ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL www.xpressmoney.com XXPPRREESSSS MMOONNEEYY SSEERRVVIICCEESS ((CCAANNAADDAA)) LLTTDD.. XAPARENNSS MTTONIIE--YMM SEROVOICENNS (CEEANYAYDA) LTD. ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING LLAAUUNNDDEERRIINNGG AANNDD COMPLIANCE MANUAL AANNTTII--TTEERRRROORRIISSTT (Version 1.8, Effective 28th March 2017) FFIINNAANNCCIINNGG COMPLIANCE MANUAL (Version 1.8, Effective 28th March 2017) MANUAL UPDATED BY BLAKES RESTRICTED © 2017 XPRESS MONEY 1 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL VERSION CONTROL TABLE OF CONTENTS VERSION DATE PREPARATION APPROVAL SUMMARY OF UPDATES Prepared by Inderpal Approved by-Mr. The major changes were made OVERVIEW .........................................S.i.n.g..h. .B.h..a.r.a..j.................S.a..n.t.h.o..s.h. .K..J............t.o. .a.c..c.e.p..t. I.D.. f.o..r. e..v.e.r.y.. t.r.a.n..s.a.c. t3io n V 1.4 August 1st,2013 (Chief Compliance (VP Global operations & when we opened an account with ROLES AND RESPONSIBILITIES OOFffi Ace Cr- COaMnadPaL)IANCE OCFomFpICliaEncRe) ........................IC..I.C..I .b.a..n.k........... 6 RISK ASSESSMENT .......................................................A..p..p.r.o.v..e.d.. b..y.-.M..r.. .......................................... 8 Prepared by Inderpal Santhosh KJ The major changes were made in V 1.6 December 22nd,2014 Singh Bharaj-CCO FINTRAC REGISTRATION/AGENT LIST ...................(.V..P. .G..lo..b.a..l .o.p..e.r.a..ti.o..n.s. .&.. ...........b.u..s.in..e.s.s.. r.e..la..ti.o..n.s.h..ip... 14 Canada Compliance) REPORTING REQUIREMENTS ................................................................................................ 15 The major changes are made Prepared by Inderpal EFT TRAVEL RULE .....................................................A..p.p..ro..v.e..d. .b.y.. -.B..o.a..r.d. .o.f. .........i.n. .N..o.n.. f.a..c.e. .t.o. .f.a.c.e../.o.n..li.n 2e 3 V 1.8 March 28th,2017 Singh Bharaj-CCO Directors transactions, domestic PEP and Canada R ECORD KEEPING REQUIREMENTS ................................................................ri.s.k.. a..s.s.e..s.s.m..e..n.t..... 24 IDENTIFICATION RECORDS .................................................................................................... 30 TABLE OF CONTENTS BUSINESS RELATIONSHIPS & ONGOING MONITORING ...................................................... 33 POLITICALLY EXPOSED FOREIGN PERSON ......................................................................... 37 OVERVIEW .................................................................................................................................. 3 RECORD RETENTION .............................................................................................................. 40 ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER ............................................ 6 PENALTIES ................................................................................................................................ 41 RISK ASSESSMENT .................................................................................................................... 8 “KNOW YOUR CUSTOMER” POLICY ....................................................................................... 42 FINTRAC REGISTRATION/AGENT LIST .................................................................................. 14 ON-GOING COMPLIANCE TRAINING PROGRAM ................................................................... 43 REPORTING REQUIREMENTS ................................................................................................ 15 ON-GOING COMPLIANCE REVIEWS ....................................................................................... 44 EFT TRAVEL RULE ................................................................................................................... 23 HIRING AND MONITORING STAFF AND AGENTS ................................................................. 45 RECORD KEEPING REQUIREMENTS ..................................................................................... 24 SCHEDULE A ............................................................................................................................. 46 IDENTIFICATION RECORDS .................................................................................................... 30 SCHEDULE B ............................................................................................................................. 47 BUSINESS RELATIONSHIPS & ONGOING MONITORING ...................................................... 33 SCHEDULE C ............................................................................................................................. 49 POLITICALLY EXPOSED FOREIGN PERSON ......................................................................... 37 SCHEDULE D ............................................................................................................................. 50 RECORD RETENTION .............................................................................................................. 40 SCHEDULE E ............................................................................................................................. 52 PENALTIES ................................................................................................................................ 41 SCHEDULE F - 1 ........................................................................................................................ 57 “KNOW YOUR CUSTOMER” POLICY ....................................................................................... 42 SCHEDULE F - 2 ........................................................................................................................ 58 ON-GOING COMPLIANCE TRAINING PROGRAM ................................................................... 43 SCHEDULE G ............................................................................................................................ 59 ON-GOING COMPLIANCE REVIEWS ....................................................................................... 44 SCHEDULE H ............................................................................................................................. 63 HIRING AND MONITORING STAFF AND AGENTS ................................................................. 45 SCHEDULE I .............................................................................................................................. 64 SCHEDULE A ............................................................................................................................. 46 QUEBEC ADDENDUM TO AML/ATF COMPLIANCE MANUAL ................................................ 65 SCHEDULE B ............................................................................................................................. 47 SCHEDULE C ............................................................................................................................. 49 SCHEDULE D ............................................................................................................................. 50 SCHEDULE E ............................................................................................................................. 52 SCHEDULE F - 1 ........................................................................................................................ 57 SCHEDULE F - 2 ........................................................................................................................ 58 SCHEDULE G ............................................................................................................................ 59 SCHEDULE H ............................................................................................................................. 63 S CHEDULE I .............................................................................................................................. 64 QUEBEC ADDENDUM TO AML/ATF COMPLIANCE MANUAL ................................................ 65 2 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL TABLE OF CONTENTS OVERVIEW OVERVIEW .................................................................................................................................. 3 This manual states the policies and procedures implemented by Xpress Money Services ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER ............................................ 6 (Canada) Ltd. (“Xpress Money”) to detect and prevent money laundering and terrorist financing activities in respect of its Canadian business. The purpose is to assist Xpress Money, RISK ASSESSMENT .................................................................................................................... 8 its agents and employees to comply with Canadian anti-money laundering and anti-terrorist FINTRAC REGISTRATION/AGENT LIST .................................................................................. 14 financing (“AML/ATF”) legislative requirements. It is also intended to act as a basis for Xpress REPORTING REQUIREMENTS ................................................................................................ 15 Money’s ongoing review, development and documentation of the policies and procedures required under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its EFT TRAVEL RULE ................................................................................................................... 23 regulations. R ECORD KEEPING REQUIREMENTS ..................................................................................... 24 Money Laundering IDENTIFICATION RECORDS .................................................................................................... 30 TABLE OF CONTENTS BUSINESS RELATIONSHIPS & ONGOING MONITORING ...................................................... 33 The United Nations defines money laundering as “any act or attempted act to disguise the POLITICALLY EXPOSED FOREIGN PERSON ......................................................................... 37 source of money or assets derived from criminal activity”. Essentially, money laundering is the OVERVIEW .................................................................................................................................. 3 process whereby “dirty money” – produced through criminal activity – is transformed into “clean RECORD RETENTION .............................................................................................................. 40 ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER ............................................ 6 money”, the criminal origin of which is difficult to trace. PENALTIES ................................................................................................................................ 41 RISK ASSESSMENT .................................................................................................................... 8 Money Laundering is not limited to cash or currency. Any type of funds can be laundered, “KNOW YOUR CUSTOMER” POLICY ....................................................................................... 42 FINTRAC REGISTRATION/AGENT LIST .................................................................................. 14 including wire transfers, payments into or out of consignment accounts, the receipt of bank ORENP-GOORITNIGN GC ORMEQPULIIARNECMEE NTRTSA I.N..I.N...G... .P..R...O..G...R...A..M... ...................................................................................................................................... 4135 cheques, personal cheques, money orders, travellers’ cheques or payments made by international drafts. There are three recognized stages to the money laundering process. ON-GOING COMPLIANCE REVIEWS ....................................................................................... 44 EFT TRAVEL RULE ................................................................................................................... 23 HIRING AND MONITORING STAFF AND AGENTS ................................................................. 45 RECORD KEEPING REQUIREMENTS ..................................................................................... 24 • Placement involves placing the proceeds of crime in the financial system. SCHEDULE A ............................................................................................................................. 46 • Layering involves converting the proceeds of crime into another form and creating IDENTIFICATION RECORDS .................................................................................................... 30 complex layers of financial transactions to disguise the audit trail and the source and SCHEDULE B ............................................................................................................................. 47 BUSINESS RELATIONSHIPS & ONGOING MONITORING ...................................................... 33 ownership of funds. This stage may involve transactions such as the buying and SCHEDULE C ............................................................................................................................. 49 POLITICALLY EXPOSED FOREIGN PERSON ......................................................................... 37 selling of securities, commodities or property. SCHEDULE D ............................................................................................................................. 50 • Integration involves placing the laundered proceeds back in the economy to create RECORD RETENTION .............................................................................................................. 40 the perception of legitimacy. SCHEDULE E ............................................................................................................................. 52 PENALTIES ................................................................................................................................ 41 S“KCNHOEWD UYLOEU FR - C 1U ..S...T..O...M...E..R...”. .P..O...L..I.C...Y.. .............................................................................................................................................................................. 5472 Terrorist Financing SCHEDULE F - 2 ........................................................................................................................ 58 ON-GOING COMPLIANCE TRAINING PROGRAM ................................................................... 43 “Terrorist financing provides funds for terrorist activity. The main objective of a terrorist activity is SOCNH-GEODIUNLGE CGO .M...P...L..I.A..N...C..E... .R..E...V..I.E..W....S.. .............................................................................................................................................................................. 5494 to intimidate a population or compel a government to do something. This is done by intentionally SCHEDULE H ............................................................................................................................. 63 killing, seriously harming or endangering a person, causing substantial property damage that is HIRING AND MONITORING STAFF AND AGENTS ................................................................. 45 likely to seriously harm people or by seriously interfering with or disrupting essential services, SCHEDULE I .............................................................................................................................. 64 SCHEDULE A ............................................................................................................................. 46 facilities or systems.” (From FINTRAC Guideline 1, June 23, 2008.) QUEBEC ADDENDUM TO AML/ATF COMPLIANCE MANUAL ................................................ 65 SCHEDULE B ............................................................................................................................. 47 There are two primary sources of financing for terrorist activities: SCHEDULE C ............................................................................................................................. 49 SCHEDULE D ............................................................................................................................. 50 • Obtaining financial support from countries, governments, organizations or individuals; SCHEDULE E ............................................................................................................................. 52 • Revenue-generating activities including criminal acts, legitimately earned income or SCHEDULE F - 1 ........................................................................................................................ 57 donations to non-profit organizations involved in terrorist financing networks. SCHEDULE F - 2 ........................................................................................................................ 58 SCHEDULE G ............................................................................................................................ 59 SCHEDULE H ............................................................................................................................. 63 S CHEDULE I .............................................................................................................................. 64 QUEBEC ADDENDUM TO AML/ATF COMPLIANCE MANUAL ................................................ 65 3 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL The sums needed are not always large and the associated transactions are not necessarily complex. When funds are generated from illegal sources, terrorist groups may launder these funds so that they can be used without drawing the attention of authorities. Transactions related to terrorist activity financing may be similar to those related to money laundering. Xpress Money will not knowingly allow its facilities to be used for the laundering of funds or the financing of terrorist activity. Penalties for money laundering are very severe including civil and criminal fines and imprisonment. Xpress Money’s existence as a business could be placed in jeopardy if money laundering or terrorist financing activities were to occur. Therefore, all Xpress Money employees and agents dealing in any manner with any customers, their transactions or their records concerning same, must have a clear understanding of the requirements of this manual. All such, Xpress Money employees and agents in Canada must read this manual in its entirety. Xpress Money has appointed a North American compliance officer whose primary duty is to ensure the effective implementation and enforcement of the policies set forth in this manual in respect of Canadian operations. Xpress Money will conduct periodic training programs on Xpress Money’s AML/ATF policies and procedures. Xpress Money will also conduct random and scheduled independent audits to verify compliance with its AML/ATF policies and procedures. Xpress Money intends to maintain the highest possible compliance with all AML/ATF laws and regulations, including compliance with all reporting and record keeping laws as well as recognizing and reporting suspicious transactions and attempted suspicious transactions. Xpress Money’s board of directors are fully committed to complete compliance with all AML/ATF laws and regulations and expects and will require a similar level of commitment from all of its officers, employees, agents and representatives. Specifically, the board of directors will ensure a Compliance Regime is in place, appoint a Compliance Officer, participate in annual AML training and in general, ensure it is kept apprised of ongoing AML activity within the organization. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PC Act”) and its regulations (Regulations) implement specific measures to detect, deter, investigate and prosecute money laundering and terrorist financing offences in Canada. The specific measures include: mandatory reporting of suspicious and prescribed transactions; the establishment of a compliance program to ensure that the requirements of the legislation are followed; record keeping and client identification; cross-border currency reporting; and registration of certain prescribed businesses. The PC Act also established the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) as the agency responsible for the collection, analysis and disclosure of information to assist in the detection, prevention and deterrence of money laundering and terrorist financing in Canada and abroad. FINTRAC also has responsibility for ensuring compliance by financial intermediaries and other reporting entities with their obligations 4 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL The sums needed are not always large and the associated transactions are not necessarily under the PC Act and Regulations. FINTRAC publishes Guidelines and Interpretation Notices complex. When funds are generated from illegal sources, terrorist groups may launder these on its website: funds so that they can be used without drawing the attention of authorities. Transactions related to terrorist activity financing may be similar to those related to money laundering. http://www.fintrac-canafe.gc.ca/ Xpress Money will not knowingly allow its facilities to be used for the PC Act Directives laundering of funds or the financing of terrorist activity. Penalties for money laundering are very severe including civil and criminal fines and Part 1.1 of the PC Act allows the Minister of Finance to issue directives (each a “Directive”) imprisonment. Xpress Money’s existence as a business could be placed in requiring money services businesses such as Xpress Money, and others, to take prescribed jeopardy if money laundering or terrorist financing activities were to occur. measures in respect of transactions originating from or bound for any foreign state. Directives Therefore, all Xpress Money employees and agents dealing in any manner may be issued in respect of foreign states that the Minister believes have insufficient or with any customers, their transactions or their records concerning same, ineffective anti-money laundering measures which could have an adverse effect on the must have a clear understanding of the requirements of this manual. All Canadian financial system. These Directives may include measures that specify: such, Xpress Money employees and agents in Canada must read this manual in its entirety. • The requirement to verify the identity of any person or entity; • The requirement to exercise customer due diligence, including ascertaining the Xpress Money has appointed a North American compliance officer whose primary duty is to source of funds, the purpose of the transaction or the beneficial ownership of control ensure the effective implementation and enforcement of the policies set forth in this manual in of any entity; respect of Canadian operations. Xpress Money will conduct periodic training programs on • The monitoring of any financial transaction or account; Xpress Money’s AML/ATF policies and procedures. Xpress Money will also conduct random • Keeping and retaining specified records; and scheduled independent audits to verify compliance with its AML/ATF policies and • Reporting on specified transactions to FINTRAC; and procedures. • A prohibition or limitation on undertaking or facilitating, directly or indirectly, certain financial transactions. Xpress Money intends to maintain the highest possible compliance with all AML/ATF laws and regulations, including compliance with all reporting and record keeping laws as well as When any Directive is issued, a new Schedule shall be added to this Compliance Manual recognizing and reporting suspicious transactions and attempted suspicious transactions. specifying the requirements applicable to Xpress Money. Xpress Money shall comply with all requirements in the added Schedule. In the event of any inconsistency between a Directive Xpress Money’s board of directors are fully committed to complete compliance with all AML/ATF issued under the PC Act and any PC Regulations, Xpress Money shall comply with the laws and regulations and expects and will require a similar level of commitment from all of its Directive, to the extent of the inconsistency or conflict. officers, employees, agents and representatives. Specifically, the board of directors will ensure a Compliance Regime is in place, appoint a Compliance Officer, participate in annual AML training and in general, ensure it is kept apprised of ongoing AML activity within the organization. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PC Act”) and its regulations (Regulations) implement specific measures to detect, deter, investigate and prosecute money laundering and terrorist financing offences in Canada. The specific measures include: mandatory reporting of suspicious and prescribed transactions; the establishment of a compliance program to ensure that the requirements of the legislation are followed; record keeping and client identification; cross-border currency reporting; and registration of certain prescribed businesses. The PC Act also established the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) as the agency responsible for the collection, analysis and disclosure of information to assist in the detection, prevention and deterrence of money laundering and terrorist financing in Canada and abroad. FINTRAC also has responsibility for ensuring compliance by financial intermediaries and other reporting entities with their obligations 5 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER The compliance officer is responsible for the day-to-day compliance by Xpress Money with the PC Act. The compliance officer will be instrumental in the development and conformity of Xpress Money’s compliance policies and procedures and in the development and maintenance of an ongoing compliance-training program for employees and agents. Xpress Money has appointed Mr. Inderpal Singh Bharaj to be its Chief Compliance Officer (the “Chief Compliance Officer”). The contact details for Mr. Inderpal Singh Bharaj are as follows: 7025 Tomken Road, Suite 237 Mississauga, ON L5S 1R6 Tel: (905) 565-0999 | Fax: (905) 565-5558 Email: [email protected] The compliance officer’s primary duty is to ensure the effective implementation and enforcement of the policies set forth in Xpress Money’s Anti-Money Laundering and Anti-Terrorist Financing Compliance Manual. It is the compliance officer’s responsibility to supervise all aspects of Xpress Money’s AMF/ATF compliance and to further: • Conduct weekly examinations of all transactions which fall within the scope of the compliance manual; • Ensure the proper reporting and filing of all required reports; • Ensure random independent audits are performed to verify compliance with the policies and procedures set forth herein; • Assess and document the risk related to ML/TF in Xpress Money’s business; • Ensure that all Xpress Money directors, officers, agents and employees undergo AML/ATF compliance training programs; • Staying abreast of any Directives issued under the PC Act and ensure that this Policy is updated to address such requirements; and • Conduct annual self-assessment of Xpress Money’s Risk Assessment, policies and procedures to test their effectiveness and to comply with the two year effectiveness testing which is required under section 71(1)(e) of the PC Regulations. The compliance officer is also required to be available to answer any questions regarding potential money laundering, terrorist financing and suspicious transactions, and is the person to whom all such questions and any money laundering and terrorists financing related problems should be directed. It is extremely important to understand that although Xpress Money has a compliance officer who is “in-charge” of Xpress Money’s compliance, the compliance officer is not the only person responsible for ensuring that Xpress Money effectively detects and reports instances of money laundering/terrorist financing or potential money laundering/terrorist financing. Rather, the compliance officer should be thought of as Xpress Money’s “last line of defense” who is available to answer questions, provide guidance and supervise Xpress Money’s AML/ATF 6 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL ROLES AND RESPONSIBILITIES OF A COMPLIANCE compliance system. Under no circumstances should the compliance officer be thought of as being solely responsible for addressing money laundering / terrorist financing issues. For this OFFICER reason all Xpress Money officers, directors, employees and agents of Xpress Money, must not only read and be familiar with the provisions of this manual but must also undergo periodic AML/ATF training programs, at the direction of the compliance officer. Furthermore, it is Xpress The compliance officer is responsible for the day-to-day compliance by Xpress Money with the Money’s policy that it is incumbent upon everyone associated with Xpress Money to take PC Act. The compliance officer will be instrumental in the development and conformity of responsibility for, and to actively partake in, Xpress Money’s AML/ATF compliance program. Xpress Money’s compliance policies and procedures and in the development and maintenance of an ongoing compliance-training program for employees and agents. Xpress Money has appointed Mr. Inderpal Singh Bharaj to be its Chief Compliance Officer (the “Chief Compliance Officer”). The contact details for Mr. Inderpal Singh Bharaj are as follows: 7025 Tomken Road, Suite 237 Mississauga, ON L5S 1R6 Tel: (905) 565-0999 | Fax: (905) 565-5558 Email: [email protected] The compliance officer’s primary duty is to ensure the effective implementation and enforcement of the policies set forth in Xpress Money’s Anti-Money Laundering and Anti-Terrorist Financing Compliance Manual. It is the compliance officer’s responsibility to supervise all aspects of Xpress Money’s AMF/ATF compliance and to further: • Conduct weekly examinations of all transactions which fall within the scope of the compliance manual; • Ensure the proper reporting and filing of all required reports; • Ensure random independent audits are performed to verify compliance with the policies and procedures set forth herein; • Assess and document the risk related to ML/TF in Xpress Money’s business; • Ensure that all Xpress Money directors, officers, agents and employees undergo AML/ATF compliance training programs; • Staying abreast of any Directives issued under the PC Act and ensure that this Policy is updated to address such requirements; and • Conduct annual self-assessment of Xpress Money’s Risk Assessment, policies and procedures to test their effectiveness and to comply with the two year effectiveness testing which is required under section 71(1)(e) of the PC Regulations. The compliance officer is also required to be available to answer any questions regarding potential money laundering, terrorist financing and suspicious transactions, and is the person to whom all such questions and any money laundering and terrorists financing related problems should be directed. It is extremely important to understand that although Xpress Money has a compliance officer who is “in-charge” of Xpress Money’s compliance, the compliance officer is not the only person responsible for ensuring that Xpress Money effectively detects and reports instances of money laundering/terrorist financing or potential money laundering/terrorist financing. Rather, the compliance officer should be thought of as Xpress Money’s “last line of defense” who is available to answer questions, provide guidance and supervise Xpress Money’s AML/ATF 7 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL RISK ASSESSMENT Xpress Money’s compliance program is required to include an assessment and documentation of the risks related to money laundering and terrorist financing in Xpress Money’s business, so as to allow Xpress Money to focus its resources where they are most needed to manage risks within its tolerance level. Assessment As required by section 71(1) of PC Regulations, Xpress Money’s risk assessment will consider and document the following factors: • Xpress Money’s clients and business relationships; − These include risks associated with the types of customers that use Xpress Money’s services and the customer’s stated purpose in dealing with Xpress Money. Examples of the categories of clients that may indicate a higher risk would include politically exposed foreign persons, customers whose nature, structure or relationship make it difficult to identify the ultimate beneficial owner of significant or controlling interests, as well as customers conducting transactions in unusual circumstances. • Xpress Money’s products and services and the delivery channels through which it offers them; − These include risks associated with the types of products and services offered by Xpress Money and how such products and services are delivered to customers. Examples of the type of services and circumstances that may indicate a higher risk classification would include customer’s conducting frequent international electronic funds transfers or transactions with persons located in high risk geographic locations as well as transactions not conducted on a face to face basis. • The geographic locations where Xpress Money conducts its activities and the geographic locations of its clients and its agents (including any geographic locations which may be the subject of a Directive); − These include risks associated with the places where Xpress Money’s business activities are carried out including jurisdictions where Xpress Money engages in business activities with agents as well as risks associated with the jurisdictions in which its customers are located. • Any new developments in respect of, or the impact of new technologies on, Xpress Money’s clients, business relationships, products or delivery channels or the geographic location of its activities; − Xpress Money must periodically consider new technologies that are impacting its business and whether such technologies will impact the risk profile of Xpress Money’s existing products, delivery channels, customers and geographic locations. 8 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL RISK ASSESSMENT • Xpress Money’s agents; − Please refer to the discussion below for a summary of the risks associated with entering into business arrangements with agents and foreign counterparties. Xpress Money’s compliance program is required to include an assessment and documentation of the risks related to money laundering and terrorist financing in Xpress Money’s business, so Using a risk based approach, Xpress Money will conduct periodic risk assessments to as to allow Xpress Money to focus its resources where they are most needed to manage risks determine where the money laundering -and terrorist financing risks are greatest. The risk within its tolerance level. assessment will take into account the factors listed above (i.e., Xpress Money’s client’s and business relationships, products and services, the geographies in which Xpress Money (and its Assessment customers) conduct business, the delivery channels of Xpress Money’s services including its agents, and the impact of new technologies) and will inform Xpress Money’s risk rating As required by section 71(1) of PC Regulations, Xpress Money’s risk assessment will consider methodology for its business and will also be used to assign a risk rating of “High” or “Low” to and document the following factors: client business relationship. The risk assessment for all business relationships is updated using a risk based methodology as described in the Section entitled “Business Relationships & • Xpress Money’s clients and business relationships; Ongoing Monitoring”. − These include risks associated with the types of customers that use Xpress Money’s services and the customer’s stated purpose in dealing with Xpress • Any other relevant factors related to Xpress Money’s business, its clients and the Money. Examples of the categories of clients that may indicate a higher risk business relationships Xpress Money has with them; would include politically exposed foreign persons, customers whose nature, − These include points to consider such as trends and typologies related to structure or relationship make it difficult to identify the ultimate beneficial owner money laundering and terrorist financing in the MSB industry and the level of of significant or controlling interests, as well as customers conducting employee turnover. transactions in unusual circumstances. Business Risk Level Assessment • Xpress Money’s products and services and the delivery channels through which it offers them; business Although Xpress Money is part of an international money services that spans − These include risks associated with the types of products and services offered across 5 continents offering its customers instant money transfer services both domestically and by Xpress Money and how such products and services are delivered to internationally through a large network of agents, Xpress Money itself only carries on business customers. Examples of the type of services and circumstances that may in Canada. indicate a higher risk classification would include customer’s conducting frequent international electronic funds transfers or transactions with persons As an entity that is dedicated to connecting people around the world, Xpress Money and its located in high risk geographic locations as well as transactions not conducted agents provide individuals and businesses with a variety of money transfer services that allow on a face to face basis. people to send and receive money in cash, direct partner banks to credit a recipient’s bank accounts, and offer both in person and online money transfer services through “Xpress Money • The geographic locations where Xpress Money conducts its activities and the Online”. With “Anywhere Payout” Xpress Money also offers customers the ability to send money geographic locations of its clients and its agents (including any geographic locations without specifying the recipient agent’s location which in turn allows the intended recipient of the which may be the subject of a Directive); funds to pick up the money from any Xpress Money location that is convenient to them. − These include risks associated with the places where Xpress Money’s business activities are carried out including jurisdictions where Xpress Money engages in As a result, in connection with the provision of its money transfer services, Xpress Money’s business activities with agents as well as risks associated with the jurisdictions business offers both in person and non-face to face methods to send and receive money and in which its customers are located. often relies on its relationships and business arrangements with agents and foreign counterparties who are located globally to provide payout services to parties who may reside in • Any new developments in respect of, or the impact of new technologies on, Xpress jurisdictions that may be subject to sanctions legislation, have been identified as having Money’s clients, business relationships, products or delivery channels or the significant levels of corruption or criminal activity and may not necessarily be subject to the geographic location of its activities; same or similar AML compliance obligations and requirements. − Xpress Money must periodically consider new technologies that are impacting its business and whether such technologies will impact the risk profile of Xpress However, despite the inherent risks in Xpress Money’s business, the nature and type of services Money’s existing products, delivery channels, customers and geographic offered by Xpress Money with respect to its Canadian business, and the nature of its customer locations. base and customer transactions and the Canadian location of its customer base, Xpress Money 9 12867753.3 ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL has determined that, based on its controls, security standards, the global security standards of its parent company and the business risk mitigation measures it undertakes with respect to its business in Canada, the AML/ATF risks associated with its Canadian business are low to moderate for the following reasons: • Xpress Money’s agent network in Canada is subject to enhanced due diligence and its foreign counterparties are well-respected banking and non-banking organisations around the world. • It is Xpress Money’s policy to only provide payouts upon proper identification of the beneficiary. Xpress Money has established a unique 16-digit PIN for establishing error-proof identity of the beneficiary. • Xpress Money is committed to continuously updating its systems and technology to ensure that its quality checks and controls are in-line with global security standards which include centralized servers for hosting all the applications and storing data. • Xpress Money has robust AML compliance features such as online scanning as well as country and product specific rules to ensure all regulatory standards set by organizations are strictly followed. • Comprehensive risk based AML monitoring solution with World-Check, the leading global provider of structured risk intelligence solutions. Additionally, regarding Xpress Money’s business activities in Canada: • Xpress Money has a stable, known client base. • Xpress Money w offers electronic transaction services and only limited products and services. • Xpress Money has few or no large currency transactions. • Xpress Money’s agents are located in areas known to have a low crime rate. • Xpress Money has minimal transactions with high-risk geographic locations. Based on the foregoing, Xpress Money has determined that the risk rating classification for its business is low to moderate. Client Risk Level Assessment FINTRAC has indicated that a client risk assessment is appropriate only where there is an ongoing relationship. Where dealings with a client are limited to a single transaction, this is not considered to be an ongoing business relationship. FINTRAC defines an ongoing business relationship as one where a client undertakes multiple identifiable transactions over a 5 year time period, regardless of whether the transactions are related to each other. As part of its risk assessment, Xpress Money will take steps to “know its clients” for ongoing business relationships and at various times throughout the relationship, depending on the risk profile of particular transactions that take place. In addition, the content of any Directive will be considered in completing any risk assessment. Please see “Know Your Customer” Policy below. In addition, Xpress Money will also “Know its Agents” and perform a risk assessment on each agent and client business relationship assigning each a risk rating classification of “High”, or 10 12867753.3