and tasks which are determined and specified for the AML Department in the

comprehensive plan of AML are mainly focused on three axes of Executive & Fundamental Measures, Informative & Training Measures and Supervisory & Controlling Measures which are practiced under the supervision of the Central Bank of I.R.Iran and the Financial Intelligence Unit (FIU) and are examined and scrutinized by the related supervisory units on regular basis.

Moving in this path, Refah K. Bank’s AML Department has succeeded in implementing and fulfilling the Bank’s perspective objectives in these years.

Some of the bank’s achievements regarding AML:

1) Acquiring the first rank regarding implementation and deployment of AML related issues from FIU

The C.B.I. and the FIU has urged the banking system to implement AML regulations and policies in a unique and organized manner. In full compliance with this specified trend and by overtaking other agent banks as competitors, Refah K. Bank has been nominated as the best bank for implementing the first phase of AML comprehensive project in its final ranking among 31 other banks and credit institutions.


2) Earning the third rank regarding implementation of AML regulations advised by C.B.I.As per the official announcement of the C.B.I.( General Directorate of Regulations, Banking Licenses

and Anti-Money Laundering), Refah K. Bank succeeded in achieving the third rank in 2015 amongst other competitors.

“Anti-Money Laundering & Combating Financing of Terrorism Policies”

Objective:Today, money laundering and terrorism financing are considered as the most considerable crime

which threatens the economy and the society. This is why countries are determined to confront with its destructive impacts and consequences due to its international effects in the current circumstances.

Abiding to international standards, providing legal infrastructures (rules and regulations) and identifying methods to confront with this problem has caused the jurisdiction of countries to be decisive in ratifying rules and regulations in line with international authorities and exercising them in order to prevent these types of crimes in financial and credit institutions or to refer the criminal to judicial authorities.

By ratifying AML act and its executive by-laws, the Islamic Republic of Iran is also considered among countries which are determined to confront this phenomenon and claimed money laundering as a crime in line with other countries and thus combined and ratified the required rules and regulations subsequent to its approval by competent authorities.

Accordingly in order to prevent such crimes, Anti-Money Laundering & Combating Financing of Terrorism policies of Refah K. Bank have been ratified and herewith presented while considering the law of AML number 258/183497 dated 13/02/2008 approved by Islamic Consultative Assembly and the law of CFT number 15/90661 dated 12/03/2016 approved by Islamic Consultative Assembly while binding to the latest guidelines of FATF, Basel principles of Bank for International Settlement (BIS) and the Wolfsberg group.

AML and CFT policies of Refah Kargaran Bank are as follows:

1) Abiding to AML ActUpon ratifying and advising AML and CFT policies to the banking system, all financial and credit

institutions are obliged to execute the laws, bylaws and instructions approved by the supreme committee of AML. Accordingly, Refah Kargaran Bank has adopted a new approach in order to meet these laws and execute the approved instructions:

1. The instruction of identifying Iranian customers and credit institutions in 37 articles and 18 notes,2. Instruction of reporting cash transactions above the designated threshold in 11 articles and 2

notes,3. Instruction of identifying suspicious transactions and the method of reporting in 15 articles and

4 notes,4. Instruction of identifying the level of the customer’s expected activity in 10 articles and 4 notes,5. Instruction of observing AML laws in Electronic Payment Systems in 21 articles and 3 notes,6. Instruction of observing AML laws in establishing correspondent banking relations and identifying

shell banks in 6 articles and 4 notes,7. Instruction of observing suspicious individuals in credit institutions in 8 articles and 1 note,


8. Instruction of process needed to send documents and papers of the customers of credit institutes to their postal address in 12 articles and 6 notes,

9. Instruction of measures and strategies for assuring the observation of AML rules in off shore in 44 articles and 1 note,

10. Instruction of the manner of keeping commercial deeds and documents based on the ratifications posed by Credit & Monetary Council on 14/06/2010 in 12 articles and 11 notes.

11. Instruction of supervising extension of base services to PEPs in credit institutions in 12 articles and 6 notes

12. Instruction of identifying foreign customers referring to credit institutions in 22 articles and 14 notes

13. Instruction of the AML rules in foreign exchange companies in 20 articles and 14 notesBy executing the aforesaid policies, Refah Kargaran Bank is obliged to act in line with AML and CFT

ratified laws and to comply with country’s rules and regulations and the international recommendations, rules and standards.

2) Policies:The activities of Refah Kargaran Bank regarding AML and CFT laws are compiled and prepared

according to the governing rules and regulations instructed by the Central Bank of Iran (C.B.I) as the regulator and supervisor of financial institutions and in line with FATF recommendations.

Policies of Refah K. Bank regarding AML procedures is as follows:1- Identifying the customer based on valid evidences while complying with related organizations,2- Constant supervision on accounts exposed to higher risk customers,3- Preventing account opening services for individuals who are in black lists,4- Preventing from establishing any correspondent banking relations with shell banks,5- Constant control on suspicious individuals and the black listed entities,6- Reporting any cash transactions above the designated threshold amount as well as the suspicious

transactions to FIU,


7- Holding general and specific courses for all the staff while keeping all the staff’s training records,8- Internal controlling based on AML and CFT policies,9- Maintaining customers’ information while avoiding any disclosure according to related privacy

rules,10- Avoiding any financial electronic transaction for unnamed accounts which is not traceable ,11- Obtaining written commitment when extending base services to non-financial entities regarding

AML rules and regulations,12- Avoiding rendering services to the institutions in terrorist crimes lists or involved in money

laundering,13- Obtaining written commitment from customers who have applied for receiving basic services

regarding AML rules and regulations,14- Designing a suitable place in the bank’s existing forms and also in all the bank’s software for

inserting one of the valid identity numbers,15- Making required decisions for suitable keeping and processing of information,16- Assigning a person in each branch for informing customers regarding the necessity of reporting

about cash crediting to accounts,17- Issuing any kinds of identifying devices after full identification of the customer and performing

complying registration of identity specifications with identification device.

3) Policies of accepting customers:Implementing KYC policies in Refah Kargaran Bank are exercised according to the instructions and

circulars of Central Bank of Iran and thus the personnel of the bank are obliged to make necessary measures for updating and completing the information and document related to previous customers according to article 15 of the executive bylaw ratified by the Board of Ministries regarding the classification of the former customers.

In case the customers are not cooperative in presenting the needed identity documents or when trying to give misinformation, the staffs refuse to extend any kinds of banking services.


Meanwhile according to article 8 of the instruction of “The manner of identifying Iranian credit institutions” ratified by the Supreme Council of AML, those customers whose identity information discrepancies are found- after being informed by the bank to present documents and to complete required information- are bound to resolve the mentioned discrepancies and if the customers refrain to do, the staff will stop extending any kinds of banking services to them anymore.

4) Know Your Customer strategies:By implementing the AML/CFT instructions (including the instruction of identifying Iranian customers

of credit institutions and the instruction of identifying foreign customers which are ratified by the supreme committee of the country’s AML council) identifying customers in Refah K. Bank imply according to the specifications received from the customer with his/her valid ID documents after the certification of the identity through competent organizations. (National organization for Civil Registration and Company Registration General Office)

According to the instruction notified by the supreme committee of AML, banking services in Refah K. Bank are divided into two types of “basic services” and “non-basic services”.

Basic services means banking and credit services which, according to regulations are considered to be pre-requisite and required for providing other services by the bank after which customers call on the bank to receive frequent and continuous services. Basic services include:

• Opening different kinds of accounts • Allocating credit facilities, leasing operations,…Non-basic services are the banking and credit services which are not preliminary for extending

other kinds of services and after which customer may not call on the bank to receive frequent and continuous services:

Non basic services include:• Receiving and paying funds• Buying and selling foreign exchangeThe process of identifying customers (including individuals or legal entities)in Refah Kargaran


Bank are divided into two levels of initial or full identification according to the type of banking services:

1. Initial identification: means checking against identification documents and entry of information declared by customer. The staffs in related branches are obliged to perform initial identification while extending non-basic services to customers.

2. Full identification: means precise identification of customer at the time of providing basic services. This type of identification includes: job status, type of activities, level of income, education, precise living address, precise working place address, expectations from the customers’ level of transactions and etc. Meanwhile, the staffs in branches make measures regarding full identification of customers when extending basic services.

5) Suspicious Transactions Report (STR)All personnel of the bank in all departments and branches are obliged, in case they notice any

suspicious transactions and activities according to the AML or CFT acts to report the matter according to AML law and its executive bylaw and also CFT law in Islamic Republic of Iran as well as the instruction on suspicious transactions identification.

These reports are sent to the AML department confidentially in order to get further specialized investigations. Subsequently in case of any suspicious transactions, the issue will be reported to FIU and AML unit.

Refah Kargaran Bank’s AML software has been implemented according to Central Bank of Iran’s circular and monitors and controls suspicious transactions of the Bank’s customers. AML department, while supervising and monitoring the suspicious transactions of accounts, takes the


following actions:•Investigating the reports received from branches as well as the outcomes of the AML software

reports,•Controlling suspicious individuals,•Performing periodic inspections in order to control the method of implementing AML and CFT laws

6) Reporting cash transactions above the designated threshold Personnel in Refah K. Bank are obliged to record all transactions above the designated threshold

in cash and report to the Anti-Money Laundering Department of the Central Bank of Iran as per the instruction on “Reporting Cash Transactions above the Designated Threshold amount”. Subsequently the related AML department dispatches the said report to FIU of the Islamic Republic of Iran.

7) Risk approach in AMLFor completing KYC procedures of customers, Refah K. Bank holds training courses for the

bank’s personnel , implements customers’ effective KYC measures and obtaining information regarding the purpose of establishing relationship with Refah Kargaran Bank, the main types of activities, financial status, customers’ background, types of services, domicile,etc.

It must be noted that according to article 11 of the instruction of “The manner of identifying Iranian credit institutions”, the personnel of the bank are exempted from extending any kind of basic services to the following entities:

• Individuals who refrain from presenting information or required documents,• Unauthorized exchange companies,• Individuals who are not permitted to open accounts due to judicial authorities’ decision, • Iranian individuals without ID or national number.It is reiterated that the following entities are categorized as the bank’s high risk customers:• Charity oriented organizations, investment and retirement Funds,• Exchange companies and non-financial occupations,• Applicants to open pooled accounts,• Virtual and non-resident customers ,• PEPs (Politically Exposed People), their family members and close associates.

8) Correspondent Banking Relation:In order to adopt necessary due diligence strategies in establishing and maintaining correspondent

banking relations, Refah Kargaran Bank takes action in establishing correspondent banking relations only after gathering sufficient information regarding the correspondent bank.

The information about the intended correspondent bank includes the following:• Structure of ownership, management, shareholders, managers etc.,• Main types of activities and the nature of respondent’s business,• The Country of domicile,• The internal policies and instructions of the respondent institution’s regarding AML and CFT,• The purpose of opening correspondent account,• The regulatory and supervisory status and the banking laws of the respondent bank’s country,


• Due diligence activities regarding extending services which lead to maintaining or transferring funds related to money laundering or terrorism financing acts,

• Not entering into a correspondent banking relationship with shell banks,• Assuring the respondent bank’s non-existence in high risk regions regarding money launderin ,• Obtaining approval from senior management prior to establishing new correspondent

relationships,• Investigating the status of PEP (politically exposed person) in the structure of managers,

shareholders and other affiliates of the related bank,• The manner of identifying, controlling and extending services to political authorities as the

respondent bank’s customers,• The manner of controlling and monitoring suspicious transactions and activities in the

respondent bank,• Investigating the bank’s status regarding probable previous sanctions in recent years,• Policies of the respondent bank in account opening and extending services to high risk

customers and accounts,• The manner of controlling people who are under pursuit of international and regional sanctions,• The quality of the rules and regulations of the respondent bank’s country regarding cooperation

with correspondent banks for presenting further information if case of need.

9) Record keepingRefah Kargaran Bank maintains all necessary records on transactions, customers’ accounts and

all records and documents which have been received for KYC purposes for at least five years after the termination of an occasional particular transaction.


10) Training ScheduleRefah Kargaran Bank makes necessary arrangements in holding pre and on-the-job training

courses for its employees at all levels. These courses are held with the purpose of familiarizing the Bank’s personnel with the Act, the bylaws and relative instructions and in particular money launderers’ manner of operation and their latest intrigues of committing crimes regarding using people involved in money laundering and the method of eliminating the criminal origin of funds.

In this connection all the staffs of the Bank have passed necessary training courses regarding KYC methods, security checks of identity documents (national ID card, identity number and Iranian and foreign passport) as well as the methods for complying information with related organizations such as National Organization for Civil Registration and Company Registration General Office

In the name of God - Refah Bank...as Samim system and Tablet Bank as one of the newly designed...

Documents

Transcript of In the name of God - Refah Bank...as Samim system and Tablet Bank as one of the newly designed...