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 Capital’s Anti-Money Laundering and Anti-Terrorist Financing Policy (AML Policy) is to demonstrate Highness Capital’s commitment to prevent, detect and address non-compliance in regard to money laundering and terrorist financing activities. Highness Capital will not knowingly participate in any capacity in the advancement of a transaction that is suspected to be related to the commission of a money laundering or terrorist financing activity.
Highness Capital 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.
The regulations, together with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act(PCMLTFA or Act or Regulations), 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 Capital will comply with record-keeping, client identification, reporting and compliance requirements of the PCMLTFA; 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 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) 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.
B. 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. Money laundering 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.
Methods of money laundering 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.
C. Definition of Terrorist Financing
FINTRAC describes terrorist financing 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. Terrorist financing 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).
D. Suspicious Transactions
PCMLTFA defines a suspicious transaction as a “financial transaction 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 money laundering (ML) offence and/or a terrorist activity financing (TF) offence”.
Determining suspicious transactions should be on evaluation of a number of factors and consideration of all surrounding circumstances. Industry specific Highness Capital indicators should be assessed. A single indication may not necessarily provide reasonable grounds to suspect money laundering or terrorist financing. However, more than one may. Some common indicators are:
- reluctance to provide adequate identification information upon subscription;
- attempts to purchase units with cash, money orders, traveler’s cheques, cashier cheques, foreign bank drafts or other bank instruments in amounts under $10,000; and
- attempts to purchase securities with third-party instruments.
E. Client Identification
Highness Capital 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.
Highness Capital will collect the following identification for clients in order to comply with the AML Policy:
Single Process Methods to Identify Individuals. Highness Capital can identify an individual using one of the following single process methods:
1. Government-issued photo identification method: Reliance on valid, current and original photo identification issued by a federal, provincial or territorial government to identify an individual. Foreign issued photo identification document can be accepted if it is equivalent to a Canadian issued photo identification document. Photo identification documents issued by any municipal government, Canadian or foreign, are not acceptable. The original document must be viewed while in the presence of the individual in order to compare them with their photo. The photo identification document must: (i) indicate the individual’s name; (ii) have a photo of the individual; and (iii) have a unique identifier number. Viewing the photo identification online, through a video conference or through any virtual type of application is not acceptable. Nor can you accept a copy of a digitally scanned image of the photo identification.
For the photo identification method, information that must be recorded includes:
- The individual’s name;
- The type of card or document used (for example, driver’s license, B.C. Services Card);
- The unique identifier number of the document or card;
- The issuing jurisdiction and country of the document;
- The expiry date of the document or card, if available (if the information appears on the document or card, you must record it); and
- The date on which you verified the information.
2. Canadian credit file method: the file must be in existence for at least three years. To be acceptable, the credit file details must match the name, date of birth and address provided by the individual. If any of the information does not match, another method to verify the individual’s identity must be used. A credit assessment to identify an individual is not necessary. Equifax Canada and TransUnion Canada are Canadian credit bureaus that provide credit file information for identification purposes.
For the credit file method, information that must be recorded includes:
- The individual’s name;
- The name of the Canadian credit bureau holding the credit file;
- The reference number of the credit file; and
- The date you consulted or searched the credit file.
Dual Process Method to Identify Individuals. This method involves referring to information from two different and reliable, independent sources. The information may be found in documents from these sources or may be information that these sources are able to provide. Information refers to facts provided or learned about an individual and can come from various places. Whereas a document refers to an official record that is either written, printed or electronic that provides evidence or facts.
Documents must be original, valid and current document. Original documents do not include those that have been photocopied, faxed or digitally scanned. Information found through social media is not acceptable. The individual does not need to be physically present at the time you confirm their identity.
A reliable source is an originator or issuer of information that you trust to verify the identity of the client. To be considered reliable, the source should be well known and considered reputable, and be one that is trusted to verify the identity of the individual. The source providing the information cannot be the reporting entity, or the individual who is being identified; it must be independent.
The dual process method to confirm an individual’s identity requires any two of the following:
- documents or information from a reliable source that contain the individual’s name and date of birth;
- documents or information from a reliable source that contain the individual’s name and address; or
- documents or information that contain the individual’s name and confirms that they have a deposit, credit card or other loan account with a financial entity.
All the information must match the information provided by the individual. This method cannot rely on information issued by a single source, even if it confirms an account and contains the name, address and date of birth of an individual. This method cannot use the same source for the two categories of information you use to verify the individual’s identity.
Information that must be recorded includes:
- The individual’s name;
- The name of the two different sources that were used to identify the individual;
- The type of information (for example, utility statement, bank statement, marriage license, CRA notice of assessment);
- The account number associated with the information;
- If there is no account number, you must record a reference number that is associated with the information; and
- Verification date.
Children. If a child is under 12 years of age, verify the identity of the parent or guardian and record the parent’s or guardian’s information. If a child is between 12 and 15 years of age, verify their identity directly using one of the methods outlined in this guideline, as long as you can refer to the required documents or information. If that is not possible, rely on one source of information that contains the name and address of the child’s parent or guardian and a second source that contains the child’s name and date of birth.
Corporations. To open corporate accounts, Highness Capital will require identify of all individuals who beneficially own more than 10% of that corporation, whether directly or indirectly. This involves obtaining the name, address, citizenship, occupation and employer of each beneficial owner and whether he or she is an insider or controlling shareholder of a publicly traded corporation or similar entity.
Highness Capital will also need to verify the identity of owners via collection of the names and occupations of all directors and a certificate of corporate status. Corporate resolutions are also required as evidence of who is authorized to trade in the account – the identity of which also must be verified.
Trusts and Third-Party Beneficiaries. Employees must be alert as to whether or not a third party is the beneficial owner of a new account or fund investment. Highness Capital and its personnel are required to take reasonable measures to determine whether or not the new client or fund investor is acting on behalf of a third party. If Highness Capital personnel have any grounds to suspect that the client or fund investor is acting on behalf of a third party, he or she must report this situation immediately to the CAMLO. The CAMLO will be responsible for maintaining a record to indicate whether, according to the client, the transaction is being conducted on behalf of a third party, and to indicate details of why it is suspected that the client is acting on behalf of a third party.
Highness Capital will need the identity of the settlor and all individual beneficiaries of more than 10% of the trust or account, whether directly or indirectly. Highness Capital will need the name, address, citizenship, occupation and employer of each and whether any is an insider or controlling shareholder of a publicly traded corporation or similar entity. Exceptions can be made for some beneficiaries such as minor children.
As support of the trust, a written trust agreement, other trust documents or a trust information form are will be requested. Highness Capital will also identify and verify the identification of all trustees of the trust.
Informal trusts, including personal trusts, will mandate a record about each of the beneficiaries. The information required in this record is the name, address and principal business and occupation of each beneficiary known at that time. If the beneficiary is an individual, the record also has to include the beneficiary’s date of birth and social insurance number.
Other Non-Individuals. For non-individual entities other than corporations and trusts, Highness Capital will request their constating documents including details of all beneficial owners holding a 10% interest. For example, Highness Capital may refer to a partnership agreement, articles of association or any other similar record that confirms the entity’s existence.
Non-Canadians. Valid foreign documents are required for the identification of non-Canadian investors equivalent to an acceptable type of Canadian identification document such as a valid foreign passport. Advisors should be mindful that non-Canadian clients would only be permitted from jurisdictions where Highness Capital and its advisors are registered or permitted to sell under an eligible exemption.
Politically Exposed Foreign Persons (PEP): Clients will be required to certify that they are not a PEP. 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; 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. The record keeping obligation in respect of reasonable measures require that a record be kept when reasonable measures were taken but were unsuccessful. In such circumstances, Highness Capital will be required to record: the measure(s) taken; the date on which the measure(s) were taken; and, the reason why the measure(s) was unsuccessful. Such records must be maintained for at least five years following the date they were created.
If it is determined that an individual is a foreign PEP for a new account, Highness Capital will:
- get the UDP’s approval to keep the account open within 14 days after the new account is activated;
- take reasonable measures to establish the source of funds that have been, will be or are expected to be deposited in that account; and
- perform enhanced ongoing monitoring of activities for that account to detect suspicious transactions.
Agent/Mandatory. When collecting identification, the original document must be presented. If face-to-face collection is not possible, an agent or mandatory may be used to verify the original document. Prior to using an agent/mandatory, Highness Capital will have to enter into a written agreement or arrangement with the agent or mandatory. In addition, Highness Capital will have to obtain from the agent or mandatory the customer information that was obtained according to the agreement or arrangement.
Individual is not Physically Present. To identify an individual who is not physically present will have to use one or the other of the following options to confirm the identity of that individual: affiliate or co-member, identification product or credit file method, attestation method and/or combination of methods. The information also has to be consistent from one method to the other.
- UNSTR: the UN Regulations and the Criminal Code require Highness Capital 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.
- Suspicious Transaction Reporting: Highness Capital must report suspicious transactions to FINTRAC within 30 days of first detection. Highness Capital employees cannot disclose that Highness Capital 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 making a report 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.
- Terrorist Property: Under the Act, Highness Capital is also required to file a Terrorist Property Report 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. Highness Capital is required to file with the OSC a monthly report under UNSTR.
Written Policies and Procedures: 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.
Designation of a Canadian Anti-Money Laundering Officer (CAMLO): Amana Manori, the CEO & UDP is the designated CAMLO. The CAMLO is ultimately responsible for ensuring day-to-day compliance with the AML Policy; the assessment and documentation of risks for money-laundering and terrorist financing and measures to mitigate high risks; and communicating the AML Policy to all employees, fulfilling reporting obligations.
Risk Methodology: The risk methodology that Highness Capital applies to its business activities is as discussed in the FINTRAC guidelines. The assessment takes into account the following factors:
- the clients and business relationships of the person or entity, including their activity and geographic locations;
- the products, services and delivery channels offered by Highness Capital;
- the geographic location of the activities conducted by Highness Capital;
- new technologies and their impacts on the clients, business relationships, and products or delivery channels of Highness Capital activities; and
- any other relevant factor.
Risk Mitigation: Highness Capital will take necessary risk mitigation measures including; confirming that necessary client identification is provided prior to the acceptance of investors; and, ensuring that the AML Policy and outlined compliance regime are strictly adhered to.
Record Keeping: In accordance with Highness Capital’s Policy on Books and Records, Highness Capital will maintain all client account records created in the normal course of business in a safe and secure location. In addition, all AML related reports including suspicious transaction reports would be maintained. 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. Records will be maintained for a minimum of seven years.