Policy on Prevention of Laundering Proceeds of Crime and Financing of Terrorism

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1 Policy on Prevention of Laundering Proceeds of Crime and Financing of Terrorism

2 About Yapı ve Kredi Bankası A.Ş. Established in 1944 as Turkey s first retail focused private bank with a nationwide presence, Yapı Kredi has played a significant role in Turkey s development, setting standards in the sector through its innovative approach, commitment to social responsibility and investment in culture and arts. In 2006, Yapı Kredi has finalised the largest merger in the history of Turkish Banking sector. Yapı Kredi, merged with the biggest 8th bank Koçbank and the biggest 7th bank Yapı Kredi, has reached to the biggest 4th private bank position. Yapı Kredi s main shareholder is Koç Financial Services (KFS) with 81.8% ownership. KFS is a 50%-50% joint venture between Koç Group and UniCredit Group. The remaining 18.20% of the shares are publicly traded on Borsa Istanbul and held by minorities. Global Depositary Receipts representing the Bank s shares are quoted on the London Stock Exchange. Corporate Policy On Prevention Of Laundering Proceeds Of Crime And Financing of Terrorism Yapı ve Kredi Bankası A.Ş., (hereinafter Bank ) a pioneer in the banking sector in Turkey and acting with the sense of responsibility assumed by it due to its being the foremost private bank established in Turkey, displays sensitivity at highest level for full compliance with provisions of Law on Prevention of Money Laundering and related regulations regarding the implementation of that Law issued on by the Financial Crimes Investigation Board, taking into consideration at the same time financial repercussions of the matter and its effects on the community. Within this scope, the Board of Directors is authorized and responsible for appointing a Compliance Officer, determining the duties and responsibilities of Compliance Officer and compliance department explicitly and in writing, approving the corporate policy, annual training program and amendments to them according to the developments, evaluating results of risk management, follow up and control and evaluation of results of internal audit activities, taking necessary preventive action for elimination on time of detected errors/deficiencies and ensuring the performance in an efficient and coordinated manner of all activities in the scope of compliance program. This Corporate Policy has been prepared taking into consideration the aforementioned regulation; covers compliance with obligations relating to Prevention of Laundering of Proceeds of Crime and Financing of Terrorism, determination of strategies to reduce contingent risk by evaluation of customers, transactions and services on a risk sensitive basis, determination of intra company controls and measures, operational rules and responsibilities as well as educating the employees of the company on these matters. This Policy is implemented in the Bank and its subsidiaries and in cases where legislation of the country where they operate permits, in its overseas branches and subsidiaries. The Bank is also responsible for its financial subsidiaries conducting policies and procedures within this context and proper execution of the conducted policies. 1

3 The extent of the Policy and Procedures is as follows: 1. Risk Management 1.1 Customer risk and know your customer principles Compliance with know your customer rules that have a very important place in Financial Action Task Force (FATF) recommendations which are also adopted by our national legislation are of extreme importance for the Bank: Having correct and enough information about the customer, identification of customers and verification of the customer s identity within the scope of identification within the frame of the law and other regulations thereunder, identifying the beneficial owner, profession, industry and business line from which income is derived, purpose of the transaction and source of the funds, business history, information on purpose and intended nature of establishing business relationship, location where activity is performed. The line of business of the customer, intense cash disposals, cross-border remittances, banking products used by them constitute customer risk. For the purpose of grading and reducing the aforementioned risks, individuals or entities with which continuing business relations should not be established as well as additional measures required to be taken are determined by adopting know your customer principles and customer risk profile within the frame of know your customer principle. The purpose of customer risk profile is to minimize our Bank s potential risks by providing to perform monitoring and control activities Individuals, entities and countries with which business relationship shall not be established Individuals and entities included in blacklists issued by competent authorities within the scope of Prevention of Laundering of Proceeds of Crime and Financing of Terrorism: Business relationship is not established with individuals and entities appearing in blacklists issued by competent authorities within the scope of Prevention of Laundering of Proceeds of Crime and Financing of Terrorism and none of their transactions are effected. Shell Banks: Direct and indirect transactions of shell banks that have no physical presence are not subjected to any audit and do not have in place adequate regulations on Prevention of Laundering of Proceeds of Crime and Financing of Terrorism shall not be permitted. Individuals and entities declining to provide information or documents: Transactions are not to be permitted of individuals and entities that decline to provide information and documents demanded during establishment of continuing business relationship and want to deposit money or make transfers without providing the information and documents required for identification purposes Individuals and entities for which enhanced measures should be taken at establishment of business relationship Customer transactions at geographical areas with high risk level or areas related thereto: Enhanced measures are taken to accept as customers individuals/entities that carry out activities in countries that do not cooperate with FATF (of which our country is also a member) or do not have adequate audit mechanisms or individuals/entities that have business relationship with individuals/entities carrying out activities in these countries and continuing business relationship is only established according to enhanced approval mechanism depending on information obtained as a result of 2

4 reasonable investigation made from sources outside the Bank. Offshore banking, free zones and finance centers: Due care and diligence is exercised with respect to transactions with offshore banks, free zones and other finance centers that have minimum or no regulatory or audit functions or with respect to customers that have relations with them, and business relationship is established according to enhanced approval mechanism. Politically exposed persons: It is determined whether the customer is a politically exposed person, a reasonable investigation is made to establish source of funds and wealth and decision to establish business relationship is made according to enhanced approval mechanism. Sensitive sector and business groups: Reasonable investigation is conducted about individuals or entities which deal in cash transactions intensely or who produce high amounts of cash on specific transactions despite cash disposals not being intense. Decision whether to have a business relation with these individuals or entities or not is made according to enhanced approval mechanism. 1.2 Service Risk Non-face to face Transactions: Contemporary technology allows non-face to face banking transactions to be realized. Transactions that are not face to face to be realized by the customer and third parties are allowed after submitting information and documents within the scope of identification requirements stated in the law and related regulations. Correspondent Banking: During establishment of correspondent banking relation, exact information is gathered to determine whether the financial institution with which relation is to be established was subjected by competent authorities to a money laundering or financing of terrorism investigation, whether it was fined or not and whether supervision in its country is adequate or not. New products and current products that are restructured as a result of developing technologies: Whether new services to be rendered and current products that are restructured as a result of continuously developing technologies are in compliance with the law or not is controlled and application is monitored and stopped when necessary. Country Risk: Countries that do not have adequate regulations for prevention of money laundering and financing of terrorism do not adequately cooperate for the fight against these crimes or countries that are accepted as risky by authorized international organizations constitute country risk. Special attention is paid to transactions of individuals/entities conducting activities in these countries and individuals/entities having business relationship with these individuals/entities. 2. Monitoring and Control Monitoring and control activities have been performed on a daily basis, the results of monitoring and control activities are evaluated in terms of Suspicious Transanction and reported to the related authority. 3. Suspicious Transactions In case there are any findings, suspicions or grounds for suspicion derived during monitoring and control activities during the performance of non-face to face activities, that the assets involved in the transaction were acquired illicitly or are used for illicit purposes or were used for terrorist activities or terrorist organizations or by terrorists or by persons financing terrorist activities or are associated with or related to the foregoing, that the customer is conducting transactions inconsistent with its profile, declining to provide information or documents, suspicious transaction reporting is made, regardless of a threshold in amount. 3

5 4. Internal Audit The internal audit management is responsible to audit annually on a risk sensitive basis whether the activities of the Bank related to anti-money laundering law, regulations and communiques thereunder are conducted in compliance with the aforementioned legislation and policies and procedures of the Bank. 5. Training The Bank organizes training programs consistent with the size, business volume of the Bank and other changing circumstances regarding Prevention of Laundering of Proceeds of Crime and Financing of Terrorism with the purpose of educating the personnel and ensuring that they evaluate the risks associated with their area of responsibility. 6. Obligation To Submit Information and Documents Information and documents required to be provided regularly as well as information and documents requested by authorized institutions and officers are provided within the frame of the law and regulations thereunder. 7. Maintenance Of Records The Bank saves and maintains all information and documents provided to it in accordance with the law on prevention of laundering of proceeds of crime and regulations thereunder in an easily accessible form to be submitted when required and for the duration set out in the legislation. 4