Anti-Money Laundering Compliance Policy Declarations


Last Modified: Nov 24th, 2018


ioBanker OÜ [14386003] anti money laundering compliance policy is designed to prevent money laundering by meeting the Estonian and European Union legislation obligations including the need to have adequate systems and controls in place to mitigate the risk of the firm being used to facilitate financial crimes.


This anti money laundering compliance policy sets out the minimum standards which must be complied with and includes:

The appointment of a Money Laundering Reporting Officer (MLRO) who has sufficient level of seniority, independence, and responsibility for oversight of compliance with relevant legislation, regulations, rules and industry guidance;

Establishing and maintaining a Risk Based Approach (RBA) towards assessing and managing the money laundering and terrorist financing risks to the company;

Establishing and maintaining risk-based customer due diligence, identification, verification and know your customer (KYC) procedures. This includes enhanced due diligence for those customers presenting higher risk, such as Politically Exposed Persons (PEPs);

Establishing and maintaining risk based systems and procedures to monitor on-going customer activity;

Procedures for reporting suspicious activity internally and to the relevant law enforcement authorities as appropriate;

The maintenance of appropriate records for the minimum prescribed periods; and Training and awareness for all relevant employees.
 

Sanctions Policy:

ioBanker OÜ [14386003] will prohibit individuals, companies and countries that are on the prescribed sanctions lists from trading.

ioBanker OÜ [14386003] will therefore screen against the United Nations, European Union, UK Treasury and US Office of Foreign Assets Control (OFAC) sanctions lists in all jurisdictions in which we operate.


Virtual and Digital Currencies Policy:

With regards to virtual or digital currencies there is no major theme for types of people, jurisdictions and delivery channels that would be considered more likely to be conducting financial crime. Jurisdiction doesn’t matter.

Risks are global due to the global nature of the internet. Fiat Payments Delivery channels will most likely be the easiest indicator for money laundering as we can see which bitcoin wallets bitcoins are being sent from, and with regards to wire transfers, we will assess the behaviour to assess money laundering risks - for example, one way flows converting digital currencies into Fiat only will raise concerns. Extensive KYC and DD, PEP checks must be made to eliminate financial crime risks on our platform. If customer DD/EDD and 3rd party KYC and PEP checks also come back clean then we will accept and maintain a relationship, until any activity raises suspicions.

ioBanker OÜ [14386003] will conduct ongoing monitoring of its business relationships on a risk-sensitive basis. Ongoing monitoring means scrutinising transactions to ensure that they are consistent with what ioBanker OÜ [14386003] knows about the customer and taking steps to ensure that ioBanker OÜ [14386003] knowledge about the business relationship remains current.

As part of this, ioBanker OÜ [14386003] requires customers to keep documents, data and information obtained in the CDD context (including information about the purpose and intended nature of the business relationship) up to date. Firms as well must apply CDD measures where it doubts the truth or adequacy of previously obtained documents, data or information.


Our own customers and companies DD and AML policy will take into consideration factors such as:

Company structures;
Political connections;
Country risk;
The customer’s or beneficial owner’s reputation;
Source of wealth;
Source of funds;
Expected account activity;
Sector risk; and
Involvement in public contracts.

‘Source of wealth’ describes how a customer or beneficial owner acquired their total wealth. Establishing the source of funds and the source of wealth can be useful for ongoing monitoring and due diligence purposes because it can help firms ascertain whether the level and type of fiat transaction is consistent with the firm’s knowledge of the customer.

‘Source of funds’ refers to the origin of the fiat funds involved in the business relationship or occasional transaction. It refers to the activity that generated the fiat funds, for example, salary payments or sale proceeds, as well as the means through which the customer’s or beneficial owner’s fiat funds were transferred. It is a requirement where the customer is a PEP this must be verified by our 3rd party KYC checker. This is sometimes referred to as ‘source of funds as evidence’ and is distinct from ‘source of funds’ in the context of Regulation 8 and Regulation 14 of the Money Laundering Regulations 2007 and of this Guide.

The law requires that firms’ anti-money laundering policies and procedures are sensitive to risks. This means that in higher-risk situations, firms will apply enhanced due diligence and ongoing monitoring. Situations that present a higher money-laundering risk might include, but are not restricted to: customers linked to higher-risk countries or business sectors; or who have unnecessarily complex or opaque beneficial ownership structures; and transactions which are unusual, lack an obvious economic or lawful purpose, are complex or large or might lend themselves to anonymity.


The ML Regulations also set out three scenarios in which specific enhanced due diligence measures have to be applied:

Non-face-to-face CDD: this is where the customer has not been physically present for identification purposes, perhaps because business is conducted by telephone or on the internet.

Correspondent banking: where a correspondent bank is outside the EEA, the UK bank should thoroughly understand its correspondent’s business, reputation, and the quality of its defences against money laundering and terrorist financing. Senior management must give approval to each new correspondent banking relationship.

Politically exposed persons (PEPs): a PEP is a person entrusted with a prominent public function in a foreign state, an EU institution or an international body; their immediate family members; and known close associates. A senior manager at an appropriate level of authority must approve the initiation of a business relationship with a PEP. This includes approving the continuance of a relationship with an existing customer who becomes a PEP after the relationship has begun.

Transaction Based Procedures: Fiat transactions going through ioBanker OÜ [14386003] platform will be manually reviewed. As we are growing and the amount of traffic going across our systems increases we will implement an automatic monitoring system to spot potential money laundering.


The following, which may not be unique to the securities industry and or the digital currency sector, have been identified as suspicious indicators involving the use of fiat wire transfers:

Wire transfers are made to or from financial secrecy havens, tax havens or high-risk geographic locations (i.e. jurisdictions known to produce illegal narcotics/psychotropic drugs or are related to terrorism);

Fiat wire transfers or payments are made to or from unrelated third parties (foreign or domestic) or where the name or account number of the beneficiary or remitter has not been supplied;

Many small, incoming fiat wire transfers are made, either by the customer or third parties, that are almost immediately withdrawn or wired out in a manner inconsistent with customer’s business or history;

There is fiat wire transfer activity that is unexplained, repetitive, unusually large or shows unusual patterns or has no apparent business purpose;

The account is used for payments or outgoing fiat wire transfers with little or no activities i.e. account appears to be used as a depository account or a conduit for transfers;

Funds are transferred to financial or depository institutions other than those from where the funds were initially directed, specifically when different countries are involved;

Transfers with no apparent business purpose are made between different accounts owned by the customer;

Fiat wire transfer logs, when viewed over a period of time, reveal suspicious or unusual patterns;

The customer requests that certain fiat payments be routed through nostro or correspondent accounts held by the financial intermediary instead of its own account; and Outgoing fiat wire transfers to third parties coincide or are close in time to incoming wire transfers from other third parties.

It should be noted that the JMLSG’s guidance provides that, in situations where the risk of money laundering/terrorist financing is very low and subject to certain conditions, firms may assume that a payment drawn on an account in the customer’s name with a UK, EU or equivalent regulated credit institution satisfied the standard CDD requirements.

Happily, some attributes actually make digital currencies not suited to money laundering and terrorist financing, namely, price volatility, illiquid market as compared to a national currency and the fact that they are not fully anonymous. As the bitcoin blockchain maintains a decentralised ledger, it is possible to trace bitcoin transaction to specific wallets - although the ultimate owner of the wallet many not be known, much information is.

ioBanker OÜ [14386003] will, as a matter of routine, deploy blockchain monitoring and analytics technologies. These technologies aggregate public and private information sources about known network addresses and combine them with relationship (or taint) analysis across the whole blockchain. This enables an unprecedented level of accuracy enabling the identification of funds associated with suspicious or illegal activity. This allows transactions not only to be monitored at the point of delivery but also transactions yet to occur may be linked to an identity in the future. A vital tool in fighting online crime.

Nevertheless, digital currencies are supported by a number of technologies that can assist in anonymising or hiding the origin of the funds.

Tumblers: Complex, semi random dummy transaction that makes it difficult to link addresses with particular transaction.

Street Dealers: Rather than going through semi-regulated exchanges you can meet street dealers and hand over cash for bitcoin.

Bitcoin and blockchain smart contracts because of its pseudo-anonymity is a flawed medium from illicit behavior, nevertheless partners must assess transactions that they assess and deem to be more likely to be money laundering transactions.

To summarise, digital currencies allow greater anonymity in non-face to face transactions which could be an issue with regards to KYC. This is exacerbated by the fact there is no central authority and is a truly borderless currency.

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