KUWAIT TURKISH PARTICIPATION BANK INC. SUMMARY OF ANTI MONEY LAUNDERING AND COMBATING FINANCE OF TERRORISM POLICY This Document is the property of KTPB and under no circumstances to be disclosed to parties/individuals/correspondents.
CONTENTS 1 SECTION I GENERAL TERMS AND PRINCIPLES 1- INTRODUCTION 2 2- PURPOSE 2 3- SCOPE 2 4- GENERAL FRAMEWORK 2 5- COMPLIANCE OFFICER AND COMPLIANCE UNIT 3 6- THE IMPORTANCE OF THIS POLICY BY THE MEMBERS OF KTPB 3 SECTION II - CUSTOMER DUE DILIGENCE 3 7- KNOW YOUR CUSTOMER PRINCIPLE 3 8- CUSTOMER IDENTIFICATION 4 9- PERSONS AND INSTITUTIONS WHO CANNOT BE ACCEPTED AS CUSTOMER 4 SECTION III - RISK MANAGEMENT 4 10- OBJECTIVES AND SCOPE OF THE RISK MANAGEMENT 4 11- RISK MANAGEMENT ACTIVITIES 5 11.a- High Risk Customers 5 11.b- High Risk Product and Services 6 11.c- High Risk Countries 6 12- ENHANCED MEASURES 6 SECTION IV MONITORING AND CONTROL 6 13- PURPOSE AND SCOPE OF THE MONITORING AND CONTROL ACTIVITIES 6 14- MONITORING AND CONTROL ACTIVITIES 7 SECTION V - TRAINING 7 15- PURPOSE AND SCOPE OF THE TRAINING 7 16- TRAINING ACTIVITIES 8 SECTION VI - INTERNAL CONTROL 8 17- PURPOSE AND SCOPE OF THE INTERNAL CONTROL 8 18- INTERNAL CONTROL ACTIVITIES 8 SECTION VII - MISCELLANEOUS 9 19- SUSPICIOUS TRANSACTION REPORTING 9 20- KTPB BUSINESSES OUTSIDE OF TURKEY 9 21- RETAINING OF INFORMATION, DOCUMENTS AND RECORDS 9 22- POLICY OWNER 9 23- EFFECTIVENESS 9 KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 1
SECTION I GENERAL TERMS AND PRINCIPLES 1- INTRODUCTION Along with the rise of globalization, due to removal of the country borders, circulation of the information and capital has been easier; on the other hand, it is easier for crime organizations to access to their financial resources. Thus, in this period it is so vital for the financial institutions with a wide variety of customer and service to manage their risk against Money Laundering (ML) and financing of terrorism. Having a prestigious and trustworthy position, with its decisive attitudes on preventing the utilization of the Kuwait Turkish Participation Banks (KTPB, the Bank) product and services for money laundering and financing of terrorism activities and conformance with the local and international standards completely with its shareholders and employees, KTPB deems the anti-money laundering and combating finance of terrorism as a social responsibility and gives great importance to this combat. The Bank also considers it as an important element for compliance with the international system. In the light of above information, in accordance with preventing money laundering and financing of terrorism and Know Your Customer (KYC) Principles, in the framework of prevailing Turkish laws and regulations on maintaining the customer information in an accurate way and the multilateral agreements for which Turkey is a part of; KTPB requires management and employees to adhere to these standards in preventing the use of its products and services for money laundering and financing of terrorism purposes. 2- PURPOSE KTPB Anti Money Laundering and Combating Finance of Terrorism Policy (the Policy) establishes the governing principals and procedures which aim to prevent the use of Kuwait Turkish Participation Bank (KTPB) and its businesses for money laundering purposes and financing terrorism. 3- SCOPE This Policy and control methods comprise the all businesses and transactions of; The Head Office of the Bank, domestic branches and, if the regulations of the related country is available, the foreign branches. The domestic subsidiaries with majority stock and if the regulations of the related country is available, the foreign financial subsidiaries. 4- GENERAL FRAMEWORK The KTPB should make it possible for the whole staff to have a standard level of knowledge and information about the following topics and to update the appended information. Concepts of criminal activity and the laundering of money. Steps involved in money laundering activities. Methods of money laundering. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 2
Historical development of the struggle against money laundering, international actors and multilateral agreements: Preventing the Finance of Terrorism. Prevention of corruption, and the struggle against bribery and similar financial crimes. 5- COMPLIANCE OFFICER AND COMPLIANCE UNIT In order to establish the determined standards in national and international level to the KTPB Head Office and branches, to follow up the legal arrangements, to take the necessary steps for the conformance of the Banks applications with current legislations, to arrange training programs in top level to inform the staff about proceeds of crime and finance of terrorism, Compliance Officer is assigned and the Compliance Unit is established. The Compliance Officer will be directly reporting to the Internal Systems Committee to whom the Board of Directors handed over its responsibilities within the framework of the related legislation although the ultimate responsibility will remain on the KTPB Board of Directors. The KTPB Units outside of Turkey with its assigned compliance officers or other personnel will check the compliance of the Unit with the legislation on laundering proceeds of crime and financing of terrorism and this Policy. 6- THE IMPORTANCE OF THIS POLICY BY THE MEMBERS OF KTPB The KTPB staff should; Prevent the use of the Banks products and services for money laundering and financing of terrorism activities. Report the suspicious transactions to the Compliance Officer within the framework of the legal arrangements and take the necessary actions. Abide the legal arrangements about the money laundering and financing of terrorism. SECTION II - CUSTOMER DUE DILIGENCE 7- KNOW YOUR CUSTOMER PRINCIPLE The principle Know Your Customer means KTPB being sufficiently informed about the clients and their activities and developing policies and procedures in order to obtain such data. Additionally, KYC policy aims to provide awareness about unusual transaction activities or activities inconsistent with the known business of customers. As part of know your customer principle, necessary precautions in the context of applicable legislation and the Bank s policies shall be taken while establishing continues business relations and executing the client s intended transaction in the following areas: Customer ıdentification, KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 3
Determining whether the transactions are made on behalf of a third party, Determining the beneficial owner, Obtaining sufficient information on the nature and purpose of the intended transaction, Monitoring the client and his/her activities while the client-relationship continues, Taking the necessary precautions with regard to the activities and transactions of the clients that require special attention. 8- CUSTOMER IDENTIFICATION The identity of a customer shall be verified in order to check the identity details of that customer and of any person acting on behalf of him or real beneficiary of him and confirm the veracity of such details subject to the applicable legislation: irrespective of any amount where a continuous business relation is established; irrespective of any amount whenever there is a suspicion as to the veracity of any customer identity verified before; irrespective of any amount in circumstances where a suspicious transaction should be reported; whenever the transaction amount, or the aggregate amount of more than one transaction linked to each other exceed the threshold defined in the applicable legislation When establishing permanent business relationship, information on the purpose and intended nature of the business relationship shall be received. 9- PERSONS AND INSTITUTIONS WHO CANNOT BE ACCEPTED AS CUSTOMER KTPB does not have business relation with below appended persons and institutions. For the persons and institutions within this statute, the Bank abstains from giving banking services to them by terminating the relations and informs the Compliance Officer about the situation; The clients who either could not be identified or those no adequate information are obtained about their business and intended transaction. Shell Banks Those who have a record of suspicion in the Bank s internal intelligence records regarding money laundering, financing terrorism or related financial crimes such as fraud, forgery and organized crime Those who are in the lists of supporters of money laundering and/or financing terrorism prepared by local regulators or international bodies and institutions SECTION - III RISK MANAGEMENT 10- OBJECTIVES AND SCOPE OF THE RISK MANAGEMENT KTPB pays a particular attention to risk management in order to define, rank, monitor asses and decrease the risks that it may face in relation to potential misuse of its banking services for the purpose of money laundering and financing terrorism. The definition and ongoing monitoring of risky areas, risky lines of business and risky transactions and also establishing enhanced due diligence and client acceptance KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 4
procedures help the KTPB to prevent the use of its products and services for money laundering and financing of terrorism purposes. Risk Management covers the internal measures and rules of practice in relation to Know Your Customer whose headlines are given below. 11- RISK MANAGEMENT ACTIVITIES By Risk management activities, KTPB aims at defining, ranking, monitoring, assessing and minimizing the risks that the Bank may face. Risk Management Activities implemented by KTPB include at least the following activities: Developing risk defining, rating, classifying and assessing methods based on customer risk, service risk and country risk, Rating and classifying services, transactions and customers depending on risks, Developing proper operational and control rules for ensuring monitoring and controlling risky customers, transactions or services; reporting in a way that warns related units; carrying out the transaction with the approval of senior management and controlling it when necessary, Questioning retrospectively the coherency and effectiveness of risk defining and assessing methods and risk rating and classifying methods depending upon sample events or previous transactions, reassessing and updating them according to achieved results and new conditions, Carrying out required development works through pursuing recommendations, principles, standards and guidelines introduced by national legislation and international organizations related to issues under the scope of risk, Reporting risk monitoring and assessing results regularly to the executive board. The money laundering and financing terrorism related risks the Bank may face due to the Bank s customers, their activities and transactions, are classified into three main categories in the light of legislation; Customer Risk Service Risk Country Risk On the ground of monitoring and control, KTPB s customers, services and transactions are ranked as in low, medium or high risk; risk profiles of the customers in terms of money laundering and financing terrorism are prepared as low, medium or high, based on their business past, activities, financial capacity, accounts and country of business and location and other indicators; and they are made subject to monitoring activities. 11.a- High Risk Customers Non-profit organizations, Politically Exposed Persons (PEP s), Private Banking customers, Off -Shore Banks, Correspondent Banks, Authorized Exchange Offices, Jewellery shops and those who are in the business of valuable stones and materials such as gold and diamond, Those operating in cash-intensive lines of business Those known for their engagement in crime activities or those who are generally suspected by the society for such engagements. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 5
11.b- High Risk Product and Services Electronic Fund Transfers Collection of Personal Cheques Drawn on Foreign Banks Systems enabling non-face to face transactions Private Banking product and services 11.c- High Risk Countries The countries existing in the list of non-cooperating countries declared by FATF The countries given in the list of Risky Countries, declared by the relevant Ministry The countries put under sanction by either UN, EU or OFAC for their policies and practices in relation to money laundering and financing of terrorism Off-Shore Centers, Free-Zones and Financial Centers Tax heavens Countries deemed as risky in international regulations in relation to money laundering and financing of terrorism 12- ENHANCED MEASURES KTPB shall apply, in proportion to the identified risk, one or more or all of the following enhanced measures for the risky situations it has identified in the framework of risk based approach. Obtaining additional information on the customer and updating more regularly the identification data of customer and beneficial owner, Obtaining additional information on the intended nature of the business relationship, Obtaining information, to the extent possible, on the source of the asset subject to transaction and source of funds of the customer, Obtaining information on the reasons for the transaction, Obtaining approval of senior manager to commence or continue business relationship or carry out transaction, Conducting enhanced monitoring of the business relationship by increasing the number and frequency of the controls applied and by selecting the patterns of transactions that needs further examination, Requiring that in the establishment of permanent relationship the first financial transaction is carried out through another financial institution subject to customer due diligence principles SECTION IV - MONITORING AND CONTROL 13- PURPOSE AND SCOPE OF THE MONITORING AND CONTROL ACTIVITIES The purpose of KTPB s monitoring and controlling is to protect the Bank against risks and to monitor and control whether the operations are carried out in accordance with the legislations. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 6
Monitoring and control activities shall be established and applied on a risk-based approach. In this respect, certain monitoring and control methods that suit the nature and level of risks associated with the Bank customers, transactions and services shall be developed and effectively implemented. On the ground of monitoring and control activities, KTPB ensures that the staff carrying out such activities access to in-house information sources. 14- MONITORING AND CONTROL ACTIVITIES Monitoring and controlling carried internally include the following activities: Monitoring and controlling the customers and transactions in the high-risk group, Monitoring and controlling transactions conducted with risky countries, Monitoring and controlling complex and unusual transactions, The Bank s control of consistency of the amount determined by the Bank according to its risk policy with the customer profile, through sampling method. Monitoring and controlling linked transactions which, when handled together, exceed the amount requiring customer identification, Control of customer related information and documents which are required to be kept in electronically or in written form and the information required to be placed in wire transfer messages, completing the missing information and documents and updating them, During the business relationship, ongoing monitoring whether the transaction conducted by the customer is consistent with information regarding business, risk profile and fund resources of the customer, Control of the transactions carried out through using systems enabling the performance of nonface-to-face transactions, Risk based control of services that may become prone to misuse due to newly introduced products and technological developments. SECTION V - TRAINING 15- PURPOSE AND SCOPE OF THE TRAINING Within the context of the relevant national and international legislation about the prevention of laundering proceeds of crime and financing of terrorism, and that of KTPB policies, KTPB employees are given training by the Compliance Officer or a Member of Compliance Unit or through outsourcing. The purpose of this training policy is to ensure the compliance of KTPB with the obligations imposed by the Law on the Prevention of Laundering Proceeds of Crime and Financing Terrorism and the regulations and communiqués issued, pursuant to the Law; to create a corporate culture by increasing the sense of responsibility of staff on policy and procedures of institution and on risk-based approach and to update the knowledge of the staff. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 7
16- TRAINING ACTIVITIES The training program given to its staff by KTPB shall cover at least the following topics: Laundering proceeds of crime end terrorist financing, The stages, methods of laundering proceeds of crime and case studies on this subject, Legislation regarding prevention of laundering proceeds of crime and terrorist financing, Risk areas, Institutional policy and procedures, In the framework of Law and related legislation; o Principles relating to customer due diligence, o Principles relating to suspicious transaction reporting, o Obligation of retaining and submitting, o Obligation of providing information and documents, o Sanctions to be implemented in violation of obligations, The international regulations on combating laundering and terrorist financing. SECTION VI - INTERNAL CONTROL 17- PURPOSE AND SCOPE OF THE INTERNAL CONTROL The purpose of internal control activities carried by the internal control units is to give assurance to the Executive Board regarding efficiency and sufficiency of whole compliance program. KTPB, annually and on a risk-based approach, ensures the investigation and control of the issue of whether the institutional policy and procedures formed in line with the relevant legislation, risk management, monitoring and controlling activities and the training programs are sufficient and efficient and the issue of sufficiency and efficiency of risk policy of the Bank and whether the transactions are carried out in compliance with the relevant laws and the Bank s policies and procedures. 18- INTERNAL CONTROL ACTIVITIES Internal control carried within this framework covers the following activities: The deficiencies, mistakes and abuses determined as the result of internal control and the opinions and proposals for prevention of reappearance of them shall be reported to the Board. While determining the scope of control, the faults detected during the monitoring and controlling activities and the customers, services and transactions containing risk shall be included within the scope of control. While determining the units and transactions to be controlled, the business size and business volumes of the Bank shall be taken into consideration. In this scope, unit and transaction in the quantity and characteristics of which can represent the whole transactions carried out by KTPB shall be ensured to be controlled. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 8
SECTION VII - MISCELLANEOUS 19- SUSPICIOUS TRANSACTION REPORTING Where there is any information, suspicion or reasonable grounds to suspect that the asset, which is subject to the transactions carried out or attempted to be carried out within or through the Bank, has been acquired through illegal ways or used for illegal purposes and is used, in this scope, for terrorist activities or by terrorist organizations, terrorists or those who finance terrorism necessary investigation to the extent permitted by the applicable means shall be carried out and any transaction concluded to be suspicious shall be reported to the FCIB within such term and subject to such conditions defined in the applicable legislation by compliance officer of the Bank. Suspicious transactions shall be reported to MASAK within ten workdays starting from the date when the suspicion occurred. The customers and transactions found suspicious by KTPB branches or Headquarter members, are immediately reported to the Compliance Officer via email or other means by preparing a Suspicious Activity Report. After the additional investigation and assessment of the Compliance Officer, if the activity is still to be found suspicious, it is reported to MASAK by additional information and supporting documents. Maximum care and diligence shall be paid by all concerned parties that are either involved in or aware of the process subject to the applicable law that suspicious transaction reporting as well as the internal reporting within the Bank shall be kept confidential and safe, and the parties involved in the process shall be duly protected. 20- KTPB BUSINESSES OUTSIDE OF TURKEY KTPB businesses outside Turkey are subject to local law that may require or permit suspicious activity reporting to local authorities. Whether or not local law requires suspicious activity reporting, KTPB businesses outside Turkey must refer transactions that are suspicious under the KTPB standard to the Compliance Officer as directed by their businesses policies and procedures. 21- RETAINING OF INFORMATION, DOCUMENTS AND RECORDS Pursuant to the Code on the Prevention of Laundering of Criminal Proceeds and the related applicable legislation, all documents, data and records that should be received and retained in relation to the customers and transactions shall be diligently retained and kept for such term and subject to such conditions defined in the applicable legislation with easy access when and if required. 22- POLICY OWNER This Policy has been prepared by KTPB Compliance Officer taking local regulations into account and approved by Board of Directors of KTPB. 23- EFFECTIVENESS This policy shall take effect on the date of the Board approval. The subsequent changes and updates to come as well, will take effect after the approval of the Board as well. KTPB. Information contained here is for Internal Use only and is proprietary to KTPB. 9