Procedures Manual regarding the prevention of Money Laundering and Terrorist Financing

A.INTRODUCTION 3 ....................................................................................................

B.KEY TERMS 3 .........................................................................................................

C.MONEY LAUNDERING - A BRIEF HISTORY 5 ......................................................................

"MONEY LAUNDERING IS CALLED WHAT IT IS BECAUSE THAT PERFECTLY DESCRIBES WHAT TAKES PLACE - ILLEGAL, OR DIRTY, MONEY IS PUT THROUGH A CYCLE OF TRANSACTIONS, OR WASHED, SO THAT IT COMES OUT THE OTHER END AS LEGAL, OR CLEAN, MONEY. IN OTHER WORDS, THE SOURCE OF ILLEGALLY OBTAINED FUNDS IS OBSCURED THROUGH A SUCCESSION OF TRANSFERS AND DEALS IN ORDER THAT THOSE SAME FUNDS CAN EVENTUALLY BE MADE TO APPEAR AS LEGITIMATE INCOME" 5 ..DEFINITION OF MONEY LAUNDERING 5 ........................................................................................STAGES OF MONEY LAUNDERING 5 ............................................................................................THE MONEY LAUNDERING PROCESS 6 ........................................................................................STAGES OF THE PROCESS 6 ...................................................................................................

I. PLACEMENT 6 .....................................................................................................II. LAYERING 7 III.INTEGRATION 7 ...................................................................................................

MONEY LAUNDERING METHODS 8 .............................................................................................

D.LEGAL FRAMEWORK 9 .............................................................................................

FINANCIAL ACTION TASK FORCE (FATF) 9 ...................................................................................EUROPEAN UNION 9 ..........................................................................................................KEY CHANGES: 9 .............................................................................................................POLITICALLY EXPOSED PERSONS (PEPS): 9 ..................................................................................BENEFICIAL OWNERSHIP INFORMATION: 9 ....................................................................................LIST OF THIRD COUNTRY JURISDICTIONS: 10 .................................................................................ONE-OFF TRANSACTIONS: 10 ................................................................................................IMPORTANT ARTICLES OF THE LAW 10 .......................................................................................PRESCRIBED OFFENCES (ARTICLE 3 OF THE LAW) 10 .........................................................................LAUNDERING OFFENCES (ARTICLE 4 OF THE LAW) 10 ........................................................................PREDICATE OFFENCES (ARTICLE 5 OF THE LAW) 10 ..........................................................................OTHER OFFENCES IN CONNECTION WITH LAUNDERING AND FINANCING OF TERRORISM OFFENCES (FAILURE TO REPORT) (ARTICLE 27 OF THE LAW) 11 ...............................................................................................OFFENCES IN RELATION TO THE DISCLOSURE OF INFORMATION (TIPPING- OFF) (ARTICLE 48 OF THE LAW) 11 ................PROCEDURES FOR PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING (ARTICLE 58 OF THE LAW) 11 ..............APPLICATION OF CLIENT DUE DILIGENCE AND IDENTIFICATION PROCEDURES (ARTICLE 60 OF THE LAW) 12 ....................WHEN TO APPLY CLIENT DUE DILIGENCE AND IDENTIFICATION PROCEDURES (ARTICLE 62 OF THE LAW) 12 ....................PROHIBITION FROM COOPERATING WITH A SHELL BANK OR KEEPING ANONYMOUS ACCOUNTS (ARTICLE 66 OF THE LAW) 13 ...

E.PROCEDURES FOR PREVENTING MONEY LAUNDERING AND TERRORIST FINANCING 13 ................

1. Board of Directors responsibilities (paragraph 5) 13 .......................................................................2. Obligations of the Internal Audit Department (paragraph 6) 14 ..........................................................3. Compliance Officer 14 ...........................................................................................................

Appointment of compliance officer - assistants of compliance officer (paragraph 8) 14 ................................Compliance officer’s duties (paragraph 9) 14 ...................................................................................

4. Compliance officer’s annual report (paragraph 10) 15 .....................................................................5. Application of appropriate measures and procedures on a Risk Based Approach-RBA (paragraph 12) 16 ..........

Client Risk 16 ........................................................................................................................Geographic/Country Risk 17 .......................................................................................................Categories of Clients that are not accepted by Woodbrook Group 17 ......................................................

6. Design and implementation of measures and procedures to manage and mitigate the risks (paragraph 14) 17 ..7. Client’s categories 18 ............................................................................................................

Low Risk Clients 18 ................................................................................................................Normal risk Clients 18 ..............................................................................................................High Risk Clients 18 .................................................................................................................List for Client’s categories 18 .....................................................................................................

8. Measures and controls for Dynamic Risk Management (paragraph 15 and 16) 19 ......................................9. Client Identification and Due Diligence Procedures (paragraph 18) 19 ..................................................10. Woodbrook Group Client’s identification procedures (paragraph 22) 20 ................................................11. Standard Identification and Due Diligence Procedures 20 ................................................................

Client Identification/Verification Documents for Individuals 20 .............................................................Client Identification/Verification Documents for Legal Entities 20 .........................................................Client Due Diligence Documents -Other Types of Entities 21 ................................................................

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12. Simplified Client identification and due diligence procedures (paragraph 23) 21 .....................................13. Enhanced Client identification and due diligence procedures (paragraph 24) 22 .....................................

Client accounts’ in the name of a third person 22 .............................................................................Additional due diligence 23 ........................................................................................................Electronic gambling /gaming through the internet 23 ........................................................................Additional due diligence: 23 .......................................................................................................Clients from countries which inadequately apply Financial Action Task Force’s recommendations 24 ................Other type of High Risk Clients as defined by Woodbrook Group 24 ........................................................Definition: Clients with complicated group structure: 24 ....................................................................

14. Information/data for the construction of the economic profile of the Client (paragraph 21) 25 ..................15. Client data recording 25 .......................................................................................................16. Internal reporting procedures and reporting to MOKAS 26 ................................................................

Internal reporting procedures (paragraph 27) 26 ..............................................................................Reporting to MOKAS (paragraph 29) 26 ..........................................................................................Submission of information to MOKAS (paragraph 30) 26 ......................................................................

17. Record keeping 26 ...............................................................................................................Record keeping of documents/data (paragraph 31) 26 ........................................................................Time period of keeping documents/data (paragraph 31) 27 .................................................................Format of records (paragraph 32) 27 ............................................................................................. Certification and language of documents (paragraph 33) 27 ................................................................

18. Employees’ obligations, Education, and Training (paragraph 34 and 35) 27 ............................................Employees’ obligations 27 ......................................................................................................... Employees’ education and training program 27 ...............................................................................

19. Suspicious Transactions/Activities related to Money Laundering and Terrorist Financing (paragraph 28) 28 .....Suspicious transactions 28 .........................................................................................................Suspicious Transactions related to Money Laundering 28 .....................................................................Suspicious Transactions related to Terrorist Financing 29 .....................................................................Sources and methods 29 ............................................................................................................Non-profit organisations 29 ........................................................................................................Unusual characteristics of non-profit organisations: 29 .......................................................................

APPENDIX 1 31 ..............................................................................................................

APPENDIX 2 32..............................................................................................................

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A.Introduction

Cyprus enacted the appropriate legislation and has taken effective regulatory and other measures by putting in place suitable mechanisms for the prevention and suppression of money laundering and terrorist financing activities. Moreover, Cyprus is committed to apply all the requirements of international treaties and standards in this area and, specifically, those deriving from the European Union Directives.

In 1992, Cyprus enacted the first Law by which money laundering deriving from drug trafficking was criminalised. In 1996 Cyprus enacted “The Prevention and Suppression of Money Laundering Activities Law” defining and criminalising money laundering deriving from all serious criminal offences. The Law recognised the important role of the financial sector on the prevention and forestalling of money laundering activities and contained special provisions for measures and procedures that persons involved in financial business should put in place to that effect. The Law was subsequently amended to adopt new international initiatives and standards in the area of money laundering, including the 2nd European Union Directive for the prevention of the use of the financial system for the purpose of money laundering (Directive 91/308/EEC).

On 13 December 2007, the House of Representatives enacted “The Prevention and Suppression of Money Laundering Activities Law” by which the former Laws on the prevention and suppression of money laundering activities of 1996-2004 were consolidated, revised and repealed. Under the current Law, which came into force on 1 January 2008, the Cyprus legislation has been harmonised with the Third European Union Directive on the prevention of the use of the financial system for money laundering and terrorist financing (Directive 2005/60/ΕC).

B.Key terms Beneficial owner: Means the natural person or natural persons, who ultimately own or control the Client and/or the natural person on whose behalf a transaction or activity is being conducted. The beneficial owner shall at least include:

In case of corporate entities:

• The natural person or natural persons, who ultimately own or control a legal entity through direct or indirect ownership or control of a sufficient percentage of the shares or voting rights in that legal entity, including through bearer share holdings, a percentage of 10% plus one share be deemed sufficient to meet this criterion;

• The natural person or natural persons who otherwise exercise control over the management of a legal entity.

In case of legal entities, such as foundations and legal arrangements, such as trusts, which administer and distribute funds:

• Where the future beneficiaries have already been determined, the natural person or natural persons who are the beneficiaries of 10% or more of the property of a legal arrangement or entity;

• Where the individuals that benefit from the legal arrangement or entity have not yet to be determined, the class of persons in whose main interest the legal arrangement or entity is set up or operates;

• The natural person or natural persons who exercise control over 10% or more of the property of a legal arrangement or entity.

Board of Directors: means the Board of Directors of Woodbrook Group Limited.

CySEC/Commission: means the Cyprus Securities and Exchange Commission established and operating pursuant to the Cyprus Securities and Exchange Commission (Establishment and Responsibilities) Law.

Directive: means Directive DI144-2007-08 of 2012 of the Cyprus Securities and Exchange Commission for the Prevention of Money Laundering and Terrorist Financing.

Financial business: includes the following:

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• Acceptance of deposits by the public; • Lending money to the public; • Finance leasing, including hire purchase financing;

• Money transmission services; • Issue and administration of means of payment such as credit cards, travellers’ cheques

bankers’ drafts and electronic money • Guarantees and commitments • Trading in one’s own account or on account of another person in stocks or securities including

cheques, bills of exchange, bonds, certificates of deposits • Participation in share issues and the provision of related services • Consultancy services to enterprises concerning their capital structure, industrial strategy and

related issues and consultancy services as well as services in the areas of mergers and acquisitions of businesses;

• Money broking; • Investment services, including dealing in investments, managing investments, giving investment

advice, and establishing and operating collective investment schemes. For this action, the term “investments” includes long term insurance contracts, whether associates with investment schemes;

• Safe custody services; • Custody and trustee services in relation to stocks • Any of the services and activities:

Which are defined in Part I and II of the third Annex of the Investment Services and Activities and Regulated Markets Law which are from time to time in force and which are provided in relation to financial instruments listed in Part III of the same Annex; Which are defined in sections 41 and 100 of the Open- Ended Undertaking for Collective Investment in Transferable Securities and Related Issues Law.

Other activities: includes the following:

• Exercise of professional activities by auditors, external accountants and tax advisors, including transactions for the account of their Clients in the context of carrying out financial business;

• Exercise of professional activities on behalf of independent lawyers, with the exception of privileged information, when they participate, whether:

By assisting in the planning or execution of transactions for their clients concerning the: • Buying and selling of real property or business entities; • Managing of client money, securities or other assets; • Opening or management of bank, saving or securities accounts; • Organisation of contributions necessary for the creation, operation or management of

companies; • Creation, operation or management of trusts, companies or similar structures.

By acting on behalf and for the account of their clients in any financial or real estate transaction

• Dealing in real estate transactions, conducted by real estate Agents per the provisions of the Real Estate Agents Law, which are from time to time in force;

• Trading in goods such as precious stones or metals, wherever payment is made in cash and in an amount of €15.000 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked;

• Provision of trust services and company administrative services to third parties:

Law: means the Prevention and Suppression of Money Laundering Activities Law.

MOKAS: Means the Unit for Combating Money Laundering established per section 54 of the Prevention and Suppression of Money Laundering Activities Law.

Woodbrook Group Limited: (“Woodbrook Group”) means a company of limited liability by shares, established under the Company Law Cap.113

Politically exposed persons (PEP): Means the natural persons who have their place of residence in the Republic of Cyprus or in another European Union Member State or in third counties and who are or have been entrusted with prominent public functions and their immediate family members or persons known to be close associates of such persons. The meaning ‘politically exposed persons’

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includes the following natural persons who are or have been entrusted with prominent public functions’ in a foreign country:

• Heads of State, heads of government, ministers and deputy or assistant ministers; • Members of parliaments; • Members of supreme courts, of constitutional courts or of other high-level judicial bodies

whose decisions are not subject to further appeal, except in exceptional circumstances; • Members of courts of auditors or of the boards of central banks; • Ambassadors and high-ranking officers in the armed forces;

Members of the administrative, management or supervisory bodies of State- owned enterprises.

Where a person has ceased to be entrusted with a prominent public function for a period of at least one year, an organisation shall not be obliged to consider such a person as politically exposed.

None of the categories set out above for PEPs shall be understood as covering middle ranking or more junior officials.

‘Immediate family members’ includes the following:

• The spouse or the person with which cohabit for at least one year;

• The children and their spouses or the persons with which cohabit for at least one year; • The parents.

Persons known to be close associates includes the following:

• Any natural person who is known to have joint beneficial ownership of legal entities or legal arrangements, or any other close business relations, with PEP;

• Any natural person who has sole beneficial ownership of a legal entity or legal arrangement which is known to have been set up for the benefit de facto of PEP.

Paragraph: Means the relevant paragraphs of the Directive

C.Money Laundering - A Brief History The term “money laundering” is said to originate from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies.

One of the ways in which they could do this was by purchasing outwardly legitimate businesses and to mix their illicit earnings with the legitimate earnings they received from these businesses. Laundromats were chosen by these gangsters because they were cash businesses and this was an undoubted advantage to people like Al Capone who purchased them.

Al Capone, however, was prosecuted and convicted in October, 1931 for tax evasion. It was this that he was sent to prison for rather than the predicate crimes which generated his illicit income and according to Robinson this tale that the term originated from this time is a myth. He states that:

"Money laundering is called what it is because that perfectly describes what takes place - illegal, or dirty, money is put through a cycle of transactions, or washed, so that it comes out the other end as legal, or clean, money. In other words, the source of illegally obtained funds is obscured through a succession of transfers and deals in order that those same funds can eventually be made to appear as legitimate income"

Definition of money laundering

Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If undertaken successfully, it allows them to maintain control over those proceeds and ultimately provide a legitimate cover for their source of income. Failure to prevent the laundering of the proceeds of crime permits criminals to benefit from their actions, thus, making crime a more attractive proposition.

Stages of money laundering

There is no specific method of laundering money. Despite the variety of methods employed, the laundering process is accomplished in three basic stages which may comprise transactions by the

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launderers that could alert a financial institution to criminal activity:

• Placement – The process of placing, through deposits or other means, unlawful cash proceeds into traditional financial institutions.

• Layering – The process of separating the proceeds of criminal activity from their origin using layers of complex financial transactions, such as converting cash into traveler’s checks, money orders, wire transfers, letters of credit, stocks, bonds or purchasing valuable assets, such as art or jewellery. All these transactions are designed to disguise the audit trail and provide anonymity.

• Integration – The process of using an apparently legitimate transaction to disguise the illicit proceeds, allowing the laundered funds to be disbursed back to the criminal. Different types of financial transactions such as sham loans or false import/export invoices, can be used. If the layering process is successful, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds.

The three basic steps may occur as separate and distinct phases or may occur simultaneously or, more commonly, they may overlap. How the basic steps are used depends on the available laundering mechanisms and requirements of the criminal organisations.

Certain points of vulnerability have been identified in the laundering process which the money launderer finds difficult to avoid and where his activities are, therefore, more susceptible to being recognised, specifically:

• Entry of cash into the financial system; • Cross-border flows of cash; • Transfers within and from the financial system.

The Money Laundering Process

Money laundering is not a single act but is in fact a process that is accomplished in three basic steps as described above.

There are also common factors regarding the wide range of methods used by money launderers when they attempt to launder their criminal proceeds. Three common factors identified in laundering operations are:

• The need to conceal the origin and true ownership of the proceeds; • The need to maintain control of the proceeds; • The need to change the form of the proceeds to shrink the huge volumes of cash generated by

the initial criminal activity.

Stages of the Process

I. PLACEMENT

Placement is the process where cash derived from criminal activity is infused into the financial system. When criminals are in physical possession of cash that can directly link them to predicate criminal conduct, they are at their most vulnerable. Such criminals need to place the cash into the financial system, usually through the use of bank accounts, in order to commence the laundering process.

This is the first stage in the washing cycle. Money laundering is a "cash-intensive" business, generating vast amounts of cash from illegal activities (for example, street dealing of drugs where payment takes the form of cash in small denominations). The monies are placed into the financial system or retail economy or are smuggled out of the country. The aims of the launderers are to remove the cash from the location of acquisition to avoid detection from the authorities and to then transform it into other asset forms; for example: travellers cheques, postal orders, etc.

Some placement methods are:

Disguised deposits: Launderers often divide large amounts of cash into several small transactions amounts, for example of less than €10,000 by, for instance:

• Making several deposits into a single or multiple accounts on successive days; • Making deposits into several accounts (often opened by using false identities) at different

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branches of the same bank; • Using different banks and then consolidating the accounts; • Depositing cash into accounts of third parties such as lawyers, real estate agents, brokers and

security firms; •• Depositing cash with the assistance of corrupt bank staff who themselves manipulate the

deposits to make them appear as if they are below the reporting threshold.

Use of monetary instruments: Launderers purchase monetary instruments, such as money orders, postal orders and travellers cheques. In this way, they convert cash into financial instruments for relatively small amounts, which are easily transportable, and then deposit them elsewhere.

Inter-mingling: Money launderers often attempt to conceal the origin of criminally derived cash by mixing it with legitimate generated cash. They do so by using the services of lawful business enterprises. A cheaper but riskier alternative is to establish what is known as a “front company”. This is a company that is incorporated on paper, but that does not own any physical assets and does not trade. The launderer opens an account in the name of the front company and deposits criminally derived cash into it, representing the money as the profits of the front company.

Asset purchases: Launderers may also use the cash proceeds of their criminal activities to buy assets like real estate, gold and precious metals, art, motor cars and antiques. These items may then be sold and converted back into cash.

Use of casinos: The extensive use of casinos both to place and integrate dirty money has emerged in recent years.

II.LAYERING

Layering usually involves a complex system of transactions designed to hide the source and ownership of the funds. Once cash has been successfully placed into the financial system, launderers can engage in an infinite number of complex transactions and transfers designed to disguise the audit trail and thus the source of the property and provide anonymity. One of the primary objectives of the layering stage is to confuse any criminal investigation and place as much distance as possible between the source of the ill-gotten gains and their present status and appearance.

Typically, layers are created by moving monies in and out of the offshore bank accounts of bearer share shell companies through electronic funds transfer (EFT). Given that there are over 500,000 wire transfers - representing in excess of $1 trillion - electronically circling the globe daily, most of which is legitimate, there isn’t enough information disclosed on any single wire transfer to know how clean or dirty the money is, therefore providing an excellent way for launderers to move their dirty money. Other forms used by launderers are complex dealings with stock, commodity, and futures brokers. Given the sheer volume of daily transactions, and the high degree of anonymity available, the chances of transactions being traced is insignificant.

Several different types of transactions may be used at this stage of the laundering process, known as layering, aiming to disguise the proceeds of crime. The main methods of layering are:

Electronic (wire) transfers: Dirty money, once placed in the system, is often transferred by electronic fund transfer (wire transfers) between accounts or between banks, whether domestic or offshore. Launderers might accumulate a number of small deposits in an account(s) and use a domestic electronic fund transfer to consolidate these accounts, followed by an international electronic fund transfer to move the monies offshore. This type of electronic money transfer can be carried out quickly and over vast distances, involving a number of offshore jurisdictions. Funds moved in this fashion, often in purported payment for goods sold or services rendered (that do not in reality exist), on a number of occasions, ultimately become practically untraceable.

Monetary instruments: Once placed in the banking system, dirty money can be used to buy cashier cheques, drafts, travellers cheques, letters of credit etc. These instruments may then be transported and transferred, either domestically or, more usually, offshore. Funds are first placed in the financial system onshore and are then moved offshore where the layering takes place. Once offshore, the funds are often transferred between accounts held by front companies incorporated in offshore centres where confidentiality provisions allow corporate service providers to act as nominees and/or for bearer shares to be issued in order to maintain anonymity in the outside world.

III.INTEGRATION 7

Integration is the stage at which laundered funds are reintroduced into the legitimate economy, appearing to have originated from a legitimate source. Integration is the final stage of the process, whereby criminally derived property that has been placed and layered is returned (integrated) to the legitimate economic and financial system and is assimilated with all other assets in the system. Integration of the "cleaned" money into the economy is accomplished by the launderer making it appear to have been legally earned. By this stage, it is exceedingly difficult to distinguish legal and illegal wealth.

Methods popular to money launderers at this stage of the game are:

Loan arrangements: The establishment of anonymous companies in countries where the right to secrecy is guaranteed. They are then able to grant themselves loans out of the laundered money in the course of a future legal transaction. Furthermore, to increase their profits, they will also claim tax relief on the loan repayments and charge themselves interest on the loan.

Sham transactions: The sending of false export-import invoices overvaluing goods allows the launderer to move money from one company and country to another with the invoices serving to verify the origin of the monies placed with financial institutions.

Inheritance: Funds held in one jurisdiction on behalf of the launderer may be transferred to another jurisdiction and be purported to represent a gift or inheritance

Redemption of life policy or similar investment: This method involves the launderer in placing funds with an insurance company and sometime later enchasing the property (or borrowing against it) so that a cheque from the insurance company has the appearance of emanating from a legitimate source.

Money Laundering Methods

The Money Laundering methods are numerous. The most common are the following:

• Structuring ("smurfing"): Smurfing is possibly the most commonly used money laundering method. It involves many individuals who deposit cash into bank accounts or buy bank drafts in amounts under €10,000 to avoid the reporting threshold.

• Money Services and Currency Exchanges: Money services and currency exchanges provide a service that enables individuals to exchange foreign currency that can then be transported out of the country. Money can also be wired to accounts in other countries. Other services offered by these businesses include the sale of money orders, cashier’s cheques and travellers cheques.

• Asset Purchases with Bulk Cash: Money launderers may purchase high value items such as cars, boats or luxury items such as jewellery and electronics. Money launderers will use these items but will distance themselves by having them registered or purchased in an associate's name.

• Electronic Funds Transfer: Also referred to as a telegraphic transfer or wire transfer, this money laundering method consists of sending funds electronically from one city or country to another to avoid the need to physically transport the currency.

• Postal Money Orders: The purchase of money orders for cash allows money launderers to send these financial instruments out of the country for deposit into a foreign or offshore account.

• Credit Cards: Overpaying credit cards and keeping a high credit balance gives money launderers access to these funds to purchase high value items or to convert the credit balance into cheques.

• Casinos: Cash may be taken to a casino to purchase chips which can then be redeemed for a casino cheque.

• Refining: This money laundering method involves the exchange of small denomination bills for larger ones and can be carried out by an individual who converts the bills at several different banks in order not to raise suspicion. This serves to decrease the bulk of large quantities of cash.

• Legitimate Business / Co-mingling of Funds: Criminal groups or individuals may take over or invest in businesses that customarily handle a high cash transaction volume to mix the illicit proceeds with those of the legitimate business. Criminals may also purchase businesses that commonly receive cash payments, including restaurants, bars, night clubs, hotels, currency exchange shops, and vending machine companies. They will then insert criminal funds as false revenue mixed with income that would not otherwise be sufficient to sustain a legitimate business.

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• Value Tampering: Money launderers may look for property owners who agree to sell their property, on paper, at a price below its actual value and then accept the difference of the purchase price "under the table". In this way, the launderer can, for example, purchase a $2 million- d o l l a r property for $1 million, while secretly passing the balance to the seller. After holding the property for a period of time, the launderer then sells it for its true value of $2 million.

• Loan Back: Using this method, a criminal provides an associate with a sum of illegitimate money and the associate creates the paperwork for a loan or mortgage back to the criminal for the same amount, including all the necessary documentation. This creates an illusion that the criminal's funds are legitimate. The scheme's legitimacy is further reinforced through regularly scheduled loan payments made by the criminal, and providing another means to transfer money.

D.Legal Framework Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The FATF has published 40+9 Recommendations to meet this objective. The third Anti-Money Laundering Directive is in line with the FATF recommendations.

The FATF monitors members' progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally. In performing these activities, the FATF collaborates with other international bodies involved in combating money laundering and the financing of terrorism.

European Union

• Directive 91/308/EEC of 10 June 1991 on the Prevention of the use of the financial system for the purpose of Money Laundering (the 1st Directive).

• Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001 on the prevention of the use of the financial system for money laundering (the 2nd Directive).

• Directive 2005/60/EC of the European Parliament and of the Council 26 October 2005 on the prevention of the use of the financial system for money laundering and terrorist financing (the 3rd EU Directive, also known as the “3MLD”).

• Directive 2015/849 the European Parliament and of the Council of 20th May 2015 on the prevention of the use of the financial system for money laundering and terrorist financing (the 4th EU Directive, also known as the “4MLD”).

The 4MLD which came into force on 26 June 2015, is designed to bring a more robust risk-based approach to the prevention of money laundering and terrorist financing across all EU member states. It should have been implemented by Member States by June 2017.

So far only 3 Member States have implemented the changes in their national laws.

Key Changes: The key changes in the provisions of this Directive compared to the existing AML regulatory framework of Cyprus, are as follows:

Politically exposed persons (PEPs): The definition of “prominent public functions” is extended in order to include members of the governing bodies of political parties. Therefore, not only leaders of political parties be considered as PEPs but also the key members of their executive committees. Also, the definition of PEP per the directive is expanded to include domestic as well as foreign PEPs.

Beneficial ownership information: The 4MLD requires that a public central register is maintained at each EU member state including information on the UBOs of legal arrangements, such as companies, foundations, holdings and trusts. This information will have to be adequate, accurate and up-to-date.

The central register will be accessible in all cases and without any restrictions to (i) the competent authorities and their FIUs; (ii) the “obliged entities” conducting their CDD duties (ASPs, banks etc); (iii) any persons or organisations that can demonstrate a legitimate interest – these persons will be able to

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access at least the following information about the UBO: name, month and year of birth, nationality, country of residence, nature and extent of beneficial interest held.

List of third country jurisdictions: The list of “equivalent jurisdictions” will be scrapped. Instead, a list of countries that have strategic deficiencies in their regimes for AML and counter-terrorism financing will be created. Enhanced due diligence will be required when dealing with persons or entities established in these countries.

One-off transactions: The threshold for triggering AML procedures form cash payments is lowered from EUR15.000 to EUR10.000.

The 4th EU directive also strengthens obligations in the following areas (i) inclusion of tax crimes as a form of money laundering offence (this is already included in Cyprus legislation); (ii) extension of the rules to the entire gambling sector rather than just casinos; (iii) obligation for potential extension of the retention period for client information for 10 years from the termination of business relation in certain circumstances; (iv) simplified due diligence will no longer be applicable in most cases.

As soon as the 4MLD will be implemented into the Cyprus laws and regulations the above changes will be applied by Woodbrook Group.

Important articles of the Law

Prescribed offences (Article 3 of the Law)

The Law has effect in relation to prescribed offences which are:

• Laundering offences and • Predicate offences

Laundering offences (Article 4 of the Law)

Every person who knows or ought to have known that any kind of property constitutes proceeds from the commission of a predicate offence and carries out any of the following activities:

• Converts or transfers or removes such property, for concealing or disguising its illicit origin or of assisting in any way any person who is involved in the commission of the predicate offence to carry out any of the above actions or acts in any other way to evade the legal consequences of his actions;

• Conceals or disguises the true nature, source, location, disposition, movement of and rights in relation to, property or ownership of this property;

• Acquires, possesses or uses such property; • Participates in, associates, co-operates, conspires to commit, or attempts to commit and aids and

abets and provides counselling or advice for the commission of any of the above-mentioned offences;

• Provides information in relation to investigations that are carried out for laundering offences for enabling the person who acquired a benefit from the commission of a predicate offence to retain the proceeds or the control of the proceeds from the commission of the offence.

Commitment of the above offences is punishable on conviction by a maximum of 14 years’ imprisonment or by a pecuniary penalty of up to Euro 500.000 or both of these penalties, in case of a person knowing that the property is proceeds from a predicate offence, or by a maximum of 5 years imprisonment or by a pecuniary penalty of up to Euro 50.000 or both of these penalties, in case of ought to have known. It shall not matter whether the predicate offence is subject to the authority of the Cyprus Courts or not. The offenders of a predicate offence may commit a laundering offence as well. The knowledge, intention or purpose which is required as elements of the offences may be inferred from objective and factual circumstances.

Predicate offences (Article 5 of the Law)

Predicate offences are:

• All criminal offences punishable with imprisonment exceeding one year, as a result of which proceeds have been derived which may constitute the subject of a money laundering,

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offence as defined in article 4 of the Law; • Financing of Terrorism offences as these are specified in Article 4 of the Financing of Terrorism

(Ratification and other provisions) Laws of 2001 and 2005, as well as the collection of funds for the financing of persons or organisations associated with terrorism;

• Drug Trafficking offences, as these are specified in section 2 of the law.

Other offences in connection with laundering and financing of terrorism offences (Failure to report) (Article 27 of the Law)

It is an offence for any person, including employees of Woodbrook Group who, during their profession, business, or employment, acquires knowledge or reasonable suspicion that another person is engaged in money laundering or terrorist financing not to report his/her knowledge or suspicion to MOKAS, as soon as it is reasonably practical after the information came to his/her attention. Failure to report in these circumstances is punishable on conviction by a maximum of five (5) years’ imprisonment or a fine not exceeding €5.000 or both penalties.

The address of the Unit for Combating Money Laundering is:

Unit for Combating Money Laundering (MOKAS), Office of the Attorney General of the Republic, 27 Katsoni Street, 1082 Nicosia. Tel.: 22 446 004 / 22 446 018 Fax: 22 317 063 Email: mokas@mokas.law.gov.cy Contact person: Mrs. Eva Rossidou – Papakyriacou

Offences in relation to the disclosure of information (Tipping- Off) (Article 48 of the Law)

Any person who discloses that, information or other relevant material regarding knowledge or suspicion for money laundering have been submitted to the Unit or makes a disclosure which may impede or prejudice the interrogation and investigation carried out in respect of prescribed offences or the ascertainment of proceeds knowing or suspecting that the said interrogation and investigation are taking place, is guilty of an offence punishable by imprisonment not exceeding 5 years.

Procedures for preventing Money Laundering and Terrorist Financing (Article 58 of the Law)

The Law requires all persons carrying on financial or other business activities, to establish and maintain specific policies and procedures to guard against their business and the financial system in general being used for the purposes of money laundering or terrorist financing. These procedures are designed to achieve two purposes: firstly, to facilitate the recognition and reporting of suspicious transactions and, secondly, to ensure through the strict implementation of the "know-your-Client" principle and the maintenance of adequate record keeping procedures, should a Client come under investigation, that the Company can provide its part of the audit trail. The Law requires that any person carrying on financial or other business activities is obliged to apply adequate and appropriate systems and procedures in relation to the following:

• Client identification and Client due diligence; • Record-keeping; • Internal reporting and reporting to MOKAS; • Internal control, risk assessment and risk management to prevent money laundering and terrorist

financing; • Detailed examination of each transaction which by its nature may be particularly vulnerable to be

associated with money laundering offences or terrorist financing and complex or unusually large transactions and all other unusual patterns of transactions which have no apparent economic or visible lawful purpose;

• Informing their employees in relation to:

i. The above systems and procedures; ii. The present Law;

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iii. The Directives issued by the competent Supervisory Authority (CySec); iv. The European Union’s Directives on the prevention of the use of the financial system for

the purpose of money laundering and terrorist financing.

• Ongoing training of their employees in the recognition and handling of transactions and activities which may be related to money laundering or terrorist financing.

Application of Client due diligence and identification procedures (Article 60 of the Law)

Persons engaged in financial and other business, including Woodbrook Group, apply Client identification procedures and Client due diligence measures in the following cases:

• When establishing a business relationship; • When carrying out occasional transactions amounting to EURO 15,000 or more, whether the

transaction is carried out in a single operation or in several operations which appear to be linked; • When there is a suspicion of money laundering or terrorist financing, regardless of the amount of

the transaction; • W h en there are doubts about the veracity or adequacy of previously Client identification data. • Ways of application of Client due diligence and identification procedures (Article 61 of the Law)

1.Client identification procedures and Client due diligence measures shall include the following:

• Identifying the Client and verifying the Client’s identity based on documents, data or information obtained from a reliable and independent source;

• Identifying the beneficial owner and taking risk-based and adequate measures to verify the identity based on documents, data or information obtained from a reliable and independent source so that the person carrying on in financial or other business knows who the beneficial owner is regarding legal persons, trusts and similar legal arrangements, taking risk based and adequate measures to understand the ownership and control structure of the Client;

• Obtaining information on the purpose and intended nature of the business relationship. • 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 information and data in the possession of the person engaged in financial or other business in relation to the Client, 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.

2. Persons engaged in financial or other business activities, including the Company, apply each of the above Clients due diligence measures and identification procedures but may determine the extent of such measures on a risk-sensitive basis depending on the type of Client, business relationship, product, or transaction. Persons engaged in financial or other business activities must be able to demonstrate to the competent Supervisory Authorities (CySec) that the extent of the measures is appropriate in view of the risks of the use of their services for the purposes of money laundering and terrorist financing.

3. For the purposes of the provisions relating to identification procedures and Client due diligence requirements, proof of identity is satisfactory if: • It is reasonable possible to establish that the Client is the person he claims to be; • The person who examines the evidence is satisfied, in accordance with the procedures followed

under this Law, that the Client is the person he claims to be.

When to apply Client due diligence and identification procedures (Article 62 of the Law)

1. The verification of the identity of the Client and the beneficial owner is performed before the establishment of a business relationship or the carrying out of the transaction.

2. By way of derogation from paragraph (1), the verification of the identity of the Client and the beneficial owner may be completed during the establishment of a business relationship and if this is necessary not to interrupt the normal conduct of business and where there is little risk of money laundering or terrorist financing occurring. In such situations, these procedures shall be completed as soon as practicable after the initial contact and before the conclusion of any transactions but not later than 15 days from the execution of the Management and Service Agreement)

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3. In cases where the person engaged in financial or other business activities is unable to:

• Identify the Client and verify the Client’s identity; • Identify the beneficial owner and verify his/her identity; • Obtain information on the purpose and intended nature of the business relationship.

it may not carry out a transaction through a bank account, establish a business relationship or carry out the transaction, or must terminate the business relationship and shall consider making a report to the Unit.

4. Identification procedures and Client due diligence requirements must be applied not only to all new Clients but also to existing Clients at appropriate times, depending on the level of risk of being involved in money laundering or financing of terrorism offences.

Prohibition from cooperating with a shell bank or keeping anonymous accounts (Article 66 of the Law)

It is prohibited for persons engaged in financial or other business activities, including Woodbrook Group, to open or maintain anonymous or numbered accounts or accounts in names other than those stated in official identity documents.

Persons carrying financial or other business activities must pay special attention to every threat or danger for money laundering or terrorist financing which may result from products or transactions which may favour anonymity, and shall take measures, if needed, to prevent their use for such activities.

E.Procedures for preventing Money Laundering and Terrorist Financing

1. Board of Directors responsibilities (paragraph 5)

• To determine, record and approve the general policy principles of Woodbrook Group in relation to the prevention of money laundering and terrorist financing and to communicate it to the Compliance Officer;

• To appoint a Compliance Officer and, where necessary, assistant Compliance Officers;

• To determine the duties and responsibilities of the Compliance Officer and Assistant Compliance Officer(s);

• To approve the Clients’ acceptance policy;

• To approve the risk management and procedures manual;

• To ensure that the risk management and procedures manual is communicated to all employees • To ensure that all requirements of the Law are applied;

• To assure that appropriate, effective and sufficient systems and controls are introduced • To ensure for the day to day compliance with money laundering and terrorist financing

obligations within the areas of the Company for which they are responsible;

• To ensure that the Compliance Officer is provided with prompt advice of unusual/suspicious transactions and other matters of significance

• To provide the Compliance Officer with complete and timely access to all data and information concerning Clients’ identity, transactions’ documents and other relevant files and information maintained by the Company to fulfil his/her function effectively;

• To provide the Compliance Officer with the appropriate resources to fulfil his/her function effectively;

• To ensure that the Compliance Officer has complete autonomy in the suspicious transaction reporting (STR) evaluation process and unfettered access to information necessary to carry out that process;

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• To ensure that all employees are aware of the person who has been assigned the duties of the compliance officer, as well as his/her assistants;

• To establish a clear and quick reporting chain of suspicious transactions to the Compliance Officer;

• To assess and approve the Compliance Officer’s Annual Report;

• To take all action as deemed appropriate to remedy any weaknesses and/or deficiencies identified in the Compliance Officer’s Annual Report.

2. Obligations of the Internal Audit Department (paragraph 6)

• To review and evaluate, at least on an annual basis, the appropriateness, effectiveness and adequacy of the policy, practices, measures, procedures and control mechanisms applied for the prevention of money laundering and terrorist financing;

• To submit the findings and observations of the internal auditor, in a written report form, to the Board of Directors which decides the necessary measures that need to be taken to ensure the rectification of any weaknesses and/or deficiencies which have been detected;

The minutes of the above mentioned decision of the Board of Directors and the Internal Auditor’s report are submitted to the Commission within twenty days from the date of the relevant meeting and no later than the end of April.

3. Compliance Officer

Appointment of compliance officer - assistants of compliance officer (paragraph 8)

The Board of Directors appoints the Compliance Officer and he/she must be an employee of Woodbrook Group. Where it is deemed necessary due to the volume and/or the geographic spread of the services/activities, assistants of the Compliance Officer might be appointed for assisting the Compliance Officer. The name of the Compliance Officer and the assistant(s) if any, is/are communicated to CySec Immediately.

Compliance officer’s duties (paragraph 9)

As a minimum, the Compliance Officer’s duties include the following:

• Designs, based on the general policy principles the internal practice, measures, procedures, and controls relevant to the prevention of money laundering and terrorist financing.

• Develops and establishes the Clients’ Acceptance Policy/Report and submits it to the Board of Directors for consideration and approval;

• Develops and establishes the Clients’ Continuance Report and submits it to the Board of Directors for consideration and approval;

• Prepares a risk management and procedures manual regarding money laundering and terrorist financing

• Monitors and assesses: • the correct and effective implementation of the policy, the practices, measures,

procedures and controls; • the implementation of the risk management and procedure manual (“the AML

Manual”); • Monitoring mechanisms (i.e. on site visits to different departments) for assessing the

level of compliance of the departments and employees; • Gives appropriate guidance for corrective measures when shortcomings and/or

weaknesses have been identified; • Direct access to the Board of Directors; • Maintains list of clients (new and existing) categorised per their risk assessment; • Evaluates the systems and procedures applied by a third person (Introducers) on whom

Woodbrook Group relies for customer identification and due diligence procedures

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• Provides advice and guidance to the employees of Woodbrook Group on subjects related to money laundering and terrorist financing

• Provides training and education to employees when deemed necessary; • Prepares correctly and submits in time to CySec the “Monthly Prevention Statement” (paragraph

11) and provides the necessary explanation to the appropriate employees of Woodbrook Group for its completion. This form is submitted to CySec within fifteen (15) days from the end of each month.

• Receives information from Woodbrook Group employees which is knowledge or suspicion of money laundering or terrorist financing activities or might be related with such activities. The information is received in a written report form ("Internal Suspicion Report”);

• Evaluates and examines the information received by reference to other relevant information and discusses the circumstances of the case with the informer and, where appropriate, with the informer’s superiors. The evaluation of the information received is done on a report ("Internal Evaluation Report”).

• If following the evaluation, the Compliance Officer decides to notify MOKAS, then he/she completes a written Suspicious Activity/Transaction report and submits it online to MOKAS the soonest possible through the new system called “go AML Professional Edition. (http://reports.mokas.law.gov.cy./live ). After the submission of the Compliance Officer’s report to MOKAS, the accounts involved and any other connected accounts, are closely monitored by the Compliance Officer and following any directions from MOKAS, thoroughly investigates and examines all the transactions of the accounts.

• If following the evaluation the Compliance Officer decides not to notify MOKAS, then he/she fully explains the reasons for such a decision on the "Internal Evaluation Report";

• Acts as the first point of contact with MOKAS, upon commencement and during an investigation because of filing a report to MOKAS.

• Prepares the Compliance Officer’s annual report. • Responds to all requests and queries from MOKAS and CySec, provides all requested

information and fully cooperates with MOKAS and the Commission. • Maintains a registry which includes the following reports and relevant statistical information:

• Internal Suspicion Report; • Internal Evaluation Report; • Records regarding the online submission of reports to MOKAS

4. Compliance officer’s annual report (paragraph 10)

The Annual Report is prepared by the Compliance Officer and submitted for approval to the Board Directors. After its approval by the Board of Directors, is submitted to the Commission together with the minutes of the meeting, during which the Annual Report has been discussed and approved.

The minutes include the measures decided for the correction of any weaknesses and/or deficiencies identified in the Annual Report and the implementation timeframe of these measures. These minutes and the Annual Report are submitted to the Commission within twenty days from the date of the relevant meeting, and not later than three months from the end of the calendar year (end of March).

The Annual Report deals with money laundering and terrorist financing preventive issues pertaining to the year under review and, as a minimum, covers the following:

• Information for measures taken and/or procedures introduced for compliance with any amendments and/or new provisions of the Law and the AML Directive;

• Information on the inspections and reviews performed by the Compliance Officer, reporting the material deficiencies and weaknesses identified in the policy, practices, measures, procedures, and controls that Woodbrook Group applies for the prevention of money laundering and terrorist financing. In this regard, the report outlines the seriousness of the deficiencies and weaknesses, the risk implications and the actions taken and/or recommendations made for rectifying the situation;

• The number of internal suspicion reports submitted by the employees of Woodbrook Group to the Compliance Officer and possible comments/observations thereon;

• The number of Reports submitted by the Compliance Officer to MOKAS, with information/details on the main reasons for suspicion and highlights of any trends;

• Information, details, or observations regarding the communication with the employees on money laundering and terrorist financing preventive issues;

• Summary figures, on an annualised basis, of Clients' total cash deposits in Euro and other 15

currencies more than the set limit of 10.000 Euro (together with comparative figures for the previous year) as reported in the Monthly Prevention Statement. Any comments on material changes observed compared with the previous year are also reported;

• Information on the policy, measures, practices, procedures, and controls applied by Woodbrook Group in relation to high risk Clients as well as the number and country of origin of high risk Clients with whom a business relationship is established or an occasional transaction has been executed;

• Information on the systems and procedures applied by Woodbrook Group for the ongoing monitoring of Client accounts and transactions

• Information on the measures taken for the compliance of branches and subsidiaries of Woodbrook Group that operate in countries outside the European Economic Area, with the requirements of the present Directive in relation to Client identification, due diligence and record keeping procedures and comments/information on the level of their compliance with the said requirements;

• Information on the training courses/seminars attended by the Compliance Officer and any other educational material received;

• Information on training/education and any educational material provided to staff during the year ( the number of courses/seminars organised, their duration, the number and the position of the employees attending, the names and qualifications of the instructors, and specifying whether the courses/seminars were developed in-house or by an external organisation or consultants;

• Results of the assessment of the adequacy and effectiveness of staff training; • Information on the recommended next year’s training program.

5. Application of appropriate measures and procedures on a Risk Based Approach-RBA (paragraph 12)

Woodbrook Group applies appropriate measures and procedures, on a RBA to focus its efforts in those areas where the risk of money laundering and terrorist financing appears to be higher.

There are three stages to a RBA

• Risk Identification (risk categories) • Application of RBA (apply client due diligence measures, enhanced where high risk cases are

identified)

• Internal Controls (the role and responsibility of Senior Management and Internal Audit)

Per paragraph 9(1)(b) of the Directive a clear client acceptance policy is developed and established. The Client Acceptance Policy is prepared after detailed assessment of the risks faced by Woodbrook Group from its clients and/or transactions and/or their countries of origin or operations.

The main risk categories that are considered by Woodbrook Group are the following:

• Client Risk • Country or Geographic Risk

Further, the Compliance Officer also takes into consideration other risk criteria when assessing a new or existing Client.

Client Risk What risk is posed by a particular Client? For example:

• Complexity of ownership structure of legal persons; • Clients on sanctions/asset freezing lists; • Politically exposed persons; • Clients engaged in transactions which involve significant amount of cash; • Non-Face to Face Clients

What risk is posed by a client’s behaviour? For example:

• Client transactions where there is no apparent legal /financial/commercial rationale,

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• Situations where the origin of wealth and/or source of funds cannot be easily verified, • Unwillingness of Clients to provide information on the beneficial owners of a legal person;

Geographic/Country Risk

Examples of jurisdictions/countries that might be of a higher risk

• Black listed countries

• Countries subject to sanctions/embargoes or similar measures issued by the United Nations and European Union;

• Countries identified by FATF as not having adequate AML/CTF measures systems (Appendix 1)

The Compliance Officer maintains relevant lists of countries (identified above) which are updated on a regular basis.

• Countries with limited corporate registration requirements which do not require the submission of beneficial ownership

• Countries identified as having significant levels of corruption or other criminal activity.

Upon completion of the Client Acceptance Policy, the Compliance Officer ranks the Client as Low/Normal/High risk client.

The Board of Directors accepts/rejects the establishment of a business relationship with a client based on the assessment and recommendation made by the Compliance Officer in the Client Acceptance Report.

Categories of Clients that are not accepted by Woodbrook Group

It is forbidden to accept Clients

• with bearer shares; • who have been sentenced for serious offence such as Terrorism, Money Laundering, Fraud,

Embezzlement, Tax Evasion, etc. • with insufficient economic profile • that are unwilling to cooperate and provide the relevant information • companies of Client that do not have up to date Financial Statements or equivalent accounting

records 6. Design and implementation of measures and procedures to manage and mitigate the risks

(paragraph 14)

When the Compliance Officer identifies the risk faced he/she designs and implements the appropriate measures and procedures for the correct management and mitigation, especially for high risk clients, which involve:

• The verification of the Clients identity; • The collection of information for the construction of their economic profile; • Monitoring their transactions and activities; • Increase awareness of higher risk situations within business lines; • Increase levels of “Know Your Client” rules or “Enhanced Due Diligence” at account opening; • Increase monitoring of transactions; • Increase levels of ongoing controls and reviews of relationships; • Obtain additional documented information regarding clients’ source of funds and wealth; • Independently verified information; • Obtains management approval of all business relationship; • Analyse money laundering and terrorist financing risk vulnerabilities for new acquisition

processes and product or service development processes; • Update 3rd party information on a more frequent basis.

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Once the risks have been identified and depending on the results found, the Compliance Officer proceeds with the risk categorisation of the Company’s clients (Low/Normal/High) and will apply Simplified Due Diligence Measures (for Low Risk Clients) standard Due Diligence for Normal Risk Clients and Enhanced Due Diligence Measures (for High Risk Clients).

7. Client’s categories

Low Risk Clients

The category of low risk Clients includes the following Clients:

• Credit or financial institution covered by the EU Directive; • Credit or financial institution which is situated in a country outside the European Economic Area

which: i. in accordance with a decision of the Advisory Authority for Combating Money

Laundering and Terrorist Financing, imposes requirements equivalent to those laid down by the EU Directive and (http://www.cysec.gov.cy/en-GB/public-info/circulars/supervised/investment-firms/39879/)

ii. it is under supervision for compliance with those requirements.

• Listed companies whose securities are admitted to trading on a regulated market in a country of the European Economic Area or in a third country which is subject to disclosure requirements consistent with community legislation;

• Domestic public authorities or countries of the European Economic Area;

• A pension or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages and the scheme rules do not permit the assignment of a member’s interest under the scheme

In the above cases Woodbrook Group should gather sufficient information to establish if the Client qualifies to be classified as Low risk client.

Normal risk Clients

All Clients which do not fall in the low or high risk categories are considered as normal risk Clients.

High Risk Clients

The category of high risk Clients includes the following Clients:

• Non-face to face Clients; • Accounts in the names of companies whose shares are in bearer form; • Trusts accounts; • Foundations • Client accounts’ in the name of a third person; • politically exposed persons’ accounts; • Electronic gambling /gaming through the internet; • Clients from countries which inadequately apply Financial Action Task Force’s

Recommendations (Appendix 1); • Correspondent banking relationships with credit institutions-Clients from third countries • Any other Clients that pose a high level of risk for money laundering or terrorist financing and

are classified by the Company as high risk based on its Clients ‘Acceptance policy. (i.e. . Complicated Group Structure).

List for Client’s categories

The Compliance Officer prepares and maintains a list for the categories (low, normal, or high risk) of Clients, which contain, among others, the Clients’ names, account numbers, and date of commencement of business relationship. These lists are promptly updated with all new or existing Clients that Woodbrook Group has determined, in the light of additional information received.

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Woodbrook Group’ Client Information Updating Procedure is based (amongst other factors described in paragraph 9 below) on the risk category of the Client:

High Risk Clients: semi-annual review Normal Risk Clients: annual review Low Risk Clients: every 2 (two) years

8. Measures and controls for Dynamic Risk Management (paragraph 15 and 16)

Risk management is a continuous process, carried out on a dynamic basis. Risk assessment is not an isolated event of a limited duration.

The measures, procedures and controls are kept under regular review by the Compliance Officer so that risks resulting from changes in the characteristics of existing Clients, new Clients and any new risks identified are countered.

The Compliance Officer monitors and evaluates, on an ongoing basis the effectiveness of the measures and procedures, and in general the implementation of the risk management and procedures manual, that have been introduced.

The Compliance Officer applies appropriate monitoring mechanisms (e.g. on-site visits to relevant staff involved in the daily administration of our Clients, review of the relevant reports during the re-acceptance procedure of our Clients) which will provide him/her all the necessary information for assessing and re-assessing the level of compliance of Woodbrook Group with the procedures and controls which are in force.

If the Compliance Officer identifies shortcomings and/or weaknesses in the application of the required practices, measures, procedures, and controls, gives appropriate guidance for corrective measures and where it deems necessary informs the Board of Directors. (paragraph 15)

9. Client Identification and Due Diligence Procedures (paragraph 18)

The Compliance Officer ensures that the Client identification records remain completely updated with all relevant identification data and information throughout the business relationship.

The Compliance Officer further examines checks and reviews the validity and adequacy of the Client identification data and information that Woodbrook Group gathered at the time of the establishment of the business relationship as appearing on the Client Acceptance Report, especially those concerning high risk Clients. The outcome of the review is recorded in the Compliance Officer’s section of the Client Acceptance Report. This report, subsequent assessment reports and the supporting KYC documentation are kept with the Compliance Officer as per the provisions of the Data Protection Law.

Taking into consideration the level of risk, if at any time during the business relationship, the Company becomes aware that reliable or adequate data and information are missing from the identity and the economic profile of the Client, then the compliance officer takes all necessary action, by applying the Client identification and due diligence procedures to collect the missing data and information, the soonest possible, so as to identify the Client and update and complete the Client’s economic profile

Furthermore, the Compliance Officer checks the adequacy of the data and information of the Client’s identity and economic profile depending on the level of risk identified (i.e. annually for High Risk Clients and every 2 years for Normal Risk Clients) or whenever one of the following events or incidents occurs (using the Client Continuance Report). Any additional documentation and information for updating the economic profile of the Client will be collected when:

• An important transaction takes place which appears to be unusual and/or significant compared to the normal pattern of transactions and the economic profile of the Client;

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• A material change in the Client’s legal status such as change of director/secretary/shareholders/beneficial owners/trustees/principal trading partners/business activities/bank signatories (except Woodbrook Group)/ bank account(s).

10. Woodbrook Group Client’s identification procedures (paragraph 22)

The purpose of these procedures is the collection of primary information about the Client, analysis of the collected information and decision for proceeding or not with an agreement for offering o u r services to the Client.

The Corporate Administration Department is responsible for the collection of all documents/information and the Compliance Officer is responsible to review and assess the collected information and proceed with the acceptance/re-acceptance or rejection of the Client.

11. Standard Identification and Due Diligence Procedures

Client Identification/Verification Documents for Individuals

• Valid Passport and/or National Identity Card • Country of residence • Full residential address (Not PO BOX) • Proof of address (recent utility bill/bank statement) • Contact details (telephone and fax numbers, e-mail address) • Current details of the profession • Details of public positions

We require recent Original or Certified True Copy of the Original of Utility Bill/Bank statements/ Tax Bill (up to 3 months). It is not acceptable to use the same verification data or information for verifying the Client’s identity and verifying its home address. Thus, separate documents for Client’s identity and its home address verification is requested.

Clients must be filtered against known lists to establish whether they are under any sanctions or have any negative press information or are Politically Exposed Persons.

Client Identification/Verification Documents for Legal Entities

Identification Requirements

• Registration Number/Registered Address • Full Address of the Head office and Contact Details • Website address (if available) • Persons who are duly authorised to operate the accounts and act on behalf of the company • Adequate date and information so as to understand ownership and control structure of the Client • Beneficial Owners • Registered shareholders acting as nominee for the beneficial owners • PEP information for all the beneficial owners, authorised signatories • The business profile • Information on any parent, subsidiaries or other affiliated companies including information on

their activities and financial information

Identification and Due Diligence also for Authorised Signatories/ Registered Shareholders/Attorneys/ Nominees or Agents/Instructing Parties and Persons who exercise effective control over the activities and assets of the company (even if the persons do not have direct or indirect interest or holding 10% or less of the ordinary share capital or voting rights of the company).

Verification documents for Legal Entities

• Full set of Corporate Documents (Certificate of Incorporation/Registered Address/Directors and Secretary/Shareholders, Memorandum and Articles of Association, Good Standing Certificate)

• Resolution of the Board of Directors for the Account Opening

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• Trust Deed/Agreement • Corporate documents of any other intermediary holding shares in the company (nominee

shareholders) • Documents and Data for the verification of the identity of the UBOs • For companies incorporated abroad need equivalent documents and data • Legal ownership structure • Company Search

The collection of information relevant for the identification procedures (KYC) and the construction of the economic profile of the Client is established by completing and signing our Personal Questionnaire and Company Formation and Review Forms by the Beneficial Owner.

We also note that we have implemented procedures specifically designed for FATCA (Foreign Account Tax Compliance Act) Purposes which are analysed and detailed in the FATCA Manual.

Client Due Diligence Documents -Other Types of Entities

Unions, societies, clubs, provident funds and charities

• Related Statutory Documents • Subscription documents • List of the members of the board of directors/management committee; the identity of

these persons must be done in accordance with the procedures for the verification of the identity of Individuals

Partnerships • Copy of the Partnership Agreement • Country of Partnership Establishment • All Partners – client identification and due diligence • Full name and residential address of each partner • Copy of latest report and accounts (where applicable) • Industry • the original or a certified true copy of the partnership’s registration certificate is obtained • The nature and size of its activities is ascertained; • All the information required for the creation of the economic profile of the business (same as for

legal persons).

12. Simplified Client identification and due diligence procedures (paragraph 23)

Woodbrook Group apply Simplified Client identification and Due Diligence procedures f or the following Low Risk Clients:

• Credit or financial institution covered by the EU Directive or equivalent to those laid down by the European Union Directive;

• Listed companies whose securities are admitted to trading on a regulated market in a country of the European Economic Area or in a third country which is subject to disclosure requirements consistent with community legislation;

• Domestic public authorities of countries of the European Economic Area; • A pension or similar scheme that provides retirement benefits to employees, where contributions

are made by way of deduction from wages and the scheme rules do not permit the assignment of a member’s interest under the scheme.

Furthermore, Public authorities or public bodies of the European Economic Area countries, to be considered as low risk, must fulfil all the following criteria:

• They have been entrusted with public functions pursuant to the Treaty on European Union, the Treaties on the Communities or Community secondary legislation;

• Their identity is publicly available, transparent, and certain; • Their activities as well as its accounting practices are transparent; • Either they are accountable to a community institution or to the authorities of a member state or

appropriate check and balance procedures exist ensuring control of the Client’s activity.

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For these clients, Woodbrook Group will gather sufficient information (KYC) to establish if the Client qualifies (I.e. obtain registration/authorisation certificate of the listed company) to be a Low Risk Client.

The Compliance officer will pay special attention to any activity of those Clients or to any type of transactions which may be regarded by their nature, to be used or abused for money laundering or terrorist financing purposes a n d will not consider that above Clients to represent a low risk of money laundering or terrorist financing if there is information available to suggest that the risk of money laundering or terrorist financing may not be low.

13. Enhanced Client identification and due diligence procedures (paragraph 24)

Woodbrook Group applies enhanced due diligence procedures for the High-Risk Clients in addition to the standard client identification procedures as follows:

Definition: High risk Clients-Enhanced Due Diligence Procedures

Non-Face to face Clients

Clients which have not been physically (i.e. when the Client requests the establishment of a business relationship or an occasional transaction through mail, telephone, or the internet without presenting himself for a personal interview) present for identification purposes.

Additional measures:

• Obtain additional documents, data, or information for verifying Client’s identity; • Take supplementary measures to verify or certify the documents supplied, or requiring

confirmatory certification by a credit or financial institution covered by the EU Directive; • Ensure that the first payment of the operations is carried out through an account opened in the

Client’s name with a credit institution which operates in a country within the European Economic Area;

• Introduction from an employee/officer/current reliable customer/etc; • Meeting with the natural person.

For compliance with the above additional measures one or more of the following documents will be obtained, depending on the judgment of the Compliance Officer on a case-by-case basis:

• Direct confirmation of the prospective Client’s true name, address and signature from a bank operating in his country of origin (Bank Reference Letter);

• Reference letter from a third person (independent and reliable source-Professional Reference Letter);

• Original Utility Bill; • Legalised Passport Copy; • Telephone contact with the Client at his residence or office, before the establishment of a

business relationship or the occasional transaction, on a telephone number which has been verified from a reliable and independent source;

• Contact with the Client through mail in an address previously verified by Woodbrook Group from independent and reliable sources;

• Video Contact with the Client through Skype; • Additional data and information, if required, for the proper and complete understanding of

their activities and source of wealth; • For transactions via the internet, phone, fax or other electronic means where the Client is

not present so as to verify the authenticity of his signature or that he is the real owner of the account or that he has been properly authorised to operate the account, Woodbrook Group applies reliable methods, procedures and control mechanisms over the access to the electronic means so as to ensure that it deals with the true owner or the authorised signatory to the account. (Unique password, unique code etc).

Once face-to-face contact is established with the client this should be recorded by the Compliance Officer and the Board of Directors so that proper evidence of the meeting is kept.

Client accounts’ in the name of a third person 22

Third persons acting as intermediaries frequently hold funds on behalf of their clients in “clients’ accounts” opened with credit institutions.

Examples:

• Financial institutions from European Economic Area countries or a third country with equivalent procedures as those laid down in the EU Directive;

• Payment Institutions and Electronic Money Institutions licensed by relevant bodies (i.e. Central Bank of Cyprus);

• Third Party acting as auditor/accountant/tax advisor or independent legal professional or trust or company service provider or real estate agent situated in a country of the European Economic Area or a third country with equivalent procedures as those laid down in the EU Directive which are subject to mandatory professional registration recognised by law and are subject to supervision regarding their compliance with the requirements of the EU Directive.

Money laundering risk can arise in escrow accounts if the true customer identifying information is hidden or unclear because the account is in the name of a lawyer, a company and/or others. This separation from the UBO and true controlling parties makes identification, verification and establishing the true audit trail difficult and accounts may be misused or administered improperly.

Woodbrook Group may open such “client accounts” if it is familiar with:

• the purpose of setting up such accounts • the nature of the Clients’ business • The transactions flowing through the account (the monitoring of such transactions should focus

on whether the activity is consistent with the intended purpose as well as with the source of funds).

Further, we must ensure that the Client’s funds deposited in the Woodbrook Group’s client accounts are held in a separate account or accounts from the other accounts used by Woodbrook Group. As soon as the funds are received Woodbrook Group immediately deposits them without any delay to one or more accounts named “Client Accounts”.

All the Client Accounts must be held with Recognised Banks and supporting documentation must be obtained for any transaction.

‘Politically exposed persons’ (PEPs) accounts

Additional due diligence

• Search in Directories to determine the PEP status (WorldCheck Reports); • Business relationship to be approved by the Board of Directors; • Ascertain the reputation of the PEP; • Establish whether the client’s wealth and funds involved in the business relationship come from

legitimate business; • Clearly define and monitor personal/economic profile; • Obtain Legalised Passport Copies/Utility Bills of the PEP; • Obtain a Reference Letter from both a Professional and a Bank with whom the PEP maintains a

bank account; • Ensure that the first payment is made from an account that was opened with a a credit institution in

the name of the client in a country of the European Economic Area; • Carry on-going monitoring of business relationship

Electronic gambling /gaming through the internet

Establish a business relationship if such persons are licensed by a competent authority of a country of the European Economic Area or a third country which, in accordance with a decision of the Advisory Authority for Combating Money Laundering and Terrorist Financing it has been determined that it applies procedures equivalent to the requirements of the European Union Directive.

Additional due diligence:

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• obtain a copy of the license that has been granted to the said persons by the competent supervisory/regulatory authority; The authenticity of above license will be verified either directly with the supervisory/regulatory authority or from other independent and reliable sources.

• collect adequate information to understand the ownership structure and the holding group and creates the economic profile;

• Obtains the signed agreement between its Client and the company that is duly licensed for electronic gambling/gaming activities through the internet.

• Business relationship to be approved by the Board of Directors; • Carry on-going monitoring of business relationship.

Clients from countries which inadequately apply Financial Action Task Force’s recommendations

The Financial Action Task Force’s (“FATF”) 40+9 Recommendations constitute the primary internationally recognised standards for the prevention and detection of money laundering and terrorist financing.

If a physical or legal person that wishes to establish a relationship with Woodbrook Group, is registered in a country that is at risk from money laundering then, before a business relationship is established the Compliance Officer should be contacted to approve such relationship. The compliance officer in turn consults the FATF( http://www.fatf-gafi.org country evaluation and the Moneyyval Committee of the Council of Europe. Also, a useful source pf information is the Transparency International Corruption Perceptions Index found on the website of Transparency International at www.transparency.org. Refer also to the attachments issued by the Ministry of Finance. (paragraph 17)

Additional Measures:

• Approval from the Compliance Officer and Board of Directors for the execution of a transaction or the establishment of a business relationship related to a non FATF Country.

• Establish commercial purpose of the transaction and consistency with the declared activities • Collect adequate evidence and information with respect to the source of funds and their legitimacy. • Keep original documents or appropriate; • Request that all documents for which we receive photocopies only, be apostilled by a notary or

consulate or request confirmatory certification within the EU Directive. • Access to all bank accounts

Other type of High Risk Clients as defined by Woodbrook Group

Definition: Clients with complicated group structure:

• More than 3 intermediary Beneficial Owners Levels/Controlling Parties; • more than 4 Entities/ individuals in ownership structure at all levels; • more than 3 countries of residence/incorporation; • more than 1 listed companies outside the EU Zone;

Additional Measures

• Confirm if a company is listed and where;

• Establish whether the structure includes several nominee shareholders who do not give adequate information on the UBOs;

• Establish whether the UBO is a nominee shareholder that cannot be identified • establish an apparent reason for having the relevant structure (i.e. tax optimisation); • obtain all the KYC documentation for all the individuals/entities in the ownership structure (up to

the ultimate beneficial owner (s)) regardless of jurisdiction ) is provided; • ongoing monitoring of all the transactions at all levels (i.e. request supporting documentation for

each transaction).

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Funds

Definition:

A fund is a vehicle established to hold and manage investments and assets and it will normally be a separate legal entity formed as limited liability company or partnership.

Where a fund is our client and an account is opened in the fund name directly for due diligence purposes it is to be treated in the following way:

• Regulated funds are subject to and supervised for compliance with AML requirements. normal due diligence requirements should be applied unless other risk factors are involved (i.e. Geographic risk - funds registered in countries which do not apply equivalent AML measures as EU)

• Unregulated funds are not subject to regulatory oversight and thus pose a higher risk. Depending on the perceived risk the Compliance Officer should consider undertaking due diligence measures on the unregulated funds and on the parties involved with the fund namely the Investment Manager (if appointed and if delegated the responsibilities for managing/investing part of the fund and/or entering transactions on behalf of the fund) and the funds’ ultimate controller (where it is not the investment manager but someone else who controls the fund/asset of the fund). Unregulated funds can have complex structures and consequently may appear to lack transparency of ownership and control. If the fund has complex structures, the fund’s ownership/control structure and any interrelationships between the entities should be fully understood, unwrapped and documented.

14. Information/data for the construction of the economic profile of the Client (paragraph 21)

• The purpose and reason for the provision of services (establishment of the business relationship); • Clear description of the main business/professional activities; • The anticipated turnover; • The nature and number of the transactions; • The expected origin of the incoming funds; • The expected destination of the outgoing funds; • Country of main business activities; • Active Bank Accounts (details and bank signatories) • The source/origin and size of wealth (of the UBO); • Approximate Annual income (of the UBO); • Name of the company and/or trading name used; • The country of its incorporation; • The head offices address; • The ultimate beneficial owner(s) of the company; • Directors/managers/authorised signatories the company; • Financial information (Financial accounts or, if not available, management accounts); • The legal control and ownership structure of the group that the company may be a part of (country

of incorporation of the parent company, subsidiary companies, and associate companies, main activities, and financial information);

15. Client data recording

The data for all Clients Is kept in the Client’s permanent file under the KYC Section along with all other documents as well as all internal records of meetings with the respective Client and it is updated regularly or whenever new information emerges that needs to be added to the economic profile of the Client.

In addition, the relevant staff of Woodbrook Group keep their own Lists for the updating of the relevant due diligence documents (i.e. Passports. Utility Bills, WorldCheck Reports).

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16. Internal reporting procedures and reporting to MOKAS

Internal reporting procedures (paragraph 27)

The Compliance Officer receives information from the Company’s employees which is knowledge or suspicion of money laundering or terrorist financing activities or might be related with such activities. The information is received in a written report form ("Internal Suspicion Report”).

The Compliance Officer evaluates and examines the information received by reference to other relevant information and discusses the circumstances of the case with the informer and, where appropriate, with the Board of Directors. The evaluation of the information received is done on a report ("Internal Evaluation Report").

If following the evaluation the Compliance Officer decides not to notify MOKAS, then he/she fully explains the reasons for such a decision on the "Internal Evaluation Report".

Reporting to MOKAS (paragraph 29)

If following the evaluation, of the Internal Suspicion Report, the Compliance Officer decides to notify MOKAS, then he/she completes the online report and submits same to MOKAS though the” goAML’ system the soonest possible.

Woodbrook Group adheres to any instructions given by MOKAS and as to whether to continue or suspend a transaction or to maintain the account active. MOKAS may instruct Woodbrook Group to refrain from executing or delay the execution of a Client's transaction without such action constituting a violation of any contractual or other obligation of Woodbrook Group and its employees.

The Compliance Officer acts as the first point of contact with MOKAS, upon commencement and during an investigation because of filing a report to MOKAS.

After the submission of a suspicious report Woodbrook Group may subsequently wish to terminate its relationship with the Client concerned for risk avoidance reasons. In such an event, Woodbrook Group exercises caution not to alert the Client concerned that a suspicious report has been submitted to MOKAS (tipping off). Close liaison with MOKAS is therefore, maintained to avoid any frustration to the investigations conducted.

Submission of information to MOKAS (paragraph 30)

Woodbrook Group ensures that in case of a suspicious transaction investigation by MOKAS will be able to provide without delay the following information:

• The identity of the account holders; beneficial owners of the account; persons authorised to manage the account

• Connected accounts; • The origin of the funds; • The type and amount of the currency involved in the transaction; • The form in which the funds were placed or withdrawn, for example cash, cheques, wire

transfers • The identity of the person that gave the order for the transaction; • The destination of the funds;

• The type and identifying number of any account involved in the transactions.

17. Record keeping

Record keeping of documents/data (paragraph 31)

The Woodbrook Group keeps records

• For client identification and details of the transactions; • Relevant documents of correspondence with the Clients and other persons with whom they keep

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a business relation; • Evaluation of the systems and procedures applied by a third person on whom Woodbrook Group

relies for Client identification and due diligence purposes;

Woodbrook Group ensures that all the above documents are made available rapidly and without delay to the competent Supervisory Authorities for discharging the duties imposed on them by the Law.

Time period of keeping documents/data (paragraph 31)

The above documents/data are kept for a period of at least five (5) years, which is calculated after the execution of the transactions or the termination of the business relationship. The documents/data relevant to ongoing investigations are kept until MOKAS confirms that the investigation has been completed and the case has been closed.

Format of records (paragraph 32)

The retention of the documents/data, other than the original documents or their certified true copies that are kept in a hard copy form may also be in other forms, such as electronic form, provided that Woodbrook Group is able to retrieve the relevant documents/data without undue delay and present them at any time, to the Commission or to MOKAS, after a request.

Certification and language of documents (paragraph 33)

The documents/data obtained should be in their original form or in a certified true copy form. In case that the documents/data are certified as true copies by a different person than Woodbrook Group itself or by the third person the documents/data must be notarised and legalised by apostille.

Translation is attached in the case that the above documents/data are in a language other than English.

18. Employees’ obligations, Education, and Training (paragraph 34 and 35)

Employees’ obligations

Woodbrook Group employees can be personally liable for failure to report information or suspicion, regarding money laundering or terrorist financing.

The employees cooperate and report, without delay anything that comes to their attention in relation to transactions for which there is a slight suspicion that are related to money laundering or terrorist financing.

Woodbrook Group employees fulfil their legal obligation to report their suspicions regarding money laundering and terrorist financing, by submitting the Internal Suspicion Report to the Compliance Officer.

Employees’ education and training program

The Compliance Officer along with the Human Resource Manager are responsible for the employee’s education and training program, that all employees are fully aware of their legal obligations per the Law and Directive.

The training program aims at educating employees on the latest developments in the prevention of money laundering and terrorist financing, including the practical methods and trends used for this purpose.

On-going training is given at regular intervals to ensure that employees are reminded of their duties and responsibilities, in the recognition and handling of transactions and activities which may be related to money laundering or terrorist financing and kept informed of any new developments.

Further, the Compliance Officer provides advice and guidance to the employees of Woodbrook Group on subjects related to money laundering and terrorist financing.

Woodbrook Group employees are required to sign on an annual basis the Annual Confirmation of Money

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Laundering Awareness (Appendix 2).

19. Suspicious Transactions/Activities related to Money Laundering and Terrorist Financing (paragraph 28)

Suspicious transactions

The definition of a suspicious transaction as well as the types of suspicious transactions which may be used for money laundering and terrorist financing are almost unlimited. A suspicious transaction will often be one which is inconsistent with a Client's known, legitimate business or personal activities or with the normal business activities, or in general with the economic profile that Woodbrook Group has created for the Client.

The list containing examples of what might constitute suspicious transactions/activities related to money laundering and terrorist financing (see list below) is not exhaustive nor includes all types of transactions that may be used, nevertheless it can assist Woodbrook Group and its employees in recognising the main methods used for money laundering and terrorist financing.

The detection by Woodbrook Group of any of the transactions contained in this list prompts further investigation and constitutes a valid cause for seeking additional information and/or explanations as to the source and origin of the funds, the nature and economic/business purpose of the underlying transaction, and the circumstances surrounding the activity.

Suspicious Transactions related to Money Laundering

• Transactions with no apparent purpose or are unnecessarily complex. • Use of foreign accounts of companies or group of companies with complicated ownership

structure which is not justified based on the needs and economic profile of the Client. • The transactions or the size of the transactions requested by the Client do not comply with his

usual practice and business activity. • Accounts opened by any newly founded legal persons whose turnover of accounts and deposits

on them are not comparable with the contributions and payments of founders. • Accounts with high activity arising only in rare moments of time. In any other time, the

accounts “sleep”. It is not connected in any way with the Client’s investments. • Large volume of transactions and/or money deposited or credited into, an account when the

nature of the Client’s business activities would not appear to justify such activity. • The business relationship involves only one transaction or it has a short duration.

• There is no visible justification for a client using the services of a firm (i.e. the Client is situated far away from the firm and in a place where he could be provided services by another firm;

• The settlement of any transaction but mainly large transactions, in cash. • Instructions of payment to a third person that does not seem to be related with the instructor. • Transfer of funds to and from countries or geographical areas which do not apply or they apply

inadequately FATF’s recommendations on money laundering and terrorist financing. • A Client is reluctant to provide complete information when for the establishment of the

business relationship and the nature and purpose of its business activities, anticipated account activity, prior relationships with other firms, names of its officers and directors, or information on its business location. The Client usually provides minimum or misleading information that is difficult or expensive for Woodbrook Group to verify.

• A Client provides unusual or suspicious identification documents that cannot be readily verified.

• A Client’s home/business telephone is disconnected. • A Client that makes frequent or large transactions and has no record of past or present

employment experience • Difficulties or delays on the submission of the financial statements or other identification

documents, of a Client/legal person. • A Client who has been introduced by a foreign firm, or by a third person whose countries

or geographical areas of origin do not apply or they apply inadequately FATF’s recommendations on money laundering and terrorist financing.

• Client and the person introducing the Client come from countries where production of drugs or drug trafficking may be common.

• The stated occupation of the Client is not commensurate with the level or size of the executed

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transactions • Financial transactions from non-profit or charitable organisations for which there appears to be

no logical economic purpose or in which there appears to be no link between the stated activity of the organisation and the other parties in the transaction.

• Unexplained inconsistencies arising during the process of identifying and verifying the Client (e.g. previous or current country of residence, country of issue of the passport, countries visited per the passport, documents furnished to confirm name, address, and date of birth etc).

• Complex trust or nominee network. • Transactions or company structures established or working with an unneeded commercial way,

i.e. companies with bearer shares or bearer financial instruments or use of a postal box. • Use of general nominee documents in a way that restricts the control exercised by the company’s

board of directors.

• Changes in the lifestyle of employees of specific company, i.e. luxurious way of life or avoiding being out of office due to holidays.

• Changes the performance and the behaviour of the employees of the specific company. Suspicious Transactions related to Terrorist Financing

Sources and methods

The funding of terrorist organisations is made from both legal and illegal revenue generating activities. Criminal activities generating such proceeds include kidnappings (requiring ransom), extortion (demanding “protection” money), smuggling, thefts, robbery and narcotics trafficking. Legal fund raising methods used by terrorist groups include:

• Collection of membership dues and/or subscriptions; • Sale of books and other publications; • Cultural and social events; • Donations; • Community solicitations and fund raising appeals.

Funds obtained from illegal sources are laundered by terrorist groups by the same methods used by criminal groups. These include:

• Cash smuggling by couriers or bulk cash shipments; • Structured deposits to or withdrawals from bank accounts; • Purchases of financial instruments; • Wire transfers by using “straw men”; • False identities • Front and shell companies; • Nominees from among their close family members, friends and associates.

Non-profit organisations

Non–profit and charitable organisations are also used by terrorist groups as a means of raising funds and/or serving as cover for transferring funds in support of terrorist acts. The potential misuse of non-profit and charitable organisations can be made in the following ways:

• Establishing a non-profit organisation with a specific charitable purpose but which actually exists only to channel funds to a terrorist organisation;

• A non-profit organisation with a legitimate humanitarian or charitable purpose is infiltrated by terrorists who divert funds collected for an ostensibly legitimate charitable purpose for the support of a terrorist group

• The non-profit organisation serves as an intermediary or cover for the movement of funds on an international basis;

• The non-profit organisation provides administrative support to the terrorist movement.

Unusual characteristics of non-profit organisations:

Unusual characteristics of non-profit organisations indicating that they may be used for an unlawful

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purpose are the following:

• Inconsistencies between the apparent sources and amount of funds raised or moved;

• A mismatch between the type and size of financial transactions and the stated purpose and activity of the non-profit organisation;

• A sudden increase in the frequency and amounts of financial transactions for the account of a non-profit organisation;

• Large and unexplained cash transactions by non-profit organisations; • The absence of contributions from donors located within the country of origin of the non-profit

organisation;

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Appendix 1

FATF PUBLIC STATEMENT

Buenos Aires, 3 November 2017

The Financial Action Task Force (FATF) is the global standard setting body for anti-money laundering and combating the financing of terrorism (AML/CFT). In order to protect the international financial system from money laundering and financing of terrorism (ML/FT) risks and to encourage greater compliance with the AML/CFT standards, the FATF identified jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system. Jurisdiction subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/FT) risks

• Democratic People's Republic of Korea (DPRK)

Jurisdiction subject to a FATF call on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction

• Iran

Many jurisdictions have not yet been reviewed by the FATF. The FATF continues to identify additional jurisdictions, on an on-going basis, that pose a risk to the international financial system. The FATF and the FATF-style regional bodies (FSRBs) will continue to work with the jurisdictions noted below and to report on the progress made in addressing the identified deficiencies. The FATF calls on these jurisdictions to complete the implementation of action plans expeditiously and within the proposed timeframes. The FATF will closely monitor the implementation of these action plans and encourages its members to consider the information presented below:

• Bosnia and Herzegovina; • Iraq; • Vanuatu; • Syria; • Yemen. • Ethiopia • Sry Lanka • Trinidad and Tobago • Tunisia

Jurisdictions no longer subject to the FATF’s ongoing AML/CFT Compliance Process

• Uganda;

For more information regarding each country’s report please follow the below link:

http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-november-2017.html

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Appendix 2 EMPLOYEES ANNUAL CONFIRMATION OF MONEY LAUNDERING AWARENESS

Name: ______________________________________________________

I confirm that I have read and understood the Company’s documented money laundering policies and procedures that are included in the Manual and confirm that I will fully comply with these policies and procedures.

As a result of reading these procedures and any other training / information received, I confirm that I am aware of:

• The money laundering Law of 2007 and 2010 (No. 188(1)/2007 and No. 58 (1)/2010) and the Cyprus Securities and Exchange Commission Directive DI144-200-08 of 2012;

• The Company’s Anti-Money Laundering Policy/Manual;

• The identity of the Company’s Compliance Officer (CO) –Mr./Mrs. ********;

• I also confirm that I have been given training in how to recognise and deal with transactions that may be related to money laundering,

Signature:

Date:

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