PASHA_BANK ANNUAL REPORT 2021

General Information Financial Information and Risk Management Review Information on Management and Corporate Governance Principles Internal Control Department Internal Control Unit is responsible for securing and coordinating a healthy, competent and efficient internal control environment, taking into consideration the evolving and changing nature of the Bank. Internal Control Unit assists the Bank in carrying out its activities efficiently, and effectively in line with the management strategy and policies and within the framework of current regulation and rules. Furthermore, it is supervised that all control activities within the Bank are carried out duly. Within the scope of the internal control model designed in accordance with three lines of defense principles, first level of controls were defined by business units considering their risks. The Internal Control Unit realized second level controls for all functions based on a certain methodology, taking into consideration the scope and sample size. Control activities regularly performed by different departments for operations of Head Office business units were closely monitored and inspections were made to observe they are being performed timely, completely and accurately. Internal Control team continuously monitors the IT activities to ensure they are being performed securely within the scope of rules defined by the Bank. Similarly, internal control points are being designed by the Internal Control Unit for the IT processes based on the Bank’s internal control model. These control points are being adopted into the control activities in accordance with the methodology and tools. Suggestions were made for deficiencies and weaknesses detected as a result of the activities of the Internal Control Department and resolutions of findings were monitored based on a specific action plan. Control activities designed for this purpose were conducted by internal control personnel competent and experienced in their areas. Local and international developments in internal control area were followed up and the Bank’s internal control applications were updated. In 2021, all operational activities of the Bank were reviewed on a changing frequency and on a need basis for control points and control results were reported to the Audit Committee and senior management. Additionally, using control assertion forms implemented by the Internal Control Unit and key control results prepared by business units responsible for first level controls, the effectiveness of the general control environment was assessed and second level controls were realized. Moreover, management assertion tests and validation studies for ICAAP Report were performed. Furthermore, Internal Control Unit team attended various trainings during the year for their professional development and one team member successfully finalized the Certified Public Accountancy exam and received the SMMM (CPA) certificate. Internal Control Unit will continue to perform their tasks and responsibilities to establish an objective, transparent and effective internal control system and ensure its sustainability, in accordance with legal requirements and the Bank’s internal regulations and procedures. Compliance Department Compliance Department performs its activities with the objective of conducting and developing control and monitoring activities which are designed within the scope of a risk‑based approach. Activities performed in 2021 in accordance with Laws 5549, 6415, 7262 and related legislation are presented below: • Development of monitoring and control activities which suits the Bank’s business activities designed with a risk‑based approach and providing for full compliance of the Bank’s activities with MASAK (Financial Crimes Investigation Board) regulations and all other related legislation. • Conducting activities for full compliance of internal regulations, legislation and procedures with MASAK (Financial Crimes Investigation Board) regulations and all other related legislation. Assessments of the Audit Committee on the Activities of Internal Systems