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PLD/ FTP

PLAN TO PREVENT MONEY LAUNDERING, FINANCING TERRORISM AND FINANCING WEAPONS OF MASS DESTRUCTION

 

PRESENTATION

 

LGBANK was founded in 2020, it is a digital financial institution, "fintech", completely dedicated to Blockchain and Cryptocurrency technology, wanting to lead this current economic and financial revolution, becoming one of the precursors of global changes in currency circulation, in order to bring together enthusiasts of this revolution, defend their legitimate interests, strengthen relations between USERS and promote the safe and transparent development of their activities.

 

LGBANK, in partnership with Feitosa & Arrais Advocacia Especializada, prepared this Plan in compliance with the entire regulatory framework relating to the Prevention of Money Laundering and the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction (PLD/FTP ).

 

This is a plan aimed at clarifying, in a simple and objective way, how the USERS of the LGBANK platform should act and the care they must take to comply with the practices of Prevention of Money Laundering, Financing of Terrorism and Financing of Arms of Mass Destruction (PLD/FTP), providing guidance on the policy, internal risk assessment, KYC, KYP and KYS procedures and internal controls adopted. We made a point of preparing practical and direct material, making it easier for the USER to understand the topic.

In addition to making communication more fluid, helping in the process of gaining efficiency and reducing risks, the PLD/FTP is yet another action by LGBANK with a commitment to getting closer to USERS, ensuring safe use of the platform and fulfilling the necessary requirements together with national and international regulatory bodies, in compliance with the provisions of arts. 10 and 11 of Law No. 9,613/98, Law No. 12,683/12 (Money Laundering Laws), Law No. 13,260/16, Law No. 13,810/19, Law 13,874/10 and Decree 9,825/19 (Laws Combat Financing of Terrorism).

 

I wish you all a good read!

 

Luiz Góes

President of LGBANK

 

INTRODUCTION

 

In 2019, Brazil presented its worst result since the creation of the PLD/FTP indicator, created in 2012. Today the country occupies the 106th (hundred-sixth) position in a ranking composed of 180 (one hundred and eighty) countries.

 

At the heart of this perception is Operação Lava Jato, which completed 5 (five) years of existence in 2019, and recovered the equivalent of more than BRL 4 billion, with the forecast that, by the end of the operation, it will recover The amount of BRL 14.3 billion was raised, an operation ended in 2021 for political reasons. During this period, there were162 (one hundred and sixty-two) temporary arrests and 165 (one hundred and sixty-five) preventive arrests. Among the accused: political agents and businessmen of great importance to the Brazilian economy.

 

The recognition of corruption as a national problem, which emerged for Brazilians from Operation Car Wash, is comparable to what was presented to several developed countries, notably the United States of America, when the discovery of what was called the "Watergate Case ”, in the year 1974.  This corruption scandal, which culminated in the resignation of the US president.

 

The repercussion of this case had a strong connection with the establishment of Conventions in Public International Law, which are part of the Brazilian legislative construction that enabled the theme of this Plan.

The first Convention that we understand to be relevant to the normative panorama that guides this Plan is the Convention against the illicit trafficking in narcotics and psychotropic substances, from 1988 (“Vienna Convention”). The Vienna Convention was responsible for the signature of representatives of 31 (thirty-one) countries, including Brazil, in an agreement in which the States Parties committed themselves to criminalizing the practice of money laundering. This Convention entered into Brazilian law through Presidential Decree No. 145, of June 26, 1991. Due to the internalization of the Vienna Convention, the first Brazilian law to specifically address the issue of money laundering was enacted, namely the Law 9613/1998.

Two years after the enactment of Law 9613/98, the United Nations Convention against Transnational Organized Crime of 2000 (“Palermo Convention”) was established. Article 7 of the Palermo Convention provides for measures to combat money laundering to be internationally standardized, including the need for Member States to institute, for banking and non-banking financial institutions, the adoption of tools capable of: ( i) identify customers; (ii) register operations; and (iii) report suspicious transactions. The provisions of this Convention entered our legal system as of March 12, 2004, the date of publication of Presidential Decree No. 5,015.

In addition to the adherence and influence of these Conventions, the set of regulations in Brazil regarding PLD/FTP is notably related to the activity of international bodies that have in their scope the fight against this kind of illegal. The most important international body for the action of the competent authorities in relation to money laundering is the International Financial Action Task Force (“FATF/FATF”). Created in 1989, at a meeting of the G-7, the FATF/FATF is an intergovernmental body that aims to develop and promote national and international policies to combat money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction.

In order to fulfill this objective, the FATF/FATF published, in 1990, 40 (forty) Recommendations, which serve as a guide for countries to adopt standards and promote the effective implementation of legal, regulatory and operational measures to achieve the best practices in PLD/FTP.

In attention to the GAFI/FATF Recommendations, and with a view to developing a culture of PLD/FTP in Brazil, the Ministry of Justice created, in 2003, the National Strategy to Combat Corruption and Money Laundering ("ENCCLA ”),  the main  Brazilian network of articulation between bodies of the Executive, Legislative and Judiciary branches of the federal and state and, in some cases, municipal spheres, as well as the Public Ministry of different spheres, for the formulation of public policies and solutions aimed at PLD/FTP.

Legal Definition:

Law 9613/98, updated by Law 12683/12, is the main law to combat money laundering.

“Provides for crimes of laundering or concealment of assets, rights and values; the prevention of the use of the financial system for the illicit activities provided for in this Law; creates the Financial Activities Control Council - COAF, and takes other measures."

FINANCING TERRORISM AND FINANCING THE PLORIFERATION OF WEAPONS OF MASS DESTRUCTION.

Terrorist financing is the process of covertly distributing funds to be used in terrorist activities. Such resources are generally derived from the activities of other criminal organizations involved in drug, arms and ammunition trafficking and smuggling, or may be derived from illicit activities, including donations to "facade" charities. The methods used by terrorists to disguise the link between them and the sources of funding are generally similar to those used in the commission of the crime of money laundering. However, terrorists usually use resources obtained legally in order to reduce the risk of being discovered before the terrorist act.

Legal Definition: LAW No. 13.810/2019

"Provides for compliance with sanctions imposed by resolutions of the Security Council of the United Nations, including the unavailability of assets of natural and legal persons and entities, and the national designation of persons investigated or accused of terrorism, its financing or acts correlated to it; and revokes Law No. 13,170, of October 16, 2015.”

DECREE No. 9,825, OF JUNE 5, 2019

"Regulates Law No. 13,810, of March 8, 2019, to provide for compliance with sanctions imposed by United Nations Security Council resolutions and designations of its sanctions committees, including the unavailability of assets of natural and legal persons and entities, and the national designation of persons investigated or accused of terrorism, its financing or related acts.”

LAW No. 13,260, OF MARCH 16, 2016

“Regulates the provisions of item XLIII of art. 5 of the Federal Constitution, disciplining  Terrorism, dealing with investigative and procedural provisions and reformulating the concept of a terrorist organization; and amends Laws No. 7,960, of December 21, 1989, and 12,850, of August 2, 2013.”

RESPONSIBILITY AND ATTRIBUTIONS

 

All LGBANK Collaborators, notably within their corresponding activities, have functions and responsibilities related to PLD/FTP.

The positions mentioned below are identified as having direct roles and responsibility for the Plan. Executive Board LGBANK's Executive Board sponsors the Policy, being responsible for ensuring that the Plan (PLD/FTP) receives adequate support.

Effective responsibility for complying with the provisions of this Policy rests with the manager of the corresponding area.

It is also up to the aforementioned Officers to determine the institutional guidelines based on values and principles established in this Policy, in LGBANK's internal control rules, in the rules issued by regulatory and self-regulatory bodies and entities, in addition to the best applicable practices.

Compliance

Responsible for managing and controlling the procedures of this Plan; Supervise compliance with the rules relating to the Prevention of Money Laundering and the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction (PLD/FTP); Observe ethical standards in conducting business, establishing and maintaining relationships with Customers; Update the information contained in this document, based on applicable legislation and standards, and when requested by LGBANK's data protection and risk mitigation sector; Periodically review the Policy or whenever material facts pointed out by the internal and external auditors occur; Monitor daily occurrences about atypical/suspicious operations reported to Management; Provide access to this material to all LGBANK Employees; Carry out internal checks annually to ensure compliance with current regulations; Make communications to COAF - Council for the Control of Financial Activities, in accordance with Money Laundering Law and Ordinance No. 36/2021; Analyze new products and services in order to identify vulnerabilities from the perspective of preventing Money Laundering and Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction; Monthly sanitization of the customer base on restrictive lists; Sanitization of the customer base on the PEP list (semi-annual in years after election years and annual in other years).

Create training programs that address the requirements of the AML/FTP Program;

Internal Audit

The Internal Audit is outsourced and performed by Sumsub. It is responsible for reviewing and evaluating, and authenticating in real time the registration data of LGBANK customers, focusing on efficiency in terms of implementation and registration controls.

Registration Area

It is the responsibility of the registration department to comply with all the precepts contained in the Rules and Procedures Policy of the Registration department (“Registration”), with special attention to: Identification and verification of customer data and legal representatives (name, profession, identification document, full address, telephone number and reference sources, among others); Research on the client's professional activities (in Brazil and abroad); Update of the Register in a period not exceeding the period required by the regulations, every two (two) years; Consultations with Compliance when there is evidence of irregularity or doubt as to the procedure to be adopted for the proper referral of the process; Identification of PEP Clients, Clients residing in a border region, who follow a particular procedure with the implementation of the process only after explicit authorization from the Compliance area.

Operators and Commercials They must observe the aspects related to the PLD/FTP Policy and compliance with the rules, especially in view of the activity of funding, intermediation and negotiation, adopting the best practices regarding the process - Know your client ("KYC"), and, also, communicate to the Compliance area the activities considered suspicious, being the supervision of the areas of responsibility of the respective Director.

Regarding the monitoring of operations and procedures related to KYC, operators and commercial advisors, in the quality of Employees of LGBANK, and also the corresponding Director in charge, must consistently meet the requirements of the procedure referring to the process adopted by LGBANK, together with the Registration and Customer Service area.

Sector for the Prevention of Money Laundering and the Financing of Terrorism and the Financing of the Ploriferation of Weapons of Mass Destruction Responsible for approving/reviewing the Money Laundering and Financing of Terrorism Policy and the Financing of the Ploriferation of Weapons of Mass Destruction and  additionally,  evaluate  cases  of  evidence of  money laundering  that were the subject of communication to COAF and carry out the ratification  of the reported occurrences.

The responsible sector must also deliberate on the PLD/FTP procedures in progress and recommend risk mitigating actions that ensure the correct performance of LGBANK's activities.

Human Resources

Responsible for adopting controls regarding the knowledge of Employees at the beginning of their activities in the company, as well as making sure that all Employees have completed the annual PLD/FTP Plan training.

Information Technology

Responsible for ensuring that LGBANK systems are properly functioning, ensuring the resolution of any failures in the shortest possible response time.

Other Employees

They must immediately report to the Compliance department any proposal, situation or operation considered atypical or suspicious and keep the report made confidential, taking care not to inform the Client or the person involved about the occurrence or situation to him. related.

PREVENTION ACTIONS

The entire procedure for identifying and monitoring activities related to the prevention of money laundering begins with the customer registration. Therefore, to ensure compliance with sound risk management practices, the client's activities must be periodically reviewed with the updating of registration information in accordance with the rules issued by regulatory and self-regulatory bodies.

Among the measures adopted to combat and prevent the flow of possible illicit transactions, the following stand out: “Know Your Client”, “Know Your Employee” and “Know Your Partner” procedures listed in this Plan;

Investments in Personnel Training; Investments in control and monitoring tools, which allow the detection of atypical operations; and Procedures for prior consultation of the Compliance area, by security managers, on new clients and/or new operations.

Communication between the Compliance area and the Executive Board and/or Security Sector of LGBANK is done dynamically, in order to speed up decision-making processes, especially if there are situations mentioned in the last two topics above.

As established in this Plan, LGBANK does not develop relationships with "Front Banks", nor with customers who do not have a permanent address or carry out activities in a country under economic sanctions or other relevant sanctions by recognized national or international bodies.

LGBANK also does not establish business with individuals and/or legal entities that have proven involvement in fraud and financial crimes, or with individuals or legal entities whose identification cannot be confirmed, or who provide incomplete, false or inconsistent information.

The monitoring tools offer LGBANK full control of its activities, allowing any suspicious transactions to be promptly analyzed for proper communication to Organs competent bodies and compliance with current legislation.

KNOW YOUR CLIENT – “KNOW YOUR CLIENT – KYC”

This is a recommendation by the Basel Committee in which financial institutions should establish a set of internal rules and procedures with the objective of knowing their client, seeking to identify and know the origin and constitution of the clients' assets and financial resources.

As a way of complying with this recommendation, LGBANK establishes, in the Customer acceptance process, not to maintain a relationship with people who show any evidence of relationship with activities of a criminal nature, especially those allegedly linked to drug trafficking, terrorism or organized crime, who have business whose nature makes it impossible to verify the legitimacy of the activities or the origin of the resources moved, or they refuse to provide the information or documents requested.

Knowing the client itself is a critical element in risk management and the adequacy of a Policy in this regard helps to protect the reputation and integrity of institutions and the financial market, being essential that LGBANK Employees obtain sufficient knowledge about clients, in order to in order to ensure transparent negotiation with individuals, legal entities and any other reputable financial or non-financial institutions.

In compliance with best market practices, and in compliance with internal financial market regulations, LGBANK performs several procedures related to the KYC process, which includes internal procedures and policies related to the acceptance and registration of customers that are practiced by all areas risk generators of LGBANK.

For Individual customers, an alternative registration process is adopted so that all registration data validation is carried out electronically and automatically through integrations with data bureaus. The system used was developed by the company Sumsub.

The registration forms of active Customers must be updated in periods not exceeding 24 (twenty-four) months. All customers are subjected to analysis of restrictive lists:

(i) List of Sanctions, which includes the names of individuals (including suspects, accused, convicted or fugitives) and legal entities, countries, governments and their agents, criminal organizations, terrorists, traffickers, or who have any type of commercial and economic embargo ; and (ii) List of Negative Media, which contains an extensive base of profiles that have been linked to illicit activities; and (iii) List of Politically Exposed Persons, which includes the persons defined as PEP and their related persons in the form of current regulations.

The active customer base is submitted to the restrictive lists described above through Sumsub's system. The results presented are constantly evaluated by Compliance analysts who classify the occurrences as “False Positive” (false positive) or “True Match” (positive identification). In the event that an analysis raises doubts regarding the status, the case may be escalated to the Superior of Compliance who will decide on the filing or positive classification - "True Match".

In turn, the Internal Audit performs periodic checks, by sampling, in order to identify the adequacy of the client's registration to LGBANK's internal procedures through annual verification tests, as determined by Ordinance No. 36/2021 ("COAF") .

Any unusual situation in the client's operational behavior when identified by the responsible advisor must be immediately reported to the Compliance area.

Reinforced Due Diligence Process - Persons with Special Monitoring [SME] Employees linked to the areas of registration and customer acquisition must pay special attention to customers identified as having high sensitivity, which are classified as:

(i) Politically Exposed Persons;

(ii) Persons cited in communication vehicles or other media for involvement in criminal activities;

(iii) Lotteries, commercial development companies, gas stations, tourist agencies, churches, temples or other religious entities, NGOs;

(iv) Customers residing or headquartered abroad, in Brazilian border municipalities and on the triple border of Foz do Iguaçu;

(v) People from tax havens and sensitive countries, due to the fragility of the regulatory environment, the level of corruption and controls in the prevention and fight against the crime of money laundering;

(vi) Customers residing, headquartered in or maintaining relationships with tax-favored countries (tax havens).

Politically Exposed People

Politically exposed people are considered to be [PEPs] those people who perform or have performed, in the last 5 (five) years, positions, jobs or relevant public functions, in Brazil or in other countries, territories and foreign dependencies, as well as their representatives, family members and other people with their close relationship.

 

The client, at the beginning of the relationship with LGBANK, must self-declare his situation as a politically exposed person. Additionally, LGBANK has a list of PEPs, prepared by a private company. The consultation is performed automatically when the Client enters the platform, and at least annually for other Clients (sanitization performed by the Sumsub system).

 

Countries that deserve special attention [Sensitive Countries]

According to FATF and internal regulatory bodies, there are countries that deserve special attention because they do not have an adequate legislative and regulatory framework regarding the Prevention of Money Laundering, Financing of Terrorism and the Financing of Weapons of Mass Destruction (PLD/FTP) , which makes such places more prone to the practice of these crimes.

 

The purpose of LGBANK is not to inhibit legitimate business in the identified jurisdictions, nor to unjustifiably terminate the relationship, but to assess the risk inherent in the relationship with customers originating in said locations. In fact, the operations and/or negotiations carried out by such clients will have special attention in terms of monitoring by the Compliance area.

KNOW YOUR EMPLOYEE – “KNOW YOUR EMPLOYEE – KYE”

LGBANK adopts a rigid and transparent posture in the hiring of its employees and in the accreditation of its autonomous investment agents.

 

Before joining the company, all candidates must be interviewed by the Recruitment department and the Board of Directors (when applicable). Requirements related to reputation in the market and profile will be evaluated, as well as the candidate's professional background.

 

In addition to these procedures, LGBANK promotes periodic training on the concepts of its Code of Ethics and Conduct and this Policy, enabling its employees to know about prohibited activities and the institution's principles.

KNOW YOUR PARTNER – “KNOW YOUR PARTNER – KYP”

LGBANK will only do business with reputable Third Parties with an excellent reputation, with adequate technical qualifications and who are expressly committed to adopting the same zero-tolerance policy regarding corruption and crimes in this Plan.

To this end, LGBANK carries out a prior analysis of the background, qualifications and reputation (Due Diligence) of its partners and service providers, seeking to remove any doubts regarding its ethical values, suitability, honesty and reputation, carefully checking any evidence that may indicate Third Party's propensity or tolerance for acts of corruption. The procedures will be proportional to the risks faced by Ativa in each engagement.

 

The process of selecting and hiring service providers are activities of paramount importance within LGBANK, both for compliance with regulatory issues and for mitigating legal and reputational risks.

Due diligence consists of the analysis process, which is essential for confirming the data provided by service providers in selection processes. We believe it is important to work with clients with a healthy economic and financial situation and who assume their legal, regulatory, labor, social and environmental responsibilities, in order to avoid image risk.

New service providers must be evaluated by the requesting area and forwarded to the legal department. Before the analysis of the contract, the legal department will forward the new supplier to the Compliance area, which will carry out a due diligence and decide whether or not to approve the new service provider.

If no discrediting information is found, the Compliance area will approve the contracting of the service provider and authorize the legal department to start the contractual analysis and negotiation with the company.

INDICATIONS OF PREVENTION OF MONEY LAUNDERING AND TERRORISM FINANCING

In accordance with the provisions of the aforementioned regulation, it is extremely important that all trainees, employees, service providers, independent agents and partners are aware of the operations that constitute evidence of money laundering and terrorist financing. The following operations are considered as evidence of money laundering and terrorist financing:

  • Whose values ​​appear objectively incompatible with the professional occupation and the declared patrimonial financial situation;

  • Carried out between the same parties or for the benefit of the same parties, in which there are consecutive gains or losses with respect to any of the parties involved;

  • Evidence of significant fluctuation in relation to the volume and/or frequency of trades of any of the parties involved;

  • Whose developments include characteristics that may constitute an artifice to circumvent the identification of the effectives involved and/or respective beneficiaries;

  • The characteristics and/or developments of which show persistently acting on behalf of third parties;

  • Private transfers of funds and securities for no apparent reason;

  • Where it is not possible to identify the final beneficiary;

  • Whose degree of complexity and risk appear to be incompatible with the technical qualification of the client or its representative. The following practices can also be configured as evidence of money laundering:

  • Resistance to providing the necessary information for the account;

  • Declare several bank accounts and/or change them regularly;

  • Authorize an attorney who has no apparent link.


TREATMENT OF OCCURRENCES AND COMMUNICATION TO COMPETENT BODIES
Once the occurrence is generated, it will be up to Compliance to analyze the client's registration, operations and transactions. Once the need is verified, Compliance may request various measures such as updating the registration and requesting clarification from the client's advisor.

Only after all the deadlines for regularizing any non-compliance situation have elapsed or if, after all the analyses, the indication of the occurrence of PLD/FTP crimes is confirmed, a report on the case should be reported to the members of the PLD/FTP Committee , which will decide whether or not to communicate it to COAF and/or to Organs regulatory and self-regulatory bodies of the capital market.

 

Cases not considered critical by the data security area or when the evidence of money laundering crime is not confirmed are closed with the filing of the event.

 

All information dealing with indications / suspicions of money laundering and combating the financing of terrorism are confidential and should not, under any circumstances, be made available to third parties.

 

TRAINING

 

Despite the fact that LGBANK conducts its business in accordance with the highest ethical standards, in compliance with the legislation, rules and regulations relating to financial institutions with regard to preventing and combating money laundering, it is not possible to deny the understandable possibility that it is not always possible to determine whether a transaction originates from or forms part of criminal activity. Indeed, in order to mitigate such occurrence, LGBANK pays, within the Program, special attention to the training of its Employees so that they carry out their activities in accordance with the elementary principles outlined below.

 

LGBANK has a security training program, with the purpose of establishing an information channel for Employees on the subject and on the PLD/FTP Policy, which must be given to Employees and members of the Executive Board annually and its performance is mandatory on the part of of the entire company.

 

Maintenance of Information and Records

The documents relating to the operations, including the recordings and registration documents, must be filed for a minimum period of 5 (five) years from the closing of the account or the conclusion of the last transaction carried out by the customer.

 

Information related to the registration of transfer of resources must be filed for a minimum period of 5 (five) years.

 

Policy Update

The update of this Policy should occur whenever there are substantive changes in procedures or regulations that affect the topic, being the Compliance area's responsibility to monitor legal and institutional innovations.

From time to time, LGBANK may publish additional, complementary and/or updated policies and rules, and the necessary disclosure must be given to Employees.

infractions

Violation of this Policy and other rules will give rise to unilateral contractual termination by LGBANK, free of any charge.

CONCLUSION

LGBANK, governed by commercial ethical principles, does not share illegal practices of criminal harassment of the national financial system. With an unblemished reputation in the international market, it now brings to Brazil the experience of protecting its financial operations and those of its users from practices that threaten financial, fiscal, tax and criminal security, in accordance with current national legislation.