Anti-Money Laundering and Counter-Terrorism Financing Policy

February 2020

1. Introduction

XPAY Group is committed to the highest standards of Anti-Money Laundering (AML) and Anti-Financial Crime (AFC) including Anti-Bribery and Corruption (ABC), Counter Terrorism Financing (CTF), Anti-Fraud and other punishable criminal acts. The members of the Management Board and all employees are required to adhere to these standards to protect XPAY GROUP and its reputation from being misused for money laundering and/or terrorist financing or other illegal purposes. The Federal Republic of Germany is a member country of the Financial Action Task Force (FATF) and the European Union (EU) and has enacted laws and rules designed to implement the anti-money laundering policies of both FATF and the EU. The goal of these laws is to detect and prevent money laundering and potential terrorist financing. XPAY GROUP will adhere to all applicable laws and regulations in all countries where it conducts business, or has business relationships to. XPAY GROUP will examine its AML and AFC strategies, goals and objectives on an ongoing basis and maintain an effective program for the its business that reflects the best practices for a diversified, global financial services provider. XPAY GROUP addresses all AML-related topics, especially Know Your Customer (KYC), ABC, Sanctions & Embargoes and Anti-Fraud.  For all these topics XPAY GROUP has implemented clear rules, transactions and accounts monitoring which must be complied with by all XPAY GROUP appointed staff.

2. Governance Framework

The Compliance Department reports directly to the responsible member of the Management Board.  It is responsible for group-wide adherence to applicable AML and Financial Crime regulations and obligations derived from the German AML Act (GwG). In addition, the Compliance Department is responsible for establishing and maintaining XPAY GROUP’s AML program to identify, assess, monitor and manage risks related to Money Laundering, terrorist financing and Financial Crime.

3. Policies and Procedure

XPAY GROUP has developed a clear set of policies and procedures outlining its general AML standards and principles. Detailed documents ensure that these standards are implemented into day-to-day business.  All policies and policy-related documents have to be published on an electronical platform so they can be accessed by all staff at any time. They are subject to a regularly review cycle to ensure their conformity with AML regulations.

4. Money Laundering and Terrorist Financing

Money laundering involves disguising financial assets so they can be used without detection of the illegal activity that produced them.  Through money laundering, the criminal transforms the monetary proceeds derived from criminal activity into funds with an apparent legal source.  Money laundering is generally viewed as a three-stage process: placement, layering and integration.

  • Placement:  The physical movement of funds from illegal activity to a place less suspicious to law enforcement, and more convenient to the criminal, such as financial institutions or the retail economy.  For example, placement can occur through breaking up large amounts of cash into less conspicuous smaller sums deposited directly into a bank account or prepaid card, or by purchasing a series of monetary instruments or gift cards.  Placement will often involve the practice of structuring, which is the illegal practice of breaking up large sums of money into small in order to avoid reporting requirements.
  • Layering:  The he process of separating proceeds from their illegal origins by using multiple, complex financial transactions.  In this stage, funds may be channeled through the purchase or sale of investment instruments, or by wire transfers through accounts at various institutions.
  • Integration: At this stage, illegal proceeds re-enter the legitimate economy and are converted into apparently legitimate business earnings through normal financial or commercial operations.  For example, a money launderer might invest in a business venture, real estate, or luxury assets.

While terrorist financing is generally accomplished using the same methods, the ideology behind terrorist financing is vastly different from money laundering.  Instead of trying to convert criminal funds into apparent legitimate funds, terrorist financing can also involve legitimate businesses and individuals providing funding for terrorist organizations or activities based on ideological, political, or other reasons.

5. Prohibited Business Relationship

XPAY GROUP must refuse to open an account/enter into a relationship or has to close an existing account/terminate a relationship, if the company cannot form a reasonable belief that it knows the true identity of the client and/or UBOs and/or the nature of business or formal requirements concerning the identification of the client and/or UBOs are not met.

In particular, the XPAY GROUP will not

  • Accept assets that are known or suspected to be the proceeds of criminal activity
  • Enter into/maintain business relationships with individuals or entities known or suspected to be a terrorist or a criminal organisation or member of such or listed on sanction lists
  • Maintain anonymous accounts, accounts for shell banks or pay-through accounts
  • Enter into relationships with clients from Special Risk Countries or
  • Enter into relationships with clients operating in prohibited industries:
    • Check Cashing
    • Child or Animal Pornography
    • Collection Agencies
    • Bestiality
    • Unlawful Pharmaceutical Sales
    • Drug Paraphernalia Sales or Manufacturing
    • Unlawful Gambling
    • Rape, Violence or Hate Crimes

6. Research and Filing of Suspicious Activity Reports (SARs)/Suspicious Transaction Reports (STRs)

Suspicious activities must be properly handled and escalated within the respective XPAY GROUP legal entity. Regular AML training ensures that staff are reminded of their duty to timely report any suspicious activity to a respective Compliance Manager.

7. Management and Controls of AML and AFC Risk

XPAY GROUP has developed and implemented a comprehensive set of measures to identify, manage and control its AML risk. These measures are:

  • Transactions Monitoring and Reporting
  • Account Monitoring and Reporting
  • A robust “Know Your Customer” (KYC) program for both, corporate and personal accounts
  • A training and awareness program for XPAY GROUP staff
  • A sound “Political Exposed Persons” (PeP) and Sanctions screening process

7.1. Risk Analysis

XPAY GROUP has implemented an ongoing AML Risk Analysis to assess the level of risk exposure considering the company’s customers, products, services, entities and geographic locations risk and to derive appropriate security measures from this analysis. AML safeguards are derived from the results of the AML Risk Analysis.

7.2. Controls

Adherence to the company’s AML program has to be reviewed regularly to ensure that the company’s efforts are successful. Compliance and AML analysts in XPAY GROUP are therefore in charge to conduct appropriate controls. The company understands it must ensure, by implementing adequate customer- and business related controls, that all applicable AML requirements are being adhered to and security measures are properly functioning.

7.3. KYC Program

XPAY GROUP has implemented a sound KYC program to ensure all kinds of customers (natural or legal persons or legal structures) are subject to adequate identification, risk rating and monitoring measures.

KYC includes not only knowing the clients and entities the Company deals with (either as a single transaction or ongoing relationship), or renders services to, but also the Ultimate Beneficial Owners (UBOs), Legal Representatives and Authorised Signatories as appropriate. The program includes strict identification requirements, name screening procedures and the ongoing monitoring and regular review of all existing business relationships. Special safeguards are implemented for business relationships with politically exposed persons (PEPs) and clients from countries or industries deemed high risk.

7.4. Training Program

XPAY GROUP has implemented a comprehensive AML/AFC training program to ensure that all staff, in particular individuals responsible for transaction processing and/or initiating and/or establishing business relationships, undergo AML awareness training.

XPAY Group’s training is tailored to the business to ensure that staff are aware of different possible patterns and techniques of money laundering which may occur in their everyday business. Training also covers the general duties arising from applicable external (legal and regulatory), internal requirements and the resulting individual duties which must be adhered to in everyday business as well as typologies to recognise money laundering or financial crime activities.

7.5. Embargo Program

Compliance with all applicable embargoes is mandatory within XPAY GROUP and for all XPAY GROUP employees. All EU embargo regulations and all German embargo regulations are binding for the whole XPAY GROUP. U.S. embargoes generally apply to U.S. persons and any entity, regardless of their place of domicile or work or where organised, and any individual causing activity with the U.S., whether from inside or outside the U.S.

7.6. Anti-Bribery and Corruption and Anti-Fraud

XPAY GROUP does not tolerate bribery, or any form of corruption. All XPAY GROUP employees and third parties that act on XPAY GROUP’s behalf are strictly prohibited from having any involvement in acts of bribery and corruption.

XPAY GROUP has implemented an Anti-Fraud Program to ensure that the Company is not misused for purposes of or that employees do not commit or contribute to any fraudulent activity.

8. Record Retention

All data obtained according to client identification and AML security measures must be documented.  Records must be kept for a minimum of 5 years, notwithstanding potentially longer retention periods under local civil or commercial law.

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