XPRESS MONEY SERVICES (CANADA) LTD. ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL

Transcription

1 XPRESS MONEY SERVICES (CANADA) LTD. ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL ANTI-MONEY LAUNDERING AND ANTI-TERRORIST FINANCING COMPLIANCE MANUAL

2 2 TABLE OF CONTENTS OVERVIEW ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER RISK ASSESSMENT FINTRAC REGISTERATION / AGENT LIST REPORTING REQUIREMENTS EFT TRAVEL RULE RECORD KEEPING REQUIREMENTS IDENTIFICATION RECORDS POLITICALLY EXPOSED FOREIGN PERSON RECORD RETENTION PENALTIES KNOW YOUR CUSTOMER POLICY ON-GOING COMPLIANCE TRAINING PROGRAM ON-GOING COMPLIANCE REVIEWS HIRING AND MONITORING STAFF AGENTS SCHEDULE A SCHEDULE B SCHEDULE C SCHEDULE D SCHEDULE E SCHEDULE F-1 SCHEDULE F-2 SCHEDULE G SCHEDULE H QUEBEC ADDENDUM TO AML/ATF COMPLIANCE MANUAL

3 3 OVERVIEW This manual states the policies and procedures implemented by Xpress Money Services (Canada) Ltd. ( Xpress Money ) to detect and prevent money laundering and terrorist financing activities in respect of its Canadian business. The purpose is to assist Xpress Money, its agents and employees to comply with Canadian anti-money laundering and anti-terrorist financing ( AML/ATF ) legislative requirements. It is also intended to act as a basis for Xpress Money s ongoing review, development and documentation of the policies and procedures required under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations. Money Laundering The United Nations defines money laundering as any act or attempted act to disguise the source of money or assets derived from criminal activity. Essentially, money laundering is the process whereby dirty money produced through criminal activity is transformed into clean money, the criminal origin of which is difficult to trace. Money Laundering is not limited to cash or currency. Any type of funds can be laundered, including wire transfers, payments into or out of consignment accounts, the receipt of bank cheques, personal cheques, money orders, travellers cheques or payments made by international drafts. There are three recognized stages to the money laundering process. Placement involves placing the proceeds of crime in the financial system. Layering involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds. This stage may involve transactions such as the buying and selling of securities, commodities or property. Integration involves placing the laundered proceeds back in the economy to create the perception of legitimacy. Terrorist Financing Terrorist financing provides funds for terrorist activity. The main objective of a terrorist activity is to intimidate a population or compel a government to do something. This is done by intentionally killing, seriously harming or endangering a person, causing substantial property damage that is likely to seriously harm people or by seriously interfering with or disrupting essential services, facilities or systems. (From FINTRAC Guideline 1, June 23, 2008.) There are two primary sources of financing for terrorist activities: Obtaining financial support from countries, governments, organizations or individuals; Revenue-generating activities including criminal acts, legitimately earned income or donations to nonprofit organizations involved in terrorist financing networks. The sums needed are not always large and the associated transactions are not necessarily complex. When funds are generated from illegal sources, terrorist groups may launder these funds so that they can be used without drawing the attention of authorities. Transactions related to terrorist activity financing may be similar to those related to money laundering.

4 4 Xpress Money will not knowingly allow its facilities to be used for the laundering of funds or the financing of terrorist activity. Penalties for money laundering are very severe including civil and criminal fines and imprisonment. Xpress Money s existence as a business could be placed in jeopardy if money laundering or terrorist financing activities were to occur. Therefore, all Xpress Money employees and agents dealing in any manner with any customers, their transactions or their records concerning same, must have a clear understanding of the requirements of this manual. All such, Xpress Money employees and agents in Canada must read this manual in its entirety. Xpress Money has appointed a North American compliance officer whose primary duty is to ensure the effective implementation and enforcement of the policies set forth in this manual in respect of Canadian operations. Xpress Money will conduct periodic training programs on Xpress Money s AML/ATF policies and procedures. Xpress Money will also conduct random and scheduled independent audits to verify compliance with its AML/ATF policies and procedures. Xpress Money intends to maintain the highest possible compliance with all AML/ATF laws and regulations, including compliance with all reporting and record keeping laws as well as recognizing and reporting suspicious transactions and attempted suspicious transactions. Xpress Money s board of directors are fully committed to complete compliance with all AML/ATF laws and regulations and expects and will require a similar level of commitment from all of its officers, employees, agents and representatives. Specifically, the board of directors will ensure a Compliance Regime is in place, appoint a Compliance Officer, participate in annual AML training and in general, ensure it is kept apprised of ongoing AML activity within the organization. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act The Proceeds of Crime (Money Laundering) and Terrorist Financing Act ( PC Act ) and its regulations (Regulations) implement specific measures to detect, deter, investigate and prosecute money laundering and terrorist financing offences in Canada. The specific measures include: mandatory reporting of suspicious and prescribed transactions; the establishment of a compliance program to ensure that the requirements of the legislation are followed; record keeping and client identification; cross-border currency reporting; and registration of certain prescribed businesses. The PC Act also established the Financial Transactions and Reports Analysis Centre of Canada ( FINTRAC ) as the agency responsible for the collection, analysis and disclosure of information to assist in the detection, prevention and deterrence of money laundering and terrorist financing in Canada and abroad. FINTRAC also has responsibility for ensuring compliance by financial intermediaries and other reporting entities with their obligations under the PC Act and Regulations. FINTRAC publishes Guidelines and Interpretation Notices on its website:

5 5 PC Act Directives Part 1.1 of the PC Act (not yet enacted) will allow the Minister of Finance to issue directives (each a Directive ) requiring money services businesses such as Xpress Money, and others, to take prescribed measures in respect of transactions originating from or bound for any foreign state. Directives may be issued in respect of foreign states that the Minister believes have insufficient or ineffective anti-money laundering measures which could have an adverse effect on the Canadian financial system. These Directives may include measures that specify: The requirement to verify the identity of any person or entity; The requirement to exercise customer due diligence, including ascertaining the source of funds, the purpose of the transaction or the beneficial ownership of control of any entity; The monitoring of any financial transaction or account; Keeping and retaining specified records; Reporting on specified transactions to FINTRAC; and A prohibition or limitation on undertaking or facilitating, directly or indirectly, certain financial transactions. When any Directive is issued, a new Schedule shall be added to this Compliance Manual specifying the requirements applicable to Xpress Money. Xpress Money shall comply with all requirements in the added Schedule. In the event of any inconsistency between a Directive issued under the PC Act and any PC Regulations, Xpress Money shall comply with the Directive, to the extent of the inconsistency or conflict.

6 6 ROLES AND RESPONSIBILITIES OF A COMPLIANCE OFFICER The compliance officer is responsible for the day-to-day compliance by Xpress Money with the PC Act. The compliance officer will be instrumental in the development and conformity of Xpress Money s compliance policies and procedures and in the development and maintenance of an ongoing compliance-training program for employees and agents. Xpress Money has appointed Mr. Inderpal Singh Bharaj to be its Chief Compliance Officer (the Chief Compliance Officer ). The contact details for Mr. Inderpal Singh Bharaj are as follows: 7025 Tomken Road, Suite 237 Mississauga, ON L5S 1R6 Tel: (905) Fax: (905) inderpal.bharaj@xpressmoney.com The compliance officer s primary duty is to ensure the effective implementation and enforcement of the policies set forth in Xpress Money s Anti-Money Laundering and Anti-Terrorist Financing Compliance Manual. It is the compliance officer s responsibility to supervise all aspects of Xpress Money s AMF/ATF compliance and to further: Conduct weekly examinations of all transactions which fall within the scope of the compliance manual; Ensure the proper reporting and filing of all required reports; Ensure random independent audits are performed to verify compliance with the policies and procedures set forth herein; Assess and document the risk related to ML/TF in Xpress Money s business; Ensure that all Xpress Money directors, officers, agents and employees undergo AML/ATF compliance training programs; Staying abreast of any Directives issued under the PC Act and ensure that this Policy is updated to address such requirements; and Conduct annual self assessment of Xpress Money s Risk Assessment, policies and procedures to test their effectiveness and to comply with the two year effectiveness testing which is required under section 71(1)(e) of the PC Regulations. The compliance officer is also required to be available to answer any questions regarding potential money laundering, terrorist financing and suspicious transactions, and is the person to whom all such questions and any money laundering and terrorists financing related problems should be directed. It is extremely important to understand that although Xpress Money has a compliance officer who is in-charge of Xpress Money s compliance, the compliance officer is not the only person responsible for ensuring that Xpress Money effectively detects and reports instances of money laundering/terrorist financing or potential money laundering/ terrorist financing. Rather, the compliance officer should be thought of as Xpress Money s last line of defense who is available to answer questions, provide guidance and supervise Xpress Money s AML/ATF compliance system. Under no circumstances should the compliance officer be thought of as being solely responsible for addressing money laundering / terrorist financing issues. For this reason all Xpress Money officers, directors, employees and agents of Xpress Money, must not only read and be familiar with the provisions of this manual but must also undergo periodic AML/ATF training programs, at the direction of the compliance officer. Furthermore, it is Xpress Money s policy that it is incumbent upon everyone associated with Xpress Money to take responsibility for, and to actively partake in, Xpress Money s AML/ATF compliance program.

7 7 RISK ASSESSMENT Xpress Money s compliance program is required to include an assessment and documentation of the risks related to money laundering and terrorist financing in Xpress Money s business, so as to allow Xpress Money to focus its resources where they are most needed to manage risks within its tolerance level. Assessment As required by section 71(1) of PC Regulations, Xpress Money s risk assessment will consider and document the following factors: Xpress Money s clients and business relationships; - These include risks associated with the types of customers that use Xpress Money s services and the customer s stated purpose in dealing with Xpress Money. Examples of the categories of clients that may indicate a higher risk would include politically exposed foreign persons, customers whose nature, structure or relationship make it difficult to identify the ultimate beneficial owner of significant or controlling interests, as well as customers conducting transactions in unusual circumstances. Xpress Money s products and services and the delivery channels through which it offers them; - These include risks associated with the types of products and services offered by Xpress Money and how such products and services are delivered to customers. Examples of the type of services and circumstances that may indicate a higher risk classification would include customer s conducting frequent international electronic funds transfers or transactions with persons located in high risk geographic locations as well as transactions not conducted on a face to face basis. The geographic locations where Xpress Money conducts its activities and the geographic locations of its clients and its agents (including any geographic locations which may be the subject of a Directive); - These include risks associated with the places where Xpress Money s business activities are carried out including jurisdictions where Xpress Money engages in business activities with agents as well as risks associated with the jurisdictions in which its customer s are located. Xpress Money s agents; and - Please refer to the discussion below for a summary of the risks associated with entering into business arrangements with agents and foreign counterparties. Any other relevant factors related to Xpress Money s business, its clients and the business relationships Xpress Money has with them. - These include points to consider such as trends and typologies related to money laundering and terrorist financing in the MSB industry and the level of employee turnover. Using a risk based approach, Xpress Money will conduct periodic risk assessments to determine where the money laundering and terrorist financing risks are greatest. The risk assessment will take into account the factors listed above (i.e., Xpress Money s client s and business relationships, products and services, and the geographies in which Xpress Money (and its customers) conduct business, and the delivery channels of Xpress Money s services including its agents) and will inform Xpress Money s risk rating methodology for its business and will

8 8 also be used to assign a risk rating of High or Low to client business relationship. The risk assessment for all business relationships is updated using a risk based methodology as described in the Section entitled Business Relationships & Ongoing Monitoring. Business Risk Level Assessment Although Xpress Money is part of an international money services business that spans across 5 continents offering its customers instant money transfer services both domestically and internationally through a large network of agents, Xpress Money itself only carries on business in Canada. As an entity that is dedicated to connecting people around the world, Xpress Money and its agents provide individuals and businesses with a variety of money transfer services that allow people to send and receive money in cash, direct partner banks to credit a recipient s bank accounts, and offer both in person and online money transfer services through Xpress Money Online. With Anywhere Payout Xpress Money also offers customers the ability to send money without specifying the recipient agent s location which in turn allows the intended recipient of the funds to pick up the money from any Xpress Money location that is convenient to them. As a result, in connection with the provision of its money transfer services, Xpress Money s business offers both in person and non face to face methods to send and receive money and often relies on its relationships and business arrangements with agents and foreign counterparties who are located globally to provide payout services to parties who may reside in jurisdictions that may be subject to sanctions legislation, have been identified as having significant levels of corruption or criminal activity and may not necessarily be subject to the same or similar AML compliance obligations and requirements. However, despite the inherent risks in Xpress Money s business, the nature and type of services offered by Xpress Money with respect to its Canadian business, and the nature of its customer base and customer transactions and the Canadian location of its customer base, Xpress Money has determined that, based on its controls, security standards, the global security standards of its parent company and the business risk mitigation measures it undertakes with respect to its business in Canada, the AML/ATF risks associated with its Canadian business are low to moderate for the following reasons: Xpress Money s agent network in Canada is subject to enhanced due diligence and its foreign counterparties are well-respected banking and non-banking organisations around the world. It is Xpress Money s policy to only provide payouts upon proper identification of the beneficiary. Xpress Money has established a unique 16-digit PIN for establishing error-proof identity of the beneficiary. Xpress Money is committed to continuously updating its systems and technology to ensure that its quality checks and controls are in-line with global security standards which include centralized servers for hosting all the applications and storing data. Xpress Money has robust AML compliance features such as online scanning as well as country and product specific rules to ensure all regulatory standards set by organizations are strictly followed. Comprehensive risk based AML monitoring solution with World-Check, the leading global provider of structured risk intelligence solutions.

9 9 Additionally, regarding Xpress Money s business activities in Canada: Xpress Money has a stable, known client base. Xpress Money w offers electronic transaction services and only limited products and services. Xpress Money has few or no large currency transactions. Xpress Money s agents are located in areas known to have a low crime rate. Xpress Money has minimal transactions with high-risk geographic locations. Based on the foregoing, Xpress Money has determined that the risk rating classification for its business is low to moderate. Client Risk Level Assessment FINTRAC has indicated that a client risk assessment is appropriate only where there is an ongoing relationship. Where dealings with a client are limited to a single transaction, this is not considered to be an ongoing business relationship. FINTRAC defines an ongoing business relationship as one where a client undertakes multiple identifiable transactions over a 5 year time period, regardless of whether the transactions are related to each other. As part of its risk assessment, Xpress Money will take steps to know its clients for ongoing business relationships and at various times throughout the relationship, depending on the risk profile of particular transactions that take place. In addition, the content of any Directive will be considered in completing any risk assessment. Please see Know Your Customer Policy below. In addition, Xpress Money will also Know its Agents and perform a risk assessment on each agent and client business relationship assigning each a risk rating classification of High, or Low in accordance with the risk assessment matrix set out in Schedules F-1 and F-2, as applicable. Enhanced Due Diligence Whenever a client business relationship has been determined to be high risk, additional enhanced due diligence measures include the following measures: Requesting an additional piece of identification from the client, and recording that piece of identification at the time of the transaction These risk mitigation measures are above and beyond the more frequent intensity of ongoing monitoring of high risk business relationships as outlined in the section entitled Business Relationships and Ongoing Monitoring. As an entity that utilizes relationships with agents or foreign counterparties to facilitate the movement of funds both domestically and internationally to reach a wider customer market and to provide customers with convenient access to its locations and services, Xpress Money takes reasonable steps to guard against the flow of illicit funds, or the flow of funds from legitimate sources to persons seeking to use those funds for illicit purposes. In light of Xpress Money s business, it is essential that agent and counterparty risk be mitigated. Xpress Money has implemented procedures to mitigate risks posed by Xpress Money s relationships with its agents. Where a Directive requires, steps will also be taken to determine source of a client s funds and/or the purpose of a transaction.

10 10 Agent and Foreign Counterparty Compliance Risk Mitigation Procedures Xpress Money has established adequate and appropriate policies, procedures and controls commensurate with the risks of money laundering and the financing of terrorism posed by Xpress Money s relationships with its agents or foreign counterparties (hereinafter agents or foreign counterparty ). Some possible risks associated with agents and foreign counterparties include but are not limited to: The ownership of the agents, including whether the owner or owners are known, upon reasonable inquiry, to be associated with criminal conduct or terrorism. For example, the individuals have been listed by the Office of Superintendent of Financial Institutions ( OSFI ) or the Department of Foreign Affairs and International Trade ( DFAIT ) or placed on any other relevant sanctions list. Information known or readily available about the agent s AML/ATF record, including public information in industry guides, periodicals and major publications. The nature of the agent s business, the markets it serves, and the extent to which its business and the markets it serves present an increased risk for money laundering or terrorist financing. The types of products and services to be provided by or to the agent. The nature and duration of the relationship with the agent. Accordingly, Xpress Money shall conduct due diligence on all potential agents with which Xpress Money conducts business. This due diligence will ensure that the agent is not complicit in illegal activity involving Xpress Money s products or services. The agent application utilized by Xpress Money will obtain as much information as possible to allow a full due diligence review (See Section 15 of this Compliance Manual). In addition, Xpress Money will enter into a written agreement with all agents that it conducts business with and each such agent will be required to: 1. Identify all owners and submit to requisite background and criminal record checks. 2. Obtain appropriate additional information to understand the agent s business, such as offering other MSB services, the agent s past record of legal/regulatory compliance, expected nature and level of transactions and customer base, and geographical exposure. 3. Comply with Xpress Money s anti-money laundering programs, risk-based policies, procedures and controls as set out in this manual. 4. Submit to periodic and ongoing reviews and evaluations of their operations including actions taken in relation to implementation of polices, procedures and controls to help assure Xpress Money. 5. Submit to risk-based monitoring and review of transactions from, to, or through Canada involving Xpress Money s products and services. 6. Provide ongoing and immediate updates of any changes to the agent s ownership structure, business, or, if relevant, the regulatory scrutiny to which it is subject in its home country. 7. Allow Xpress Money to identify, through the monitoring and review of transactions, and, where appropriate, report as suspicious, all suspicious activity, including but not limited to: instances of unusual wire activity, bulk sales or purchases of sequentially numbered instruments, multiple purchases or sales that appear to be structured, and illegible or missing customer information. 8. Allow Xpress Money to verify that the agent is effectively implementing an AML/ATF program and review and correct any and all difficulties or problems related thereto. 9. Provide Xpress Money and/or FINTRAC with the ability to carry out an audit on the agent s premises.

11 11 In addition to the foregoing, Xpress Money will review the agent s activity for signs of (i) structuring or unnecessarily complex transmissions through multiple jurisdictions that may be indicative of layering, or (ii) attempts to evade the identification, reporting or other requirements, whether imposed by the PCAct, Xpress Money s own internal compliance program or other applicable law. Through the implementation of these procedures and controls, Xpress Money will identify unreasonable risks of money laundering or terrorist financing posed by agents and take necessary corrective action. Such corrective action will depend on the severity of the risk and the agents response to Xpress Money s requests for changes in policies, procedures or activities designed to eliminate, or reduce to a reasonable level, such risk. If unreasonable risks are not addressed in a timely and acceptable manner, or if an agent demonstrates systemic, willful or repeated lapses in compliance, then aggressive corrective action will be implemented immediately, including but not limited to termination of the relationship. The additional factors that Xpress Money will look to as part of its risk assessment are set out in Schedules F-1 and F-2. FINTRAC REGISTRATION/AGENT LIST The PC Act requires Xpress Money to register as a money service business with FINTRAC. Agents of Xpress Money are generally not required to file their own registration form unless they are conducting money services business independently of Xpress Money. Xpress Money is required to renew its registration every two years before its current registration expires 2. In addition, where there are any changes to the information filed in Xpress Money s original application, or more new information is obtained that should have been included in the application, Xpress Money is required to notify FINTRAC within 30 days of the date it became aware of the change or new information 3. Where Xpress Money utilizes agents in its business, it must also register its agents including the addition of new agents or the removal of others. The compliance officer will be responsible for making these updates on a timely basis. Finally, where FINTRAC sends Xpress Money a clarification request about any information on the registration, Xpress Money will respond to such a request within 30 days. The seriousness of such clarification requests cannot be ignored as FINTRAC can revoke an MSB s registration if a response is not made within 30 days of the original request. 2 Section of the PC Act. 3 Section of the PC Act.

12 12 REPORTING REQUIREMENTS A. Large Cash Transaction Reporting The PC Regulations require Xpress Money to file a Large Cash Transaction Report (LCTR) with FINTRAC when it receives an amount of Can. $10,000 or more in cash 4. Transactions not involving cash are not affected by this requirements, for example, cheques, drafts, wire transfers or other similar instruments. Transactions for, or on behalf, of the same customers, occurring at different Xpress Money branches or locations made within 24 consecutive hours must be aggregated for purposes of calculating the $10,000 threshold. Xpress Money s policy is to not accept cash transactions at any location on any day in amounts of over $5,000. Accordingly, unless a single client uses two or more agents to carry out transactions aggregating $10,000 or more in a 24 hour period, it is unlikely that Xpress Money will have to file large cash transactions reports. While not advertised or encouraged, there is always a slight possibility that a customer may mail or courier cash to Xpress Money without prior notification. If such an instance occurs, Xpress Money will request the customer to be physically present to conduct the transaction. Where the funds are valued at $10,000 or more, Xpress Money will have to file a large cash transaction report. In addition, where deemed to be suspicious, such transactions may be submitted to FINTRAC as Suspicious Transaction Reports (STRs). Moreover, a LCTR does not need to be filed when receiving money from a financial institution or a public body, such as a government entity. Procedures In the event a LCTR must be filed, it must be filed with FINTRAC by the fifteenth (15th) calendar day after the day of the transaction 5. Xpress Money must maintain a file of all LCTR s filed for a period of 5 years. The Compliance officer will be responsible for sending the LCTR to FINTRAC. In order to comply with the deadline for filing LCTR, all LCTR must be sent to Xpress Money s compliance officer by the 3rd day after the day of the transaction or the date Xpress Money becomes aware that there were numerous sends over a 24 hour period amounting to in excess of $10,000. See Schedule Afor information on the aggregating of transactions. B. Electronic Funds Transfer Reporting Xpress Money is required to file an Electronic Funds Transfer Report (EFTR) with FINTRAC 6 when: (i) it receives from outside of Canada, an EFT, sent at the request of a client, of Can. $10,000 or more in the course of a single transaction; or (ii) it sends out of Canada, at the request of a client, an EFT of Can $10,000 or more in the course of a single transaction. Transactions for, or on behalf, of the same customers, occurring at differing Xpress Money branches or locations in Canada over 24 consecutive hours must be aggregated for purposes of calculating the Can $10,000 threshold.

13 13 Procedures Xpress Money must file an EFTR for each EFT transaction or aggregation of multiple EFT transactions, sent outside Canada or received from outside Canada, conducted by or on behalf of the same customer over a 24 hour period if these transactions involve amounts of Can. $10,000 or more. The EFTR must be filed with FINTRAC not later than 5 working days after the day of the transaction 7. Xpress Money must maintain a file of all EFTRs filed for a period of 5 years. 4 Section 28(1)(a) of PC Regulations. 5 Section 5(2) of PC Regulations. 6 Section 9.5 of PC Act and section 28 of PC Regulations. 7 Section 28(1)(a) of PC Regulations.

14 14 The Compliance officer will send EFTR to FINTRAC. In order to comply with the deadline for filing EFTR, all EFTR s must be sent to Xpress Money s compliance officer by the 2nd day after the day of the transaction or the date that Xpress Money becomes aware that there were numerous EFTs over a 24 hour period amounting to in excess of $10,000. See Schedule A for information on the aggregating of transactions. C. Suspicious Transaction Reporting Identifying Suspicious Transactions Xpress Money s staff and agents are required to identify suspicious transactions or attempted suspicious transactions for reporting to FINTRAC 8. A suspicious transaction is not defined in the PC Act. The PC Act requires that Xpress Money reports every financial transaction that occurs or that is attempted in the course of its activities and in respect of which there are reasonable grounds to suspect that the transaction is related to the commission or attempted commission of a money laundering or a terrorist activity financing offence. An assessment of suspicion is therefore based on a reasonable evaluation of relevant factors including knowledge of the customer s financial history, background and behaviour. When either an employee, an agent or a senior officer detects a fact that constitutes reasonable grounds to suspect a transaction or attempted transaction is related to money laundering or terrorist activity financing, the transaction will have to be reported. The same holds true if a person starts a transaction, but then decides to abandon it. There is no monetary threshold amount for a transaction or attempted transaction. Suspicious transactions or attempted transactions must be reported within 30 days after Xpress Money (or any staff member, agent, officer or director) first detects that there are reasonable grounds to suspect that the transaction or attempted transaction is related to a money laundering or a terrorist activity financing offence 9. 8 Section 5(2) of PC Regulations. 9 Section 9.5 of PC Act and section 28 of PC Regulations.

15 15 FINTRAC has provided the following guidance: When staff or an agent believe that a transaction or group of transactions, raises questions or gives rise to discomfort, apprehension or mistrust, the transaction(s) may be connected to money laundering or terrorist activity financing. All circumstances surrounding a transaction should be reviewed. Factors may seem insignificant when taken individually, but when taken together may raise suspicion. An assessment of suspicion should be based on reasonable evaluation of relevant factors, including the knowledge of the customer s business, financial history, background and behaviour. It is important to remember that behaviour is suspicious, not people. Indicators of a suspicious transaction related to terrorist activity financing are similar to those related to money laundering. However, amounts relating to terrorist financing may be smaller. It is possible that a suspicious transaction could be related to both a money laundering offence and a terrorist activity financing offence. FINTRAC s guideline provides a list of what may be considered suspicious behaviour. That list, with some modification is attached to this policy as Schedule E. Staff, agents and employees are expected to review the list and make themselves familiar with what may constitute a suspicious transaction. When in doubt, please consult with the compliance officer. There are opportunities for different levels of staff or agents of Xpress Money to identify suspicious transactions. Xpress Money will ensure that staff and agents at all levels, as appropriate, are trained to detect suspicious money laundering / terrorist activity financing transactions. Documenting and Reporting of Investigations Documentation and reporting to superiors of the investigation process and results regarding the identified suspicious activities are essential. For the protection of Xpress Money and its employees and agents, it is important to document all findings during the monitoring and investigation of suspicious behaviour and while deviations from a customer s profile are being examined. In terms of detection of suspicious transactions as a result of ongoing monitoring of all business relationships, the analysis is documented in an excel spreadsheet. A detailed transaction review is conducted on all clients who have conducted an aggregate of $5,000 or more in transactions within each month. In addition, an enhanced analysis is conducted on clients deemed to be high risk. These ongoing monitoring measures are detailed in the section entitled Business Relationships & Ongoing Monitoring. Xpress Money is ultimately responsible for making the final decision as to whether a transaction or an attempted transaction is reported to FINTRAC as suspicious. Deciding whether to report a transaction as suspicious will turn on the facts and circumstances relating to each transaction. However, the following types of transactions tend to be indicative of serving no business or apparent lawful purpose: The contemporaneous purchase of multiple remittances to the same beneficiary or city by the same purchaser; The purchase of multiple remittances in the same or similar amounts by the same person; A large volume of transactions or both, directed to one correspondent from one agent (operating either through a single or multiple offices) on a single day; Patterns of remittances to the same city or correspondent purchased at approximately the same time; Patterns of remittances purchased just below the dollar thresholds for reporting or record

16 16 Documentation and reporting to superiors of the investigation process and results regarding the identified suspicious activities are essential. For the protection of Xpress Money and its employees and agents, it is important to document all findings during the monitoring and investigation of suspicious behaviour and while deviations from a customer s profile are being examined. In terms of detection of suspicious transactions as a result of ongoing monitoring of all business relationships, the analysis is documented in an excel spreadsheet. A detailed transaction review is conducted on all clients who have conducted an aggregate of $5,000 or more in transactions within each month. In addition, an enhanced analysis is conducted on clients deemed to be high risk. These ongoing monitoring measures are detailed in the section entitled Business Relationships & Ongoing Monitoring. Xpress Money is ultimately responsible for making the final decision as to whether a transaction or an attempted transaction is reported to FINTRAC as suspicious. Deciding whether to report a transaction as suspicious will turn on the facts and circumstances relating to each transaction. However, the following types of transactions tend to be indicative of serving no business or apparent lawful purpose: The contemporaneous purchase of multiple remittances to the same beneficiary or city by the same purchaser; The purchase of multiple remittances in the same or similar amounts by the same person; A large volume of transactions or both, directed to one correspondent from one agent (operating either through a single or multiple offices) on a single day; Patterns of remittances to the same city or correspondent purchased at approximately the same time; Patterns of remittances purchased just below the dollar thresholds for reporting or record keeping requirements; Significant changes or fluctuations in volume at one or more of the business agents or branches; Significant variations in the size of the average remittance at a business agents or branches; Multiple senders of remittances using the same recipient s last name, address or telephone number. Structuring structuring is an attempt to evade the rules and regulations set forth in the PC Act and Regulations by breaking up large sums of money into smaller amounts. All Xpress Money employees and agents must be ever vigilant and alert to the possibility that customers may be structuring transactions to evade or attempt to evade the reporting or record keeping. Filing a Suspicious Transaction Report (STR) ASTR must be filed with FINTRAC within 30 days of the suspicious event or attempted commission of the suspicious event. A copy of the report and all supporting documentation must be kept for at least five years from the time of filing. The compliance officer will be responsible for filing all STRs. All STR supporting documentation prepared by staff and agents must be submitted to the Compliance Officer within 2 business days. It is critical that the information Xpress Money or one of its agents provides in a STR is as accurate and complete as possible. Therefore the following steps will be followed by Xpress Money or one of its agents when filling out a STR form: Describe, as fully as possible, why the activity or transaction is unusual for the customer, taking into consideration the types of products and services offered by Xpress Money and the nature and typical activities of similar customers; Accurately and completely explain the nature and circumstances of suspicious activity or attempted suspicious activity; Follow the STR instructions on how to correctly complete fields of critical value (these sections are typically marked with an asterisk);

17 17 Follow the STR instructions on how to correctly complete fields that are reasonable efforts (these sections are not marked with an asterisk). If the information is in our records, it will be included on the report. Tipping Off Offence Xpress Money, its directors, officers, employees, and agents are forbidden from disclosing to any person (including customers) that suspicious transaction reports have been made, or disclose the contents of such reports, with the intent to prejudice a criminal investigation, whether or not a criminal investigation has begun. It is a criminal offence with penalty of up to two years imprisonment for making such disclosures. 10 No criminal or civil procedures may be brought against Xpress Money or its agents or employee for making a suspicious transaction report or providing FINTRAC with supporting documentation. 11 D. TERRORIST PROPERTY REPORTING AND SANCTIONS The PC Act, the Criminal Code and the United Nations Act contains separate but related requirements with respect to dealings with terrorist property and certain specified persons or entities. In addition, under the authority of the Special Economic Measures Act (SEMA) Canada has imposed sanctions in the absence of a United Nations Security Council resolution. These individuals and entities are specifically listed or designated under the relevant regulations and such persons are generally subject to asset freezes (described further below). There are also reporting requirements with respect to property of such persons under the PC Act and these regulations. In this context, property means any type of real or personal property in Xpress Money s possession or control. This includes any deed or instrument giving title or right to property, or giving right to recover or receive money or goods, including funds, financial assets or economic resources. For example, cash, bank accounts, insurance policies, money orders, real estate, securities, and traveller s cheques, precious metals and stones among other types of assets, are considered property. The Criminal Code, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (the UNSTR ) and the other legislation set out below prohibit Xpress Money and its employees and agents from dealing with the property of a listed person, a terrorist group, a designated person, the Taliban or a person associated with the Taliban (collectively, an Affected Person ) or providing any financial services for the benefit of an Affected Person. The additional legislation is as follows: United Nations Al Qaida and Taliban Regulations (the Al Qaida Regulations ); United Nations Democratic Republic of the Congo Regulations (the Congo Regulations ); Regulations Implementing the United Nations Resolutions on the Democratic Peoples Republic of Korea (the Korean Regulations ); Regulations Implementing the United Nations Resolutions on Iran (the Iran UN Regulations ); United Nations Sudan Regulations (the Sudan Regulations ); Regulations Implementing the United Nations Resolutions on Somalia (the Somalia Regulations ); Regulations Implementing the United Nations Resolutions on Eritrea (the Eritrea Regulations ); Special Economic Measures (Burma) Regulations (the Burma Regulations ); 10 Section 28(1)(a) of PC Regulations. 11 Section 5(2) of PC Regulations.

18 18 Regulations Implementing the United Nations Resolutions on Libya and Taking Special Economic Measures (the Libya Regulations ) Special Economic Measures (Democratic People s Republic of Korea) Regulations (the Korea Sema Regulations ); Special Economic Measures (Zimbabwe) Regulations (the Zimbabwe Regulations ); Special Economic Measures (Iran) Regulations (the Iran Sema Regulations ); Special Economic Measures (Syria) Regulations (the Syria Regulations ); Freezing of Assets of Corrupt Foreign Officials (Tunisia and Egypt) Regulations (the Freezing of Assets Regulations ); Special Economic Measures (Russia) Regulations (the Russia Regulations ); and Special Economic Measures (Ukraine) Regulations (the Ukraine Regulations ). (the UNSTR, the Al Qaida Regulations, the Korean Regulations, the Iran UN Regulations, the Libya Regulations, (collectively the UN Regulations ), the Burma Regulation, the Zimbabwe Regulations, the Iran Sema Regulations, the Korea Sema Regulations and the Syria Regulations (collectively, the SEMA Regulations ), the Somalia Regulations, the Eritrea Regulations, the Freezing of Assets Regulations and the Criminal Code, are collectively referred to as the Applicable Legislation ). Regularly updated and unofficially consolidated lists of Affected Persons under the Criminal Code and the UN Regulations are available on the website of OSFI at (the OSFI lists ). Lists of persons designated under SEMA Regulations ( SEMA Lists ) are available on the DFAIT web site at Xpress Money has a comprehensive software system that searches the OSFI List, the SEMA List and similar lists in other countries (the Lists ). Reporting to FINTRAC Where Xpress Money is in possession or control of any property of any person on the lists created pursuant to the UNSTR or the Criminal Code, Xpress Money will file a terrorist property report (a TPR ) with FINTRAC in the prescribed form and manner. Specifically, the Regulations require Xpress Money to file a TPR where Xpress Money or any of its employees and agents have property in their possession or control that they know or believe is owned or controlled by or on behalf of a listed person or entity under the Criminal Code or the UNSTR. TPRs are to be sent to FINTRAC without delay. If Xpress Money or any agent or employee believes that a transaction is related to property owned or controlled by or on behalf of a terrorist group or a sanctioned person, the transaction should not be completed. Terrorist property must be frozen under the Applicable Legislation. If either Xpress Money, an employee or an agent does not know, but suspects that it is dealing with a terrorist, and the transaction is completed, then a suspicious transaction report is required to be filed with FINTRAC. Disclosure to RCMP and CSIS The Applicable Legislation requires disclosure in respect of an Affected Person to the Commissioner of the RCMP and the Director of CSIS. Information is to be provided to them, as follows:

19 19 RCMP, Anti-Terrorist Financing Team, unclassified fax: (613) ; and CSIS Financing Unit, unclassified fax: (613) The Applicable Legislation requires disclosure in respect of an Affected Person on the SEMA Lists or the lists under the Eritrea Regulations or Somalia Regulations, to the RCMP as follows: RCMP Customs & Excise Branch Ottawa, ON Fax: (613) National Operations Centre Ottawa, ON Fax: (613) * Lists for these purposes means the List under the Criminal Code and the United Nations Suppression of Terrorism Regulations. Xpress Money is to disclose the existence of any such property promptly without delay to each of FINTRAC, the RCMP and, where applicable, to CSIS. No criminal or civil proceedings will lie against a person for disclosure made in good faith under the Applicable Legislation. Freezing of Property It is important to understand that the Applicable Legislation not only prohibits Xpress Money from dealing with the property of an Affected Person, but also from providing any type of financial assistance to an Affected Person. Specifically, the Applicable Legislation prohibits any person from knowingly: (a) Dealing directly or indirectly in any property of an Affected Person (including funds derived or generated from property owned or controlled directly or indirectly by that person); (b) Entering into or facilitating, any transactions related to a dealing referred in a paragraph (a); (c) Providing any financial or other related service in respect of the property referred to in paragraph (a); or (d) Making any property or any financial or other related service available, directly or indirectly, for the benefit of an Affected Person. Procedures The following procedures are to be followed to ensure compliance with the PC Act and Applicable Legislation: 1. Before adding a Customer to the Xpress Money database or doing a transaction on behalf of a customer a check is done against the Lists. If the Customer is found to be on any of such database, the customer is contacted and advised that the transaction cannot be processed. 2. On a daily basis, Xpress Money s entire client database is run through the screening software of Xpress Money to ensure that there are no matches and reports are generated daily. 3. Information concerning any matches will be provided to the Xpress Money compliance officer. 4. The compliance officer will report the information to the RCMP and to CSIS, as applicable. 5. Any money held by Xpress Money related to this account would be frozen. Any money held by an agent must immediately be forwarded to the compliance officer. 6. A record of the report, and the actions taken will be kept for a minimum of 5 years.

20 20 E. Reporting to FINTRAC in Respect of Directives Under proposed changes to the PC Act, the Minister of Finance (the Minister ) will have the authority to issue a Directive requiring money services businesses (including Xpress Money) to report to FINTRAC on any financial transactions originating from or bound to any foreign state or foreign entity that occurs or is attempted in the course of Xpress Money s activities that may be set out in any Directive ( Directive Transactions ). Xpress Money will report any such Directive Transactions to FINTRAC within the time frames specified by the applicable Directive. At the time that any Directive is issued by the Minister, the Compliance Officer will ensure that the requirements of the Directive are disseminated to all relevant personnel. Relevant personnel will then be aware of the requirement to provide information on all Directive transactions to the Compliance Officer enabling the Compliance Officer to report to FINTRAC within the required time limitations. F. Prohibited Transactions Under Any Directive Xpress Money will comply with any limitation or prohibition with respect to entering into, undertaking or facilitating (directly or indirectly) any financial transaction to any foreign state or foreign entity that may be set out in any Directive G. Cross-border Currency Reporting All importation or exportation of currency or monetary instruments of Can. $10,000 or more, whether in person, by courier or through the mail, must be reported to customs officer 12. As Xpress Money does not regularly engage in the physical transportation of instruments, these requirements are set out in Schedule B. 12 Section 12(1) of the PC Act and section 2(1) of the CB Regulations.