UPDATED MARCH 24, 2017 STRATEGIC PRIORITIES PREVENTION

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1 STRATEGIC PRIORITIES PREVENTION 1. Strengthen the infrastructure of the financial-preventive regime by creating a special administrative procedure for granting licenses to currency exchange operators, remittance houses and electronic payment operators. 2. Strengthen the AML/CFT risk-based supervision procedure for financial operators of foreign businesses, be they banks, currency exchange houses or insurance companies, by means of more robust supervision methodologies permitting the identification of foreign risks and vulnerabilities, as well as remedial actions in those foreign businesses to mitigate risks. 3. Continue the development of special actions that favor the integrity and reputation of the country s economy. 4. Strengthen the competent authorities regulatory and operational framework for ML/FT/FPWMD supervision for each sector (banking, securities, insurance, cooperatives, DNFBP) to establish a risk-based supervision regime. 5. Develop and/or strengthen formal methods for the coordination, cooperation and exchange of required information between the Financial Analysis Unit (UAF, for its acronym in Spanish) and supervisors (banking, insurance, securities, cooperatives and DNFBP). 6. Establish and/or strengthen preventive measures to prevent and control ML/FT activities when: - Used by individuals and legal entities; - Used by foundations and trust funds; and - Used by nonprofit organizations 7. Strengthen the use of electronic payment instruments in the Colon Free Zone. 1. Strengthen the infrastructure of the financial-preventive regime by creating a special administrative procedure for granting licenses to currency exchange operators, remittance houses and electronic payment operators. Create worktables to study the operating and regulatory system of currency exchange operators, including [the process and requirements for] granting licenses, along with the regulator for AML/CFT/FPWMD. Talk with the currency exchange operator industry to settle the matters relevant to this sector and to present the results of the worktables in order to draft a bill. Start the process and its respective submittal by the competent authority based on the results of the worktables. Ministry of Commerce and Industries August 2017 August 2018 September 2018 February 2019 March 2019 October 2019 Ref. No.: SG-TRAD

2 Strengthen the infrastructure of the financial-preventive regime by creating a special administrative procedure for granting licenses to remittance houses. Strengthen the infrastructure of the financial-preventive regime by creating a special administrative procedure for granting or denying licenses to electronic payment operators and remittance houses. 2. Strengthen the AML/CFT risk-based supervision procedure for financial operators of foreign businesses, be they banks, currency exchange houses or insurance companies, by means of more robust supervision methodologies permitting the identification of foreign risks and vulnerabilities, as well as remedial actions in those foreign businesses to mitigate risks. Create worktables to study the operating and regulatory system of the remittance houses, including [the process and requirements for] granting authorizations, along with the regulator for ML/FT/FPWMD. Talk with the electronic payment sector to settle the matters relevant to this sector and to present the results of the worktables in order to draft a bill. Initiate the drafting process and its respective submittal by the competent authority based on the results of the worktables. Conduct a nationwide and international study of the operating and regulatory systems of payment operators. Talk with the payment operators sector to settle the matters relevant to this sector and to present the results of the worktables. Start the drafting process and its respective submittal by the competent authority based on the results of the worktables. SMV: 1. Sign IOSCO s MMoU to strengthen the prevention supervision procedure by identifying risks in international operations. 2. Include the operations conducted with international jurisdictions that have few or no compliance with FATF s standards in the higher risk-weighted categories (Risk Matrixes). Ministry of Commerce and Industries Ministry of Commerce and Industries of the Securities Market of (SMV, for its acronym in Spanish) July 2017 July 2018 August 2018 January 2019 February 2019 September 2019 September September October 2018 March 2019 April 2019 November 2019 June 2017 January 2018 June 2017 June Conclude and implement a risk-based supervision consultancy. January 2017 July Draft a MoU among regulators to conduct joint examinations (SMV, SBP and SSRP). SBP: 1. Reinforce the MoUs with foreign jurisdictions of banks with foreign operations conducted from, in order to have an of Banks of February 2017 September 2017 May 2017 December 2018 Ref. No.: SG-TRAD

3 appropriate legal framework for the exchange of information for an appropriate AML/CFT supervision and risk management. 2. Design a remedial actions framework in order to guarantee that banks with foreign operations apply enhanced due diligence measures to business relationships and transactions linked to jurisdictions whose AML/CFT regulations are considered inadequate by the SBP. 3. Ensure that banks with international operations of which the SBP is the home supervisor apply overall follow-up processes and adopt the stricter regulations if there are any discrepancies with more flexible regulations, to avoid regulatory refereeing. 4. Establish joint supervision coordination agreements for AML/CFT supervision between the SBP, SMV and SSRP for mixed financial groups with international operations in banking, insurance, securities and having specialized or material exposure in international trade. The purpose of coordination agreements will be for supervisors to ensure that financial groups do follow-up on joint transactions and accounts within the same financial group, and that the Compliance Unit maintains global policies and procedures for high-risk customers. SSRP: 1. Conduct a simultaneous consultancy with the other Superintendencies to develop and implement risk-based supervision. 2. Procure a consultancy to continue with the design and implementation of the risk-based supervision approach Project. 3. Include in the consultancy the supervision of corporations conducting operations abroad that have a risk profile different (SBP, for its acronym in Spanish) of Insurance and Reinsurance of (SSRP, for its acronym in Spanish) April 2017 December 2017 March 2017 December 2017 May 2017 September 2017 January 2017 June 2017 May 2017 January 2018 May 2017 January 2018 Ref. No.: SG-TRAD

4 3. Continue the development of special actions that favor the integrity and reputation of the country s economy from that of their domestic operations and consequently a different supervision., the supervision of companies conducting 4. Sign a MoU with other Supervisory Bodies to establish joint supervision. 5. Accede to the core insurance principles of the International Association of Insurance Supervisors (IAS). IPACOOP: Maintain an Awareness Program on AML/CFT/FPWMD by: 1. Participating in international and domestic training programs for supervisors. 2. Continuing to broadcast national dissemination campaigns and ongoing training and awareness programs addressed to regulated entities. 3. Issuing resolutions pursuant to the sector s needs. nian Institute of Autonomous Cooperatives (IPACOOP, for its acronym in Spanish) April 2017 December 2017 May 2017 December 2020 April 2017 December 2019 March 2017 December Conducting risk-based approach supervision. January 2017 December 2019 SMV: 1. Actively participate in international forums (IOSCO, etc.). of the Securities Market of January 2017 June Train the Compliance Officers regularly along with the Public Ministry and Judicial Branch. Provide specialty training for CEOs and the members of the Board of Directors of the Financial Regulated Entities. 3. Hold regular and follow-up awareness meetings with regulated entities. (Advisory Council Associations). 4. Conduct investor education programs based on Investor Behavior. Conduct Case Study workshops - AML/CFT/FPWMD Awareness case study workshops. 5. Broadcast information, write academic papers and opinion pieces, newspaper articles and educational brochures addressed to the general public. Ref. No.: SG-TRAD

5 6. Conduct workshops on risk matrixes addressed to regulated entities. 7. Strengthen publications on risk policies adopted by the regulator. 8. Draft AML guidelines. 9. Plan the dissemination of the AML/CFT/FPWMD National Strategy INTENDANCY: 1. Actively participate in the High-Level Commission on International and Financial Services (CANDSIF, for its acronym in Spanish) in order to strengthen the country s services, promoting a strategy that will favor the Republic of s integrity and reputation based on transparency and the exchange of information. 2. Strengthen the national and international communication campaign on the development, actions and results being conducted by the Intendancy, especially on: Risk-based supervision pursuant to FATF s recommendations. Customer Due Diligence Final beneficiary identification Reports to the UAF 3. Continue the training programs for the regulated nonfinancial entities to keep them aware of the latest AML/CFT/FPWMD best practices. 4. Analyze training effectiveness according to the consultations made by the regulated nonfinancial entities. 5. Update, based on the Intendancy s efforts, the regulatory framework as well as the issuance of the relevant guidelines to Intendancy for the Supervision and Regulation of Regulated Nonfinancial Entities March 2017 June 2019 Ref. No.: SG-TRAD

6 4. Strengthen the competent authorities regulatory and operational framework for ML/FT/ FPWMD supervision for each sector (banking, securities, insurance, cooperatives, DNFBP) to establish a risk-based approach regime. the regulated nonfinancial entities in order to properly comply with the current AML/CFT/FPWMD regulations. SSRP: 1. Continue the regular internal and external AML/CFT/FPWMD dissemination plan, including the adoption of the risk-based approach and training, among others. 2. The SSRP is currently conducting a consultancy to adopt the riskbased approach with Toronto Centre s help. 3. Upgrade the SSRP s website with more AML/CFT/FPWMD information. IPACOOP: 1. Strengthen the IPACOOP s Manual on the Risk-based Approach to AML/CFT, pursuant to the received consultancy. 2. Continue conducting risk-based approach offsite and onsite examinations. 3. Conduct risk assessments of the regulated entities (cooperatives) by means of offsite examinations, to rate risk as low, medium and high. 4. Broaden the number of onsite examinations to be conducted in accordance with the regulated entities risk rating. SMV: 1. Implement methodologies, technology tools, procedures and risk-based supervision systems for onsite and offsite examinations pursuant to the consultancy results. 2. Revise the specific offsite area in the AML supervision manuals. 3. Strengthen the Annual Examination Plan criteria with a riskbased approach after the regulated entities are classified as high, medium, low. 4. Implement an annual self-assessment, biannual independent of Insurance and Reinsurance of January 2017 December 2019 January 2017 December 2019 January 2017 December 2017 IPACOOP April 2017 December 2017 of the Securities Market of January 2017 December 2019 April 2017 December 2017 March 2017 December 2017 Ref. No.: SG-TRAD

7 assessment program (Methodologies, and Risk Matrixes, Tools, Policies and Supervision Manuals). INTENDANCY: 1. Issue orientation and feedback regulations on the procedures to identify the final beneficiaries of legal entities; provide guidelines for the application of ML/FT preventive measures, such as guidelines for the due compliance with preventive measures. 2. Provide guidelines for the application of ML/FT/FPWMD preventive measures, such as guidelines for the due compliance of preventive measures. 3. Update the Intendancy s Supervision Manual to include risk matrixes by sector. 4. Develop the Intendancy s Supervision Protocol so that it contains a detailed description of supervision phases. 5. Update the Sector Risk Assessment of Regulated Nonfinancial Entities. 6. Continue training Intendancy supervisors on updated typologies and best prediction analysis information techniques. 7. Establish self-assessment mechanisms to measure the Intendancy s effectiveness and efficiency as a supervisory body. 8. Define Notarial roles within the current regulation by issuing the relevant Resolution and those resolutions required after a prior analysis. SBP: 1. Complete the consultancy on AML/CFT/FPWMD risk-based supervision currently being conducted with the International Monetary Fund s technical assistance. 2. Prepare a plan and action schedule to implement relevant changes to the AML/CFT/FPWMD risk-based supervision. Intendancy for the Supervision and Regulation of Regulated Nonfinancial Entities. of Banks of March 2017 December 2018 January 2017 March 2017 February 2017 April 2017 Ref. No.: SG-TRAD

8 5. Develop and/or strengthen formal methods for the coordination, cooperation and exchange of required information between the UAF and supervisors (banking, insurance, securities, cooperatives and DNFBP). 3. Continue developing the human resources training and strengthening on AML/CFT regulations. 4. Develop the appropriate regulatory standards for updating the AML/CFT regulation due to changes in AML/CFT risk-based supervision. SSRP: 1. Amend SSRP Rule Analyze the regulated entities and products that by their nature of Insurance and could be excluded, included or treated differently according to Reinsurance of their ML/FT/FPWMD risk exposure. 3. Strengthen onsite and offsite supervision, adopting a risk-based approach resulting from the consultancy hired for financial supervisors. 4. Update the Supervision Manual, strengthening the onsite and offsite supervision methodology by sector with the ML/FT/ FPWMD risk-based approach. IPACOOP: Comply with the Inter-institutional Agreement entered into by the IPACCOP and the UAF. February 2017 December 2017 April 2017 December 2017 January 2017 May 2017 January 2017 January 2018 January 2017 February 2017 January 2017 January 2018 IPACOOP April 2017 December 2019 Prioritize the requests for information the UAF may require. January 2017 December 2019 SMV: Institutionalize, reinforce and develop mechanisms for the exchange of information between the UAF and the SMV. Prioritize the information required to be exchanged between both entities. Draft a MoU between the SMV and the UAF. of the Securities Market of. January 2017 December 2017 Intendancy: 1. Comply with the provisions of the Inter-Institutional Cooperation Agreement entered into by the Intendancy for the Supervision and Regulation of Regulated Nonfinancial Entities and the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism. Intendancy for the Supervision and Regulation of Nonfinancial Entities. March 2017 June 2019 Ref. No.: SG-TRAD

9 6. Ensure compliance and application of a preventive framework to prevent and control the use and misuse of legal structures such as legal entities, foundations and trust funds in ML/FT/ FPWMD. 2. Prioritize the required exchange of information between the Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism and the Intendancy for the Supervision and Regulation of Regulated Nonfinancial Entities. SBP: 1. Reach an inter-institutional agreement with the Financial Analysis Unit (UAF) to strengthen coordination and cooperation for the supervision and evaluation of information to mitigate ML/FT. SSRP: 1. Sign a MoU or inter-institutional cooperation agreement with other supervisory bodies and the UAF SMV 1. Continue weighing, as one of the risk elements, the customer type in the specific case of the use of foundations and trust funds. 2. Verify Registered Agent information. 3. Continue using Rule , which clearly provides the risk of using private foundations and trust funds among the Guidelines of Suspicious Operations Red Flags. Intendancy: 1. Establish solid examination plans based on holistically approaching the lawyers and law firms acting as Registered Agents for nian legal entities, in order to determine compliance with the preventive measures when establishing, and throughout, a commercial relationship with those legal entities. of Banks of of Insurance and Reinsurance of of the Securities Market of Intendancy for the Supervision and Regulation of Regulated Nonfinancial Entities. March 2017 June 2017 April 2017 December 2017 January 2017 June 2019 March 2017 June 2019 Ref. No.: SG-TRAD

10 Strengthen and develop the legal framework and resolutions and integrate the OSFL administrative regime as an infrastructure factor for the integrity of the preventive regime. 2. Include expanded verifications when conducting supervision to analyze whether regulated entities analyzed the risk posed by customers, products and services offered and implemented the relevant prevention policies and procedures. 3. Issue orientation standards and guidelines for lawyers and notaries so they can properly comply with preventive measures in appropriately identifying the final beneficiary. 4. Update supervisory tools to be applied within the sectors by professions conducting activities under supervision. IPACOOP: Validate compliance with the regulatory framework issued by the IPACOOP by means of risk-based supervision, by testing regulated entities in their dealings with legal entities, foundations or trust funds and their effectiveness. SBP: 1. Propose changes to the legal framework on trusts to restrict the use of trust funds based on legal frameworks from other jurisdictions with weaker regulations or jurisdictions with nonacceptable AML/CFT legal frameworks. 2. Enter into a Memorandum of Understanding with jurisdictions for the AML/CFT/FPWMD supervision of trust companies. SSRP: 1. Implement risk-based supervision of regulated insurance entities, taking into account the regulated entities profile. 2. Design a risk-based supervision schedule including the new regulated entities. 3. Revise and adjust the SSRP s regulatory framework, supervision manuals and methodology on AML/CFT/FPWMD. IPACOOP March 2017 December 2019 of Banks of of Insurance and Reinsurance of March 2017 April 2017 September 2017 December 2018 May 2017 July 2017 May 2017 January 2018 January 2017 January 2018 MINGOB: 1. Amend the Executive Decree regulating Nonprofit Private Ministry of Government April 2017 May 2017 Ref. No.: SG-TRAD

11 7. Strengthen the use of electronic payment instruments in Free Trade Zones. Interest Foundations and Organizations to adjust and update (MINGOB, for its the structure of these organizations to comply with ML/FT laws. acronym in 2. Verify the sector internal and individual risk factors. Spanish) January 2017 June Organize and identify all control measures for the activities January 2017 December 2017 engaged in by these organizations. 4. Monitor, visit and examine onsite the associations for risk January 2017 December 2017 prevention and control. 5. Catalog nonprofit organizations and foundations by category, January 2017 January 2018 according to the activities they perform. 6. Prepare a statistical database of the organizations, which should January 2017 June 2018 be periodically collected and updated for better compliance control and review. 7. Analyze the possibility that the Ministry of Government could July 2017 September 2018 perform inter-institutional agreements for the control of registered legal entities and those legally under other institutions. Study best practices for e-commerce and analyze current Colon Free Zone March 2017 December 2018 regulations for viability. Form worktables with the Financial Analysis Unit to reinforce Colon Free Zone April 2017 March 2018 online submittal of cash and quasi-cash reports. Intendancy: Support the efforts of the Colon Free Zone and other Intendancy for March 2017 June 2019 free trade zones, as nonfinancial entities, in their work for fostering the Supervision the use of electronic payment instruments, once the respective and Regulation of analyses have been conducted. Regulated Nonfinancial Entities. Ref. No.: SG-TRAD