CONTEXT
This document contains the Anti-Money Laundering (‘AML’) key points of DAXCHAIN OU (hereinafter called “Daxchain”). This Manual is a component of the Company’s AML Policy and Programme, administered by DAXCHAIN OU its Senior Management, and its Board of Directors.
SCOPE OF THE DOCUMENT
This Anti-Money Laundering (“AML”) and Terrorist Financing (“CTF”) Policy and Program (hereinafter called “Policy”) establishes the firm-wide framework by which Daxchain complies with applicable AML/CTF laws and regulations. The aim of the Daxchain Policy is to conduct Daxchain’s business in compliance with applicable laws and regulations. This is central to Daxchain’s business, values and ethics. All employees are expected to live up to these standards and to help improve and enhance the assets and reputation of the Daxchain.
Daxchain designed this Policy to provide the framework for effective compliance with AML/CTF laws and regulations, as well as to communicate its clear commitment to creating a strong compliance culture to the Daxchain employees.
The Board and senior Management recognize that Virtual Currencies and Virtual Currency services pose challenges in the deployment of AML/CTF regulations that are essentially designed to support pre-digitalized financial services.
Daxchain, because of its positioning in the market, needs rigorous AML/CTF controls. Daxchain has adopted a risk-based approach to mitigate the risk of being used for the purpose of money laundering or terrorist financing.
All exceptions to Policy must be approved by the Chief Compliance Officer or the CEO.
REGULATORY FRAMEWORK
DAXCHAIN has adopted standards that are compliant with all applicable laws and regulations, and in particular, Estonian laws and regulations.
The Estonian legal framework on AML/CTF includes the following (without prejudice to the exhaustiveness of the list to follow):
Money Laundering and terrorist financing prevention Act passed 26.10.2017 Revised 10.03.2020;
International Sanctions Act passed 12.05.2010;
All other ministerial regulations on counter-financing of terrorism;
Other relevant laws and regulations applicable as, among others, the following:
Directive (EU) 2015/849 of the European Parliament and of the Council of May 20, 2015 on the prevention of the use of the financial system for the purpose of money laundering and terrorist;
Regulation EC N° 1781/2006 of the European Parliament and of the Council of November 15, 2006 on information on the payer accompanying transfers of funds;
FATF/GAFI 40+9 recommendations;
FATF Report Virtual Assets, Red Flag Indicators of Money Laundering and Terrorist Financing, September 2020.
KEY TERMS AND DEFINITIONS
Sanctions means a measure which is not related to the use of armed forces and the imposition thereof has been decided by the European Union, the United Nations, another international organizations or the Governmental bodies in order to achieve the following objectives:
to maintain or restore peace,
prevent conflicts and reinforce international security,
support and reinforce democracy,
follow the rule of law, human rights and international law, and
achieve other objectives of the common foreign and security policy of the European Union. These sanctions are imposed by the European Union (“EU”) and in the US by the Office of Foreign Assets Control (‘OFAC’) of the US Department of the Treasury, on certain countries and specified individuals and entities, for the purpose of addressing security threats.
Money laundering means:
the conversion or transfer of property derived from criminal activity or property obtained instead of such property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an activity to evade the legal consequences of that person’s actions;
the acquisition, possession or use of property derived from criminal activity or property obtained instead of such property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation therein;
the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property derived from criminal activity or property obtained instead of such property, knowing that such property is derived from criminal activity or from an act of participation in such an activity.
Politically Exposed Person (PEP) is an individual who is or who has been entrusted with prominent public functions such as Head of States or of Government, ministers, deputy or assistant minister; a member of parliament or of a similar legislative body, a member of governmental body of a political party, a member of a supreme court, a member of a court of auditors or of the board of the central bank; an ambassador, a charge a’affaires and a high ranking officer in the armed forces; a member of an administrative, management or supervisory body of a State owned enterprise; a director and a member of the board or equivalent function of an international organization, except middle-ranking or more junior officials;
Terrorism financing shall mean any action as defined in the Penal Code Article 237. It is the process by which terrorists finance their activities. While money laundering is the process where cash raised from criminal activities is made to look legitimate for re-integration into the financial system, terrorism financing cares little about the source of the funds, but it is what the funds are to be used for that defines its scope.
Tipping off means alerting a customer to suspicions of money laundering or disclosing to a customer confidential action taken by Daxchain for AML purposes, tipping off is strictly prohibited.
POLICY OBJECTIVES
This AML/CTF Policy seeks to protect Daxchain from being used by money launderers, terrorists and those financing terrorist activities. Specifically, the Policy seeks to:
Define specific roles and responsibilities for Daxchain AML/CTF compliance;
Create an AML/CTF risk assessment process;
Outline Daxchain AML/CTF internal control process;
Create a Know Your Customer (“KYC”) framework that provides for risk-based customer identification, verification and due diligence;
Create a transaction monitoring and suspicious activity reporting program, including both automated transaction monitoring and employee referrals;
Establish controls to ensure compliance with sanctions requirements/the screening against official public financial sanctions lists (as published on the Estonian FIU website) will be performed each time the list has changed;
Establish a process to ensure adherence to all AML/CTF requirements (including Estonian FIU requirements), including filing of reports, responding to information requests and maintaining records;
Ensure Daxchain documents efforts to meet its legal and regulatory obligations and meets applicable recordkeeping requirements;
Provide a training program for all employees;
Require periodic independent testing; and
Require regular reporting to the Board and senior management, on Daxchain AML/CTF.
GOVERNANCE, ORGANIZATIONAL STRUCTURE AND AUTHORITY
The Daxchain Board appoints the Chief Compliance Officer, who is responsible for the execution of this Policy. Chief Compliance Officer reports directly to the CEO and have direct accountability, and access, to the Board as needed. The MRLO is the Nominated Officer and is responsible for receiving internal disclosures of information concerning suspicions of money laundering and ensuring the timely disclosure of suspicious activity reports (SARs) to the Estonian FIU.
The Chief Compliance Officer is responsible for maintaining sufficient staffing, both in numbers and qualifications, to implement the Daxchains AML Policy/ effectively and for requesting additional resources from the CEO as needed. Notwithstanding the delegation of the day-to- day activities of AML compliance to the Chief Compliance Officer, the CEO and the Board remain responsible for ensuring that adequate resources are available for the Chief Compliance Officer to execute the duties of this Policy, and for ensuring that the Daxchain AML program is effective. The CEO will advise the Chief Compliance Officer, Senior Management and Board with respect to AML-related legal and regulatory obligations, and otherwise advise the Chief Compliance Officer as needed.
The Chief Compliance Officer and his or her employees are independent of the Daxchain other teams and have the authority to cross departmental lines to perform compliance reviews and to implement corrective actions.
INTERNAL CONTROL MONITORING
The Chief Compliance Officer is in particular responsible for developing monitoring processes to promptly identify possible systematic errors and control deficiencies. These processes facilitate remediation of identified AML control deficiencies, including sufficient supporting documentation, as well as escalation procedures. Daxchain performs internal control monitoring in addition to the independent testing program described below. At a minimum, internal control monitoring includes:
KYC program;
Transaction monitoring;
SAR decisioning and filing;
Sanctions and PEP screening; etc..
REPORTING
To ensure effective management and Board oversight of the AML Policy, the Chief Compliance Officer reports no less than annually to the Board and quarterly to the CEO and senior management.
The Chief Compliance Officer provides an annual report on the state of AML compliance and any significant emerging issues that assist the Board and CEO in evaluating any Policy changes that may be appropriate.
CUSTOMER ACCEPTANCE
(KNOW YOUR CUSTOMER “KYC” PROGRAM)
This Policy covers all new Daxchain Customers. The term “Customers” includes anyone who opens an account, including corporations and other legal entities.
Acceptance of Customers is subject to approval process that must comply with the articles 19-41 of the Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020.
For that purpose, a Due Diligence process is initiated with a view to collect documents and information on the applicant.
The Name of the applicant is also screened against list of persons or entities suspected to be in connection with criminal activities.
Depending on the exposure to money laundering/terrorism financing that Daxchain would face once the applicant has been on boarded, the Due Diligence can be enhanced to:
Collect and analyse more information on the background of the applicant;
Obtain additional documentation to substantiate the profile of the applicant and/or mitigate the exposure to Money Laundering/Terrorism Financing;
Perform additional verifications to ensure of the quality of documentation received and the address communicated to us.
In case the name screening or any other investigation reveals the customer is entrusted with political function, an enhanced due diligence on the applicant will be triggered. Furthermore, the acceptance of such applicant can only be decided by either the Chief Compliance Officer or by the CEO of Daxchain.
If an existing customer becomes a PEP or if Daxchain becomes aware, after the applicant has been on boarded, that the latter is a PEP, an enhanced Due diligence process will be conducted. Additionally, a formal acceptance of the continuation of relationships with the customer will be required from the Chief Compliance Officer or by the CEO of Daxchain.
DENIAL OF ACCOUNT OPENING AND CLOSING OF ACTIVE ACCOUNTS
Daxchain will not open accounts for customers who:
Live or are citizens of Iran or North Korea;
Are shell banks under the article 18 of Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020;
Do not provide the required information;
Otherwise do not adequately cooperate with the DD processes;
Are subject to international, EU, Estonian and US sanctions;
Are known to be closely linked to money laundering, criminal or other undesirable activity;
Present any other factor posing unacceptable AML risks.
Further, the Chief Compliance Officer will close any accounts belonging to existing customers where any of the above factors are identified during the course of the customer relationship.
TRANSACTION MONITORING AND SUSPICIOUS ACTIVTY REPORTING
Due diligence measures also comprise conducting ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the professional’s knowledge of the customer, the business and risk profile, including, where necessary, the source of funds and ensuring that the documents, data or information held are kept up-to-date.
Daxchain current transaction monitoring involves in particular:
Review of transactional activity;
Manual review incoming and outgoing wire transaction; and
Requiring all of its employees and, to the extent relevant, contractors and vendors to report unusual or potentially suspicious activity to the Chief Compliance Officer.
The Chief Compliance Officer oversees the timely review and documentation of investigations and determines whether Daxchain needs to take actions, including but not limited to, seeking consent to process a transaction or report a suspect to the Estonian FIU, closure of the account and/or, if appropriate, the filing of a SAR.
In accordance with article 49 of the Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020, the Chief Compliance Officer files SARs with the Estonian FIU when he identifies in economic or professional activities, a professional act or provision of a professional service an activity or facts whose characteristics refer to the use of criminal proceeds or terrorist financing or to the commission of related offences or an attempt thereof or with regard to which the obliged entity suspects or knows that it constitutes money laundering or terrorist financing or the commission of related offences.
The Chief Compliance Officer ensures that Daxchain:
Documents its SAR decisions;
Seeks the consent of the Estonian FIU to process transactions that have not yet occurred but for which a suspicion has already been formed;
Files or amends SARs within timeframes prescribed by Estonain FIU;
Creates and retains appropriate records of reported activity; and
Complies with all Estonian FIU and other regulatory SAR filings.
The Chief Compliance Officer will personally review and file SARs, except when unavailable, but may delegate responsibility for the investigation and closing of false-positive alerts. As part of the Daxchain internal control monitoring, the Chief Compliance Officer reviews a sample of alerts cleared by other employees to ensure quality and documentation of decisioning.
When the Chief Compliance Officer files a SAR:
He or she evaluates whether the contents of the SAR warrant outreach to any law enforcement agencies; and
The Chief Compliance Officer and CEO evaluate whether to close each account on which it files a SAR. The Chief Compliance Officer is responsible for documenting the basis for the decision reached on the basis of the evaluation. Where the account is not closed, a 90-day review is performed to determine whether there is continuing activity that warrants an additional SAR.
OTHER ASPECTS
Chief Compliance Officer/Compliance Officer:
The Chief Compliance Officer/Compliance Officer will be responsible for designing, implementing and monitoring this policy as well as all other AML/CTF aspects. There will be a direct reporting line to the BOD.
The Chief Compliance Officer/Compliance officer can be seconded by a qualified team of AML-officers and -assistants. The qualifications of the members of the team and their number will be at all times sufficient to meet the AML/CTF needs in the light of the activities of Daxchain.
Training and awareness of employees:
The Chief Compliance Officer/Compliance Officer will be responsible for training all Daxchain employees on all elements of AML/KYC/CTF and PEP policies and procedures including detection, monitoring and reporting. He/she will keep abreast of changes in legislation in Estonia and other relevant jurisdictions. Training records will be kept by Daxchain.
Retention of records:
Daxchain will be responsible for holding all elements collected. All customer related data and information will be kept and stored in accordance with articles 46, 47 and 48 of the Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020.
Keeping information up to date:
In accordance with articles 19-41 of the Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020, ongoing due diligence includes the obligation to verify and, where appropriate, to update, within an appropriate timeframe to be set by the professional according to its risk assessment, the documents, data or information gathered while fulfilling the customer due diligence obligations. Such documents, data and information shall be verified and updated immediately when a situation occurs calling for these measures.
Control of the AML/CTF Policy:
In accordance with article 14 of the Money Laundering and terrorist financing prevention Act passed 26.10.2017 revised 10.03.2020, the control of the AML/CTF policy will be an integral part of the mission of the Daxchain internal audit function.
DAXCHAIN OÜ
Harju maakond, Tallinn, Lasnamäe linnaosa, Väike-Paala tn 2, 11415
Registration number: 14660094
Virtual Currency service license: FVT000045
AML CFT Policy effective 4th January, 2021.
