HIGHNESS GLOBAL CAPITAL INC. ANTI-MONEY LAUNDERING POLICY AND ANTI-TERRORIST FINANCING POLICY
This is an abbreviated policy, please contact firstname.lastname@example.org for a complete version of the AML Policy
The purpose of Highness Global Capital Inc. (Highness) Anti-Money Laundering and Anti-Terrorist Financing Policy (AML Policy) is to demonstrate Highness’ commitment to prevent, detect and address non-compliance in regard to money laundering (ML) and terrorist financing (TF) activities. Highness will not knowingly participate in any capacity in the advancement of a transaction that is suspected to be related to the commission of a ML or TF activity.
Highness will do its best to ensure the AML Policy sets out the standards that employees, agents, and others authorized to act on its behalf must meet. The AML Policy is written plainly to be clearly communicated, understood and followed by all those authorized to act on Highness’ behalf (employees, agents and any others that deal with clients, transactions or other activities).
NOTE ON PRIVACY: The use of personal information collected by Highness is protected by privacy legislation. We will inform clients about the collection of their personal information except when we include their personal information in the reports that we are required to submit to FINTRAC.
The applicable AML regulations (Regulations), together with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA or Act), impose obligations on a wide range of entities, including registered and registration exempt firms in Canada, and include requirements relating to reporting, filing, record-keeping, client identification, establishing and maintaining a compliance regime including an assessment and documentation of related risks to the business, as well as certain other monitoring requirements and restrictions on dealing with designated individuals and groups. Highness will comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations (PCMLTFR); the Canadian Criminal Code (Criminal Code); and the United Nations Suppression of Terrorism Regulations (UNSTR).
PCMLTFA creates a mandatory reporting system for suspicious and prescribed transactions and the cross-border movement of large amounts of currency and monetary instruments. PCMLTFA has three objectives:
- To implement specific measures to detect and deter money laundering and the financing of terrorist activities and to facilitate investigations and prosecution of related offences;
- To respond to the threat posed by organized crime by providing law enforcement officials with the information they need to deprive criminals of the proceeds of their criminal activities, while protecting individual privacy; and
- To help Canada’s international commitments to fight multinational crime.
Canada is also a member of Financial Action Task Force (FATF), the agency that establishes international anti-money laundering standards. Canada has also signed and ratified the United Nations International Convention for the Suppression of the Financing of Terrorism and the Anti-Terrorism Act (ATA). The ATA creates measures to deter, disable, identify, prosecute, convict and punish terrorist organizations. In addition, the ATA provides new investigative tools for law enforcement and national security agencies. Specifically, the ATA make it a crime to: knowingly collecting or providing funds, either directly or indirectly, used to carry out terrorist activities; knowingly participating in, contribute to or facilitate the activities of a terrorist organization; instruct anyone to carry out a terrorist activity on behalf of a terrorist organization; or knowingly harbour or conceal a terrorist.
The Regulations Implementing the UNSTR, the United Nations Al-Qaida and Taliban Regulations, Regulations Implementing the United Nations Resolution on the Democratic People’s Republic of Korea, Regulations Implementing the United Nations Resolution on Iran, Special Economic Measures (Venezuela) Regulations, and Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) (collectively, UN Regulations) provide a consolidated list of individuals or entities believed to be involved in, or associated with, terrorist activity (UN List). The UN Regulations, through resulting amendments to the Criminal Code, make it an offence for anyone in Canada, or any Canadian outside of Canada, to collect funds from, or provide funds to, any individual or entity appearing on the UN List.
FINANCIAL TRANSACTIONS AND REPORTS ANALYSIS CENTRE OF CANADA (FINTRAC)
FINTRAC is an anti-money laundering agency established by PCMLTFA. FINTRAC’s mandate is to collect, analyze, assess and, where appropriate, disclose information relevant to the investigation and prosecution of money laundering and terrorist financing offences. FINTRAC is also responsible for conducting research and for undertaking educational measures to inform the public, those who are required to report suspicious transactions and the law enforcement community about the nature and extent of money laundering and terrorist financing activities, and effective detection, prevention and deterrence measures.
Highness will comply with any ministerial directives issued by the Minister of Finance that are issued in addition to the Act. Highness will monitor and assess compliance with directives in its ongoing monitoring and internal audits.
FINTRAC can issue administrative monetary penalties to address instances of non-compliance and may also disclose cases of non-compliance to law enforcement when there is extensive non-compliance or little expectation of immediate or future compliance.
Definition of Money Laundering
The United Nations (UN) defines money laundering as “any act or attempted act to disguise the source of money or assets derived from criminal activity.” It is the process whereby “dirty money” (money generated through criminal activity) is transformed into “clean money,” the criminal origin of which is difficult to trace. ML has three recognized stages:
- Placement – placing the proceeds of crime into the financial system. Also referred to as the “physical disposal” of cash proceeds derived from illegal activity.
- Layering – separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and the source and ownership of funds (i.e. through the use of monetary instruments and electronic transfers).
- Integration – adding an apparent legitimacy to criminally derived wealth. For instance, via a complicated web of transactions designed to make tracing of the original source nearly impossible. Upon success of stage two of layering, integration then places the laundered funds back into the economy, so the funds appear as if they are normally derived proceeds of business.
Any of the above-noted three stages may occur consecutively or concurrently.
In Canada, a ML offence involves concealing or converting property or the proceeds of property, knowing or believing that the property or proceeds were derived from the commission of another offence (predicate offence). Predicate offenses include, but are not limited to: drug dealing, bribery, gaming, robbery, fraud, theft, extortion and counterfeiting.
Methods of ML include:
- Smurfing – smurfs depositing cash or buying bank drafts at various institutions, or one individual executing a series of consecutive transactions in dollar amounts slightly less than the amount that triggers the requirement to report the transaction to FINTRAC, and the cash is subsequently transferred to a central account.
- Nominees – recruiting family members, friends or associates who are trusted members of their community in order to conceal the source and ownership of the dirty money being laundered.
- Bulk Cash Purchases – when individuals purchase large value items such as cars, boats and real estate using cash that are often registered in a friend or relative’s name.
Definition of Terrorist Financing
FINTRAC describes TF as the provision of monies for terrorist activity including funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organizations, as well as from criminal sources, such as from predicate offences.
Similar to money laundering, terrorist financing activity is intended evade authorities’ attention and to protect the identity of their sponsors and of the ultimate beneficiaries of the funds. Unlike laundering however, terrorist financing transactions tend to be in smaller amounts and thus, when they are derived from legitimate sources, the detection and tracking of these funds is more difficult.
TF comes from two primary sources:
Financial Support – financial sponsorship from like-minded countries, sympathetic governments, or individuals with sufficient financial means.
Revenue Generation – revenue generation typically involves criminal activities (i.e. the activities of criminal organizations).
FINTRAC’s AML COMPLIANCE PROGRAM REQUIREMENTS
Highness conforms with FINTRAC’s Compliance Program Requirements with this AML Policy and by establishing and implementing an effective AML compliance regime to adhere to all required reporting, record keeping, client identification and know-your-client requirements under the PCMLTFA and the Regulations. In particular, Highness recognizes and complies with the following five key elements identified in FINTRAC’s Compliance Program Requirements:
- Designation of a Canadian Anti-Money Laundering Officer (CAMLO): Amana Manori, CEO, CCO & UPD is the designated CAMLO for Highness.
The CAMLO is ultimately responsible for ensuring day-to-day compliance with Highness’ AML compliance program, AML policies and procedures, ongoing training, risk assessment, and effectiveness review conducted, at a minimum, every two years. The CAMLO may delegate certain duties to other employees; however, where such a delegation is made, she remains responsible for the implementation of the compliance program. While Amana Manori is designated for these functions, Highness has the ultimate responsibility to meet its compliance program requirements under the PCMLTFA and associated Regulations. The CAMLO will report compliance related issues to the board of directors on a regular basis.
- Written Policies and Procedures Must be Developed and Applied: This AML Policy is an important component of Highness’ overall compliance program as it will guide decisions and actions with respect to Highness’ legislative obligations. The AML Policy will be reviewed regularly to ensure that it is up to date and applicable to the activities of the firm. Several factors could trigger the need to update the AML Policy including changes in legislation, non-compliance issues, or the introduction of new services or products. The AML Policy will be approved by the UDP.
- Risk Assessment of Activities and Relationships: As part of its AML compliance regime, Highness will continually assess the existing and potential risks of the firm that would make it vulnerable to ML and TF activities. Highness has identified the inherent risks and has implemented necessary risk mitigation strategies. FINTRAC workbooks have been consulted in determining the applicable methodology and examination for the nature, size and objectives of the business.
The specific risk methodology has been noted in the AML Policy and risk ratings have been identified in the recent biennial AML review that is available upon request conducted November 2020. Risk assessments and mitigation measures will be updated as necessary.
- Written Ongoing AML Compliance Training Program: Highness’ AML Training is covered in this AML Policy. It will be reviewed at least, annually and will reflect applicable changes in the Act and Regulations. It will also consider any FINTRAC guidance issued for securities dealers.
As Highness is a very small firm, its training may be part of the training offered to the parent company to affiliated and related issuers. Regardless, Highness’ participation and results will be documented and reviewed. Training will be mandatory of all Highness staff, dealing representatives and consultants who are involved in client transactions. Training will also be mandatory for all those involved in implementing and overseeing Highness’ compliance regime.
- Effectiveness Review of AML Compliance Regime: Every two years (at minimum) either the CAMLO or an independent internal or external auditor will conduct a comprehensive review of the effectiveness of Highness’ AML compliance regime. This review will include an assessment of all policies, record keeping procedures, testing of procedures, client identification processes, training and overall risk assessment.
The purpose of the review is to identify gaps and weaknesses to ensure Highness is effectively detecting and preventing ML and TF. It is also designed to assess how well Highness is meeting its AML requirements. In terms of risk analysis, the review it meant to identify risk and required mitigation strategies. As Highness is a small firm with limited business and client volume, the review will be limited as the business is not complex or complicated. All appropriate sample testing will be done.
Upon completion of the review, the scope of the review will be documented with detailed findings, recommendations and subsequent updates to policies/procedures. Upon 30 days of the completion of the review, a report to management will be produced and presented. Following the report, the CAMLO will respond with follow up actions in response to recommendations and timeline for completion.
PCMLTFA defines a suspicious transaction as: a financial transaction (attempted or completed) that occurs in the course of (business) activities and in respect of which there are reasonable grounds to suspect the transaction is related to the commission of a ML or TF offence.
As part of the Highness AML compliance regime, it will implement specific measures as a part of its compliance program and will submit various types reports to: assist in criminal investigations and prosecutions of offences related to ML/TF, as well as threats to the security of Canada; detect trends and patterns related to ML/TF risks; uncover vulnerabilities to Canada’s financial system; and enhance public awareness of ML/TF matters.
Highness will determine what is a suspicious transaction on evaluation of a number of factors and consideration of all surrounding circumstances including industry specific indicators (or red flags). A single indication may not necessarily provide reasonable grounds to suspect ML or TF. However, more than one may.
FINTRAC guidance on Suspicious Transaction Reports (STRs) will be consulted not only for reporting requirements, but also to assess which indicators are relevant to help identify suspicious transactions. That is, what are reasonable grounds to suspect and when should Highness submit an STR to FINTRAC. It helps understand what are deemed facts and how the context of financial transactions within Highness will highlight what information is essential in determining what is suspicious. Upon examination of this information, Highness may decide it is important to assess a client’s current and past financial transactions. While Highness’ assessment of multiple elements, when viewed together, may inform a circumstance of suspicion – it may also negate it. Highness will rely on ML/TF indicators, open source, media reporting or FINTRAC’s operational briefs and alerts to help identify suspicious financial transactions and determine reasonable grounds to suspect.
Reasonable grounds suggest that Highness has reached a conclusion that is unbiased/non-prejudiced after considering all the facts. Simple suspicion, on the other hand, is a lower threshold than reasonable grounds to suspect that lacks any facts, context or ML/TF indicators to support that there are reasonable grounds to suspect the occurrence of an ML/TF offence. Reasonable grounds to suspect are the required threshold for submitting an STR to FINTRAC. While Highness will not have an obligation to prove ML/TF, it will have to present the facts, context and ML/TF indicators that led to the determination of reasonable grounds to suspect the occurrence of an ML/TF offence.
REPORTING & RECORD-KEEPING REQUIREMENTS
In accordance with Highness’ Policy on Books and Records, Highness will maintain all client account records created in the normal course of business in a safe and secure location. Highness will maintain records on STRs (see below), account opening records, records created in the normal course of business, client statements and reasonable measures records.
Records will be maintained in a format and location that will permit them to be provided to FINTRAC within 30 days of request. A record (or a copy) may be kept in a machine-readable or electronic form, so long as a paper copy can be easily produced. All records must be kept for a minimum of five years from the date they were created.
The UN Regulations and the Criminal Code require Highness to determine on a monthly basis whether they are in possession or control of property that is owned or controlled by, or on behalf of, anyone on the UN List by reporting to the firm’s principal supervisory or regulatory body. Names under the Criminal Code and UN Regulations have been combined into the lists currently posted on the Office of the Superintendent of Financial Institutions (OSFI) website. Highness complies with the UNSTR by submitting the UNSTR form on a monthly basis (by the 14th of the month) to the OSC through the online portal.
A consolidated list of the names of suspected terrorist organizations and individuals published under the Regulations Establishing a List of Entities made under the Criminal Code or the UNSTR is found at the OFSI website. It will be consulted when filing the monthly UNSTR with the OSC.
SUSPICIOUS TRANSACTION REPORTING (STR)
Highness must report suspicious transactions to FINTRAC within 30 days of first detection by way of a STR. The appropriate law enforcement body will be contacted to report the suspicious transaction.
Highness employees cannot disclose that Highness has made a suspicious transaction report, or disclose the contents of such a report, with the intent to prejudice a criminal investigation, whether it has started or not. No criminal or civil proceedings may be brought against a person for filing a STR in good faith.
Suspicious transactions related to an attempted commission of money laundering or terrorist activity financing offence also have to be reported. For example, when a transaction – or a group of transactions – raises questions or gives rise to discomfort, apprehension or mistrust.
The STR can be filed electronically on FINTRAC. Submission of STRs may be expedited in certain situations involving time-sensitive information and threats to national security, such as suspected terrorist financing. FINTRAC reviews and assesses every STR within days of its receipt.
The CAMLO will retain a copy of the STR for audit purposes for both completed and attempted transactions. For record-keeping purposes, the STRs must be retained for a minimum of five years.
Highness acknowledges that a failure to report an STR may have a direct impact on FINTRAC’s capacity to carry out its mandate, including FINTRACs ability to aid in the protection of Canada’s national security, therefore impeding the achievement of the objective of the PCMLTFA and associated Regulations.
TERRORIST PROPERTY REPORT (TPR)
Under the Act, Highness is also required to file a TPR with FINTRAC if it has in its possession or control property that it (or an employee) knows is owned or controlled by a terrorist or a terrorist group or has knowledge of a proposed transaction that involves terrorist assets.
In addition, there is also a requirement under the Criminal Code for anyone in Canada and any Canadian outside Canada to disclose to the Royal Canadian Mounted Police (RCMP) and the Canadian Security Intelligence Service (CSIS) the existence of property in their possession or control that they know is owned or controlled by or on behalf of a terrorist or a terrorist group. It is an offence under the Criminal Code to deal with any property if you know that it is owned or controlled by or on behalf of a terrorist or a terrorist group. It is also an offence to be involved in any transactions in respect of such property.
LARGE CASH TRANSACTIONS
Highness does not accept cash transactions and will reject any prospective client that wishes to transact in cash. Business will only be conducted through recognized financial entities. If this changes, Highness will amend the AML Policy to manage cash transactions as per FINTRAC requirements.
ACCOUNT OPENING RECORDS
When Highness opens a client account, it has a New Client Account Package and collects evidence of the client’s signature or authorized representatives’ signature(s). It can include the handwritten signature of an individual or an electronic signature that is created or adopted by an individual. The electronic signature can be encrypted (i.e. a PIN), numeric, character-based, or biometric, so long as it is unique to the individual and a record can be kept.
The account opening documents will identify the intended use of the account. Individual accounts will also record the investors name, address, date of birth and the nature of their principal business or occupation. When Highness opens an account for an entity (other than a corporation), it will record of its name, address and the nature of its principal business. If the entity is a corporation, Highness will keep a copy of the part of official corporate records that contains any provision relating to the power to bind the corporation regarding the account (i.e. certificate of incumbency, the articles of incorporate or the bylaws).
RECORDS CREATED IN THE NORMAL COURSE OF BUSINESS & CLIENT STATEMENTS
Highness will retain the following records created in the normal course of business including:
- new account applications;
- confirmations of purchase or sale;
- trade authorizations;
- powers of attorney and joint account agreements;
- every client statement sent; and
- all correspondence, including emails, about the operation of accounts.
REASONABLE MEASURES RECORDS
If Highness takes reasonable measures in accordance with this AML Policy, it will document such measures to show when reasonable measures were taken but were unsuccessful. A reasonable measure is unsuccessful when Highness does not obtain a response, such as a yes or no, and cannot make a conclusive determination. These records must include Details on the measures taken; the date on which each measure was taken; and the reasons why the measures were unsuccessful.
Highness assesses its inherent risks by looking at its:
- Business-based risk assessment: products, services and delivery channels; the geographical location in which its business operates along with other relevant factors.
- Relationship-based risk assessment: products and services clients utilize, the geographical locations in which they operate or do business as well as their activities, transaction patterns, etc.
Under the Act and Regulations, Highness must take steps to identify every person who is authorized to give instructions for an account, as well as ascertain the identity of the beneficial owner of the investment. Identifying a client requires viewing certain information to verify a client’s identity and ensuring that this information matches what is known about that client. The identity of said beneficiary must be verified within six months of the time the subscription is received.
Previously Identified Individuals And Entities
For subsequent transactions, Highness will not reverify individuals and entities that were previously verified if there has been ongoing monitoring and updates of client files and there is no reason for concern except if the initial was done via the reliance method, simplified method or agent/affiliate method.
Activities Exempted From client identification requirements
There are certain instances where Highness will not have to verify the identity of persons and entities (see unabbreviated policy for list). These exceptions do not apply to large cash transactions, large VC transactions, or suspicious transactions.
Screening and Monitoring of Politically Exposed Foreign Persons (PEP) & Heads of International Organizations (HIO)
Clients will be required to certify, through the Highness New Client Package or initial client account documentation, that they are not a PEP. Highness will also screen for HIOs and relatives and close associates to PEPs and HIOs.
A foreign PEP is an individual who holds or has ever held one of the following offices or positions in or on behalf of a foreign country: a head of state or government; a member of the executive council of government or member of a legislature; a deputy minister (or equivalent); an ambassador or an ambassador’s attaché or counselor; a military general (or higher rank); a president of a state-owned company or bank; a head of a government agency; a judge; or a leader or president of a political party in a legislature.
This certification extends to the client’s immediate family as well such as: mother or father; child; spouse or common-law partner (including ex-spouses and ex-partners); spouse’s or common-law partner’s mother or father and brother, sister, half-brother or half-sister (that is, any other child of the individual’s mother or father). An individual or family member is a politically exposed foreign person regardless of their citizenship, residence status or birthplace.
Reasonable measure must be taken to determine if the person for whom the regulated entity, such as a securities dealer, opens an account is a foreign PEP, but also whether the person is a domestic PEP, head of an international organization, a family member of one of those persons or a person who is closely associated with a politically PEP.
Highness does not accept cash transactions and will reject any prospective client that wishes to transact in cash. Business will only be conducted through recognized financial entities.
ELECTRONIC FUNDS TRANSFERS (EFT)
Highness does not operate in the EFT business.
Highness does not currently transact in virtual currencies. Should it start doing so, it will implement reporting, recordkeeping and other processes to ensure adherence to PCLMTFA.
ONGOING AML COMPLIANCE TRAINING
Highness training program will be required of all employees upon hire and a refresher training on an annual basis. How training will be implemented will be based on the number of staff that require training and may change from year to year.
Any employee who knowingly assists in ML activities will be liable to criminal prosecution and summary dismissal for cause. There are criminal and administrative penalties for non-compliance. Both criminal penalties and AMPs will not be issued against the same instances of non-compliance.
ADMINISTRATIVE MONETARY PENALTIES (AMPS)
FINTRAC’s AMP program is to encourage future compliance with AML rules and regulations by providing a measured and proportionate response to instances of non-compliance. AMPs are not issued automatically as it is the hope that other compliance actions can be taken to change behaviour before an AMP is required.
FINTRAC has developed an AMP Policy to provide a framework and offer principles and guidelines. It considers objectivity, reasonableness, transparency, fairness, consistency and documentation. Highness and its employees are vulnerable to an AMP if FINTRAC has reasonable grounds to believe that Highness has violated a requirement of the Act and its Regulations. The AMP Regulations provides a list of possible violations that could lead to an AMP. There is a 2-year time limit for FINTRAC to issue the notice of a violation. Penalties are due within 30 days. If Highness pays the penalty indicated in the notice of violation, it is deemed to have committed the violations specified, and then the AMP process ends. Highness has a right to appeal.
FINTRAC must make public all administrative monetary penalties imposed. Notice will be made as soon as feasible when BBIG: pays the penalty issued in a notice of violation; neither pays the penalty issued in a notice of violation nor makes representations to FINTRAC’s Director; receives a notice of decision indicating that a violation has been committed; enters into a compliance agreement with FINTRAC; and/or does not comply with a compliance agreement.
FINTRAC may disclose cases of non-compliance to law enforcement when there is extensive non-compliance or little expectation of immediate or future compliance. Disclosing the fact that a STR was made, or disclosing the contents of such a report, with the intent to prejudice a criminal investigation of up to 2 years imprisonment.
PENALTIES FOR BREACH OF MINISTERIAL DIRECTIVES
The existing administrative monetary penalties regime will be extended to all directives, and failure to comply with a directive could result in a penalty. Penalties applicable to a breach of a directive would be set out in the Proceeds of Crime (Money Laundering) and Terrorist Financing Administrative Monetary Penalties Regulations.
Both criminal and administrative monetary penalties cannot be pursued against the same instances of non-compliance.