Anti-Money Laundering, Counter-Terrorists Financing and Sanctions Regime Control Policy

The purpose of this Policy is to put in place general principles of the AML/CTF, and to make the Customers and the Staff aware of the ML/TF and of the measures taking a place if any the ML/TF activity is suspected.

The Policy is executed in light of requirements of the Acts, Sanctions and AntiMoney Laundering Act 2018, Proceeds of Crime Act 2002, Terrorism Act 2000 and other the AML regulation and Law requirements and outlines the general issues and elements of the AML/CTF and the Sanctions regime control.

The Policy is based on the general principles of the AML/CTF, which are integrated into the Company’s business processes in order to ensure the Risks possessed by the Customers are under control and those changes are detected in time.

The Company provides the Services only in compliance with the Policy and the applicable Law. Therefore, the Policy applies to every employee and Customer of the Company, but certain issues related to the ML/TF or Sanctions regime apply only to the Staff directly engaged in the AML/CTF and compliance with the Sanctions regime

The Policy is reviewed at least once a year, in case of necessity doing it more frequently. Therefore, all amendments in the Acts and other applicable Law are continuously followed and implemented into the Policy by updating the general principles of the AML/CTF and compliance with the Sanctions regime stated herein accordingly.

The amended version of the Policy is approved by the Senior Manager and is published on the Company’s website not later, than on a Business day after its’ approval

Money laundering is the process whereby criminals attempt to conceal the true origin and ownership of the proceeds of criminal activity. The objective is to make the proceeds of crime appear legitimate by integrating them into the financial system by distancing the money from its origin. The money laundering rules create a number of criminal offences in respect of assisting money laundering. There are criminal penalties for:

• Failing to report knowledge or suspicion of money laundering
• Failing to have adequate procedures to guard against money laundering
• Knowingly assisting money launderers
• Tipping–off suspected money launderers

In summary, there are five requirements arising from the money laundering regulations:

• LARCO GLOBAL must obtain satisfactory evidence of the identity of each customer with whom it has a business relationship
• This evidence of client identity must be retained for the duration of the client relationship and for a period of five years after it terminates; details of transactions must be kept for the same time period
• Any suspicious transaction, whether in connection with a new or existing client, must be reported immediately to the designated Money Laundering Reporting Officer (MLRO)
• • The Money Laundering Reporting Officer must, if deemed appropriate, report suspicion of money laundering to the appropriate authorities.
• Appropriate training must be provided to substantially all members of staff who handle, or are managerially responsible for handling, transactions which may involve money laundering to ensure they are aware of firm procedures which guard against money laundering and the legal requirements of the money laundering rules; this training will be co-ordinated by the MLRO.

The nature and extent of systems and controls will depend on a variety of factors including:

• the nature, scale and complexity of the firm’s business;
• the diversity of its operations, including geographical diversity;
• its customer, product and activity profile;
• its distribution channels;
• the volume and size of its transactions; and
• the degree of risk associated with each area of its operation.

The Money Laundering Regulations 2017 (MLR) focus on a risk-based approach to mitigating money laundering and terrorist financing risks. Such an approach diverges from a ‘tick-box’ exercise and instead places the onus on firms to be proactive and foster a ‘culture of compliance’. Under MLR 2017 is its requirement for firms to perform and document a money laundering risk assessment. Regulation stipulates that:

“A relevant person must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”

LARCO GLOBAL’s risk assessment will be documented, kept up to date and made available to regulators on request, taking account of:

• information made available by regulators/supervisors in the National Risk Assessment;
• and the listed risk factors:
  • Customer risk factors
  • Geographic risk factors
  • Product and Service risk factors
  • Transaction risk factors
  • Delivery Channel risk factors

In deciding which steps are appropriate, LARCO GLOBAL will take account of the size and nature of their business. In considering the risk factors outlined above, LARCO GLOBAL will take account of the illustrative examples in Annex 4-II of the revised JMLSG Guidance (as replicated in Appendix 8).

In identifying its money laundering risk, LARCO GLOBAL and its Senior Management will consider the following:

• What risk is posed by LARCO GLOBAL’s customers?
• What risk is posed by a customer’s behaviour?
• How does the way the customer comes to LARCO GLOBAL affect the risk?
• What risk is posed by the products/services that the customer is using?

According to the Money Laundering Regulations 2017 risk assessment LARCO GLOBAL have carried out, the firm faces Medium overall risk of being used for money laundering or terrorist financing purposes. As a result, Standard Due Diligence will be applied to all clients. All clients will undergo an individual risk assessment and where there is a need to carry out Standard Due Diligence, or in certain high-risk scenarios, Enhanced Due Diligence, LARCO GLOBAL will do so by consulting the below policy.

The Money Laundering Regulations 2017 requires LARCO GLOBAL to have arrangements in place to prevent operations relating to money laundering or terrorist financing. To manage these arrangements, the firm will decide the extent of Customer Due Diligence (CDD) measures which need to be carried out and the timing of such measures. LARCO GLOBAL arrangements will also stipulate situations where limited CDD measures are required (Simplified Due Diligence), and those where Enhanced Due Diligence is required.

CDD measures that must be carried out involve:

• identifying the customer, and verifying his identity;
• identifying the beneficial owner, where relevant, and verifying his identity; and
• obtaining information on the purpose and intended nature of the business relationship

To be reasonably satisfied as to the identity of the client, the firm should apply CDD measures involving several steps before commencing a business relationship. Identifying a customer is a two-part process. The firm first identifies the customer, by obtaining a range of information from him or her (comprising name, permanent address and / or date of birth). The second part – the verification – consists of the firm verifying some of this information through the use of reliable, independent source documents, data or information. The collection of evidence is usually a cumulative activity; the more separate pieces of evidence that cumulatively present a picture of a client’s identity, the better. However, where LARCO GLOBAL concludes that an individual customer cannot reasonably meet the standard identification requirements, we may accept as identification evidence other forms of confirmation such as, a letter or written assurances from an appropriate person or organisation who have dealt with the individual for some time. The firm should take into account that some documents are more easily forged than others, and should take proportionate steps available, to establish whether the document offered has been reported lost or stolen.

How much identity information or evidence to ask for, and what to verify, in order to be reasonably satisfied as to a customer’s identity, are matters for the judgement of the firm, which will be exercised on a risk-based approach, taking into account factors such as:

• the nature of the product or service sought by the customer (and any other products or services to which they can migrate without further identity verification);
• the nature and length of any existing or previous relationship between the customer and the firm;
• the nature and extent of any assurances from other regulated firms that may be relied on; and
• whether the customer is physically present.

LARCO GLOBAL must apply CDD measures when it:

• establishes a business relationship;
• carries out an occasional transaction
• suspects money laundering or terrorist financing; or
• doubts the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification

There are some exceptions where the verification of identity is not required in full. LARCO GLOBAL may apply Simplified Due Diligence in relation to a particular business relationship or transaction if it determines that the business relationship or transaction presents a low degree of risk of money laundering or terrorist financing, having taken into account —

• The risk assessment it carried out;
• Relevant information provided to it by the European Supervisory Authorities
• Customer risk factors, including whether the customer is:
  • A publically owned company
  • Located in a geographical area of low risk
  • A regulated entity subject to the Fourth EU Anti Money Laundering Directive
  • A company whose shares are traded on a Regulated Market
• Product, service, transaction or delivery channel risk factors, including where the product is:
  • a low-premium life insurance policy
  • an employer-funded pension scheme,
  • a product designed for financial inclusion,
  • a product that inherently manages ML/TF risks
• Geographical risk factors, including whether the country where the customer is resident, established or registered or in which it operates is:
  • An EEA states
  • A Third Country with effective AML/CTF systems
  • A Third Country identified by credible sources as having low levels of corruption, criminal activity, terrorism, etc
  • A Third Country which on the basis of credible sources such as evaluations/assessments/reports by FATF, IMF, World Bank, OECED, etc. has AML/CTF requirements that are consistent with the FATF 40 Recommendations

LARCO GLOBAL must not continue to apply Simplified Due Diligence if:

• it doubts the veracity or accuracy of any documents or information previously obtained for the purposes of identification or verification;
• its risk assessment changes and it no longer considers that there is a low degree of risk of money laundering and terrorist financing; or
• it suspects money laundering or terrorist financing.

The presence of one or more risk factors outlined above in relation to presumptions of low risk may not always indicate that there is a low risk of money laundering or terrorist financing in a particular situation. Emphasis is always placed on applying a risk based approach to the level of Due Diligence which LARCO GLOBAL feels is required in any given case.

LARCO GLOBAL will obtain the following information in relation to a personal customer:

• full name
• residential address
• date of birth

If documentary evidence of an individual’s identity is to provide a high level of confidence, it will typically have been issued by a government department or agency, or by a court or local authority because there is a greater likelihood that the authorities will have checked the existence and characteristics of the persons concerned.

In cases where such documentary evidence of identity may not be available to an individual, other evidence of identity may give the firm reasonable confidence in the customer’s identity, although the firm should weigh these against the risks involved.

If identity is to be verified from documents, this is normally based on:

Either a government-issued document which incorporates:

• the customer’s full name and photograph,
• and either
  • his or her residential address, or
  • his or her date of birth.

e.g.:

• Valid passport
• Valid photocard driving licence (full or provisional)
• National Identity card (non-UK nationals)

or a government-issued document (without a photograph) which incorporates the customer’s full name, supported by a second document, either government-issued, or issued by a judicial authority, a public sector body or authority, or another FCA-regulated firm in the UK financial services sector, or in a comparable jurisdiction, which incorporates:

• the customer’s full name
• and either
  • his or her residential address, or
  • his or her date of birth

e.g.:

• Government-issued documents without a photograph include:
  • Valid (old style) full UK driving licence
  • Recent evidence of entitlement to a state or local authority-funded benefit (including housing benefit and council tax benefit), tax credit, pension, educational or another grant
• Other documents include:
  • Instrument of a court appointment (such as liquidator, or grant of probate)
  • Current council tax demand letter, or statement for the current year
  • Current bank statements, or credit/debit card statements, issued by a regulated financial sector firm in the UK, EU or comparable jurisdiction (but not ones printed off the internet)
  • Utility bills (but not ones printed off the internet) less than three months old

When using an electronic/digital source to verify a customer’s identity, LARCO GLOBAL will ensure that it is able to demonstrate that it has both verified that the customer exists, and satisfied itself that the individual seeking the business relationship is, in fact, that customer (or beneficial owner). Before using a commercial organisation for electronic verification of identity, LARCO GLOBAL should be satisfied that information supplied by the data provider is considered to be sufficiently extensive, reliable and accurate, and independent of the customer. Currently Sum&Sub is providing such services for LARCO GLOBAL by performing daily ongoing screening of each client using Comply Advantage databases.

The firm will ensure that it fully understands the client’s legal form, structure and beneficial ownership, and must obtain sufficient additional information on the nature of the company’s business, and the reasons for seeking the product or service. In addition to evidencing the identity of beneficial owners and controllers, the following additional documentation (original or certified copies) should be obtained:

• Certificate of incorporation
• Memorandum and Articles of Association (object clause to be checked to ensure investment activity envisaged is within the objects of the firm)
• Most recent financial statements
• List of authorised signatories
• Board minute authorising the opening of the account

The critical issue is to establish a link between the beneficial owners (whose assets are in the firm) and controllers (who will operate the account) of the firm

The relevant person should verify the existence of the corporate from:

• either confirmation of the company’s listing on a regulated market
• or a search of the relevant company registry
• or a copy of the company’s Certificate of Incorporation.

For companies listed on a regulated market (within the meaning of MiFID) in the EEA, or on a non-EEA market that is subject to specified disclosure obligations, or a majority owned and consolidated subsidiary of such a listed company, Simplified Due Diligence may be applied.

For companies not listed on a recognised stock exchange (i.e. private companies), identity should be verified for:

• The director as a beneficial owner if the director owns or controls more than 25% of the company’s shares or voting rights (whether shares are held directly or indirectly);
• Individual beneficial owners owning or controlling more than 25% of the company’s shares or voting rights (whether shares are held directly or indirectly);
• Individuals with principal control over the firm’s assets (e.g. controllers, director/partners, shadow directors)
• The full names of the board of directors (or if there is no board, the members of the equivalent management body) and the senior persons responsible for the operations of the body corporate.

LARCO GLOBAL will report identified discrepancies between information it holds on its corporate customers compared with the information provided in the Companies House Register

LARCO GLOBAL must apply Enhanced Due Diligence measures on a risk-sensitive basis to situations which present a higher risk of money laundering or terrorist financing. Where standard evidence of identity is insufficient, the firm must obtain additional information about a particular customer.

The Money Laundering Regulations 2017 (as amended in 2019) prescribe various situations in respect of which EDD measures must be applied. These are:

• where the customer has not been physically present for identification purposes;
• in respect of a correspondent banking relationship;
• in respect of a business relationship or occasional transaction with a Politically Exposed Person, or family member or close associate with a PEP
• In respect of relationships with clients established in a high-risk third country
• Upon discovery that a customer has provided false or stolen identification documentation or information and the firm wishes to continue dealing with the said customer
• in respect of complex and unusually large, or abnormally patterned of transactions
• in respect of transactions total value exceeding of 9 000 EUR
• in respect of transactions that have no apparent economic or legal purpose
• there are relevant transactions between parties based in high-risk third countries
• the customer is the beneficiary of a life insurance policy
• the customer is a third-country national seeking residence rights or citizenship in exchange for transfers of capital, purchase of a property, governments bonds or investment in corporate entities
• non-face to face business relationships or transactions without certain safeguards, for example, as set out in regulation 28 (19) concerning electronic identification processes
• transactions related to oil, arms, precious metals, tobacco products, cultural artefacts, ivory or other items related to protected species, or archaeological, historical, cultural and religious significance, or of rare scientific value

In addition, on a case-by-case basis, LARCO GLOBAL will document the rationale for any additional due diligence measures it has undertaken (or any it has waived) compared to its standard approach, in view of its risk assessment of a particular customer.

If LARCO GLOBAL determines that the risk of the business is increased further by the customer and/or payment and/or location (e.g., the customer is a PEP in a high-risk country), the firm should consider, as part of its EDD, whether the information regarding source of wealth should be demonstrated. For example, for source of wealth from inheritance, a copy of the Will could be requested.

A cautionary note: certain accounts (i.e. PEPs and high value accounts) may be more likely to use the services of an investment manager, who would need to obtain considerable customer information in order to service their needs properly. E.g. Source of wealth and income. Should these persons seek direct investment, or execution only services, it may be an indicator that they are seeking to avoid having to provide that additional information

Non face-to-face identification and verification carries an inherent risk of impersonation fraud. Where identity is verified electronically, or copy documents are relied on, a firm should apply an additional verification check to manage the risk of impersonation fraud. The additional checks we may carry out consist of robust anti-fraud checks that we routinely undertake as part of our existing procedures, or another measure, such as:

• requiring the first payment to be carried out through an account in the customer’s name with a UK or EU regulated credit institution or one from a comparable jurisdiction
• verifying additional aspects of the customer’s identity
• requesting the applicant to confirm a secret code or PIN, or biometric factor, that links him/her incontrovertibly to the claimed electronic/digital identity – such codes, PINs or other secret data may be set up within the electronic/digital identity, or may be supplied to a verified mobile phone, or through a verified bank account, on a one-time basis,
• telephone contact with the customer prior to opening the account on a home or business number which has been verified (electronically or otherwise), or a “welcome call” to the customer before transactions are permitted, using it to verify additional aspects of personal identity information that have been previously provided during the setting up of the account
• communicating with the customer at an address that has been verified (such communication may take the form of a direct mailing of account opening documentation to him, which, in full or in part, might be required to be returned completed or acknowledged without alteration)
• internet sign-on following verification procedures where the customer uses security codes, tokens, and/or other passwords which have been set up during account opening and provided by mail (or secure delivery) to the named individual at an independently verified address
• other card or account activation procedures
• requiring copy documents to be certified by an appropriate person

Under certain conditions, where the money laundering or terrorist financing risk in a product is considered to be at its lowest, a payment drawn on an account with a UK or EU regulated credit institution, or one from a comparable jurisdiction, and which is in the sole or joint name of the customer, may satisfy the standard identification requirement. Whilst the payment may be made between accounts with regulated firms or by cheque or debit card, the accepting firm must be able to confirm that the payment (by whatever method) is from a bank or building society account in the sole or joint name(s) of the customer. LARCO GLOBAL will need to be able to demonstrate why they considered it to be reasonable to have regard to the source of funds as evidence in a particular instance.

Some customers may not be able to produce identification information equivalent to the standard, for example some low-income customers in rented accommodation, customers with a legal, mental or physical inability to manage their affairs, individuals dependent on the care of others, dependant spouses or minors, students, refugees and asylum seekers, migrant workers and prisoners.

LARCO GLOBAL commits to not unreasonably denied access to financial services where a potential client cannot reasonably be expected to produce standard evidence of identity.

Regulation states that, where appropriate, with regard to the size and nature of its business, LARCO GLOBAL must:

• appoint one individual who is a member of the board of directors (or if there is no board, of its equivalent management body) or of its senior management as the officer responsible for the relevant person’s compliance with these Regulations;
• carry out screening of relevant employees appointed by the relevant person, both before the appointment is made and during the course of the appointment;
• establish an independent audit function with the responsibility:
  • to examine and evaluate the adequacy and effectiveness of the policies, controls and procedures adopted by the relevant person to comply with the requirements of these Regulations;
  • to make recommendations in relation to those policies, controls and procedures, and
  • to monitor the relevant person’s compliance with those recommendations”

LARCO GLOBAL may rely on the following for CDD purposes:

• Another firm subject to the MLRs 2017
• A firm in the EEA that is subject to 5MLD
• A firm in a Third Country subject to CDD requirements which are equivalent to those in 5MLD

Regardless of a LARCO GLOBAL ’s reliance on the third party, liability fundamentally lies principally with us for any failure to apply such measures.

Should the firm rely on a third party to apply CDD measures, LARCO GLOBAL:

• must immediately obtain from the third party all the information needed to satisfy the CDD requirements of Regulation;
• must enter into arrangements with the third party which—
  • enable it to obtain from the third-party copies of any identification and verification data and any other relevant documentation on the identity of the customer or its beneficial owner;
  • require the third party to retain copies of the data and documents for the period referred to in Regulation

The JMLSG Guidance advises that where third parties are used for verification purposes a firm may approach an electronic/digital source of its own choosing, or the potential customer may elect to offer the firm access to an electronic/digital source that he/she has already registered with, and which has already accumulated verified evidence of identity.

Periodic checks must be made on the status of each client and its directors, shareholders, director/partners, trustees or trustee beneficiaries if appropriate. Any suspicions should be referred to the MLRO. LARCO GLOBAL will conduct ongoing monitoring of our customers. LARCO GLOBAL will:

• Scrutinise transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure that the transactions are consistent with our knowledge of the customer, his business and risk profile;
• Ensure that documents or information obtained for the purposes of applying customer due diligence are kept up to date.

Monitoring customer activity helps us to identify unusual activity. If unusual activities cannot be rationally explained, they may involve money laundering or terrorist financing. Monitoring customer activity and transactions that take place throughout a relationship helps us know our customers, assist them to assess risk and provides greater assurance that our business is not being used for the purposes of financial crime.