ACTIVITIES OF АК BARS BANK ON THE PREVENTION OF MONEY LAUNDERING AND TERRORISM FINANCING GENERAL PROVISIONS

Activities of AK BARS Bank (hereinafter - the Bank) are aimed at protecting the rights and legal interests of citizens, society and state through the implementation of internal controls in order to counter the laundering of proceeds from criminal activity and terrorism financing (hereinafter - the AML/CFT) implemented in order to minimize the legal, reputation and, consequently, the financial risk.

The Bank’s Policy on AML/CFT stipulates the general framework of internal AML/CFT controls in order to mitigate the above mentioned risks.

When implementing internal control for AML/CFT the Bank follows Russian laws and regulations in this sphere and Bank’s internal documents.

DEFINITIONS

Bank – AK BARS Bank (including the head office, branches, additional offices, credit and cash offices, stand-alone cash desks, stand-alone cash desks outside cash offices, exchange offices, as well as other internal business units, under regulations of the Bank of Russia);

Internal controls for AML/CFT - a set of measures taken by the Bank in order to counteract the legalization (laundering) of proceeds from criminal activity and terrorism financing;

Foreign politically exposed persons (hereinafter - FPEP) - any appointed or elected person holding any position in the legislative, executive, administrative or judicial authority of the foreign state, or person executing any public function for a foreign state, including functions for public agency or a public enterprise or person who has been entrusted with prominent public position less than 1 year ago.

Customer - Any individual, private entrepreneur or legal entity, that is accepted or being serviced in AK BARS Bank, as well as respondent bank or any other bank (Russian or foreign), with which AK BARS Bank is making a deal.

Responsible officer - an official responsible for the development and implementation of Rules of internal control, program implementation and other internal arrangements for such purposes, as well as for organizing a presentation of information to the Authorized body for counteract the legalization (laundering) of proceeds from criminal activity and terrorism financing;

Responsible officer for countering the legalization (laundering) of proceeds from criminal activity and terrorism financing (hereinafter - AML/CFT Responsible) - Officer of the Bank involved in the implementation of banking operations and other transactions, directly organizing and leading the work in his unit on countering the legalization (laundering) of proceeds from crime and terrorism financing (AML/CFT Responsible is appointed by the order of the Chairman of the Management Board);

The Authorized body - the State body (bodies), receiving suspicious transactions reports and other messaged sent by the Bank in accordance with national AML/CFT laws and regulations.  

GENERAL PRINCIPLES OF WORK ON AML/CFT

The main principles of AML/CFT are:

• participation of all employees of the Bank, regardless of position, within their competence in identification of the activities of individuals, private entrepreneurs and legal entities who are served by the Bank, transactions subject to mandatory control, and other operations with money or other property related to the legalization (laundering) of proceeds from criminal activity and terrorism financing;
• confidentiality of internal documents of the Bank, designed to AML/CFT;
• confidentiality of information on accounts and deposits of Customers of the Bank, about Customers and their operations, as well as other information, as defined by the Bank;
• exclusion of the involvement and participation of Bank staff in the implementation of the legalization (laundering) of proceeds from crime and terrorist financing.

Responsibility for the establishment and effective maintenance of AML/CFT systems and controls rests with the senior management of the Bank.

Responsible Officer and AML/CFT Responsible are appointed in the Bank.

The senior management receives timely information on the effectiveness of the Bank’s Rules of internal controls for AML/CFT.

The Bank has developed programs of internal control for AML/CFT, which include:

• arrangement of work on AML/CFT;
• Customers’ identification and identification of beneficiaries;
• a program to reveal operations in Customer’s activity which are subject to mandatory control and other operations with money or other property connected with legalization (laundering) of proceeds from criminal activity and terrorism financing;
• monitoring of a Customer or a Customer’s transactions, the beneficiary in order to confirm reasonableness of the suspicion that a Customer launders the proceeds from criminal activity and terrorism financing;
• a program for documental fixing of information;
• a program for storage of records and documents obtained as the result of implementation of the programs of internal controls for AML/CFT;
• staff training procedures in AML/CFT;
• a program defining the procedure of refusal to sign in the agreements of bank account (deposit) with individuals and legal entities and rejection of Customer's orders;
• a program that defines the order of work in the Bank to suspend operations with cash resources or other property.

The internal AML/CFT documents are regularly revised in order to bring them into line with the changes of Russian legislation, the emergence of new banking products and / or other changes in the Bank's business profile.

STATUS AND RESPONSIBILITIES OF THE RESPONSIBLE OFFICER

The Responsible Officer of the Bank holds a leading position, has experience and credentials that are sufficient for making independent decisions in carrying out his responsibilities.

Responsible Officer arranges implementation of internal controls for AML/CFT, including programs for its realization.

The Responsible Officer is responsible for the Bank’s compliance with the national AML/CFT laws and regulations and Bank's internal control requirements and ensures that all staff abide by the internal AML/CFT rules and procedures.

The Responsible Officer is further responsible for organizing the procedure of reporting to the Authorized body. It is also his responsibility to respond promptly to any reasoned request for information made by this Body, national supervisory or law enforcement authorities.

The Responsible Officer reports annually to the senior management of the Bank on the effectiveness of the Bank’s AML/CFT strategy and existing money laundering/terrorism financing risks.

AML/CFT PROCEDURES CUSTOMER DUE DILIGENCE

The Bank identifies and examines Customers, when making bank transactions and other transactions in accordance with the Russian legislation, the requirements of regulatory acts of the Bank of Russia and the internal regulations of the Bank.

The Bank takes reasonable and available measures to establish and identify the beneficiaries, that is the Bank takes appropriate and reasonable steps to determine whether a Customer is acting on behalf of third parties and to identify individuals to whose benefit acts a Customer, except as provided by Russian legislation.

During the initial appeal of a Customer to the Bank for opening an account or securing a bargain, or making the transaction, the Bank gets information and documents from a Customer which allows to identify and examine a Customer, to establish and identify a final beneficiary. When identifying a Customer, the Bank obtains a range of information from a Customer and verifies this information (or part of it) by reference to reliable, independent source documents, databases or information.

All documents enabling to identify and examine a Customer, as well as data provided by a  Customer to establish and identify a final beneficiary, should be valid on the date of their presentation.

Due diligence procedure is not carried out in cases defined by Russian law unless the Bank became aware or the Bank suspects that the activity of a Customer or a separate transaction involves the laundering of proceeds of criminal activity or terrorism financing.

Identification requirements for new individual Customers

Identifying an individual, the Bank researches the following information:

• full name,
• residential address,
• date and place of birth,
• identification documents,
• other information required by Russian laws and regulations.

When business is conducted face-to-face, the Bank employees have to require originals of any documents used for identification. Documentary verification of Customer’s identity is accomplished only on the basis of documents considered as evidences of identity by Russian law and regulations.

Bank does not open accounts (deposits) to individuals without personal presence of a person opening the account (deposit), or his representative.

Foreign politically exposed persons (hereinafter - FPEP)

As regards to FPEP, in addition to the standard data obtained about an individual the Bank:

• determines, using a risk-based approach, whether a Customer is a FPEP;
• obtains appropriate senior management approval for establishing or maintaining business relationships with such Customers;
• takes reasonable measures to establish the source of wealth and source of funds of such Customers; and
• conducts enhanced ongoing monitoring of the operations of the FPEP.

New and existing Customers may not initially meet the definition of a FPEP. The Bank takes reasonable and available means to obtain information relating to possible changes in the status of its Customers in connection with their involvement in political and public activities.

Identification requirements for corporate customers

The Bank takes necessary measures to obtain a complete information on the legal form of a Customer - legal entity, its structure, ownership, and obtains sufficient additional information on the nature of a Customer’s business and the reasons for his interest in a banking product.

The Banks establishes the following information in relation to the legal entity:

• full name,
• registration number,
• registered address in country of incorporation,
• business address, location of management and administration,
• list of administrative bodies and all directors (or equivalent),
• other information required by Russian law.

The Bank should identify the organizations acting as intermediaries, and in cases when intermediaries act in favor of other persons, identify such persons, except cases (if any) set by Russian law.

For operational purposes the Bank should have a list of persons authorized to sign payment instructions on behalf of a Customer, and have the documents confirming the right of these persons to sign such instructions.

Establishing correspondent relations the Bank ascertains whether the Correspondent takes measures to counteract the legalization (laundering) of proceeds from criminal activity and terrorism financing, including the identification and studying Customers.

The Bank does not establish correspondent relationships and does not carry out transactions with financial institutions that have no AML/CFT controls.

The Bank does not establish or maintain relations with non-resident banks which do not have their permanent management in a jurisdiction where they are registered.

Updating Customer files

In order to keep the information about Customers up to date, the Bank reviews and updates existing Customer’s documents and records not less than once every three years. The review and update of information about clients with a high level of risk is carried out at least once a year. Also, review and update information on a Customer can be performed, if necessary, when a Customer commits any significant action (i.e. resumption of bank service, opening a new account), or when any changes in Customer’s management bodies, ownership structure, the level of assigned risk, etc. are detected.

CUSTOMER ACTIVITY MONITORING

The Bank makes all necessary efforts to ensure the detection of customer transactions or activities related to money laundering and terrorism financing, and operations subject to mandatory control (in the relevant jurisdictions).

The Bank, exercising Know Your Customer policies, monitors the activities of its Customers with a view to identify, during the course of a relationship, unusual activity. If unusual events cannot be rationally explained, they may indicate their connection with money laundering or terrorism financing. Monitoring the customer’s activities and transactions throughout the period of servicing helps to get assurance that the Bank is not being used for purposes of money laundering or terrorism financing.
The essentials of the system of monitoring are:

• Marking of operations and/or activities of customers requiring further examination;
• immediate analysis of the records of such transactions and/or activities by the authorized persons/person;
• taking appropriate decisions on the further study of customers on the results of the analysis.

Monitoring can be conducted:

• in real time, transactions and/or activities can be reviewed as they take place or prior to take place,
• during the subsequent monitoring of the transactions/activities of a Customer.

In both cases, unusual transactions or activities are flagged for further examination.

Monitoring procedures include the analysis of the types of transactions performed by a Customer, areas of activity and comparison of the data with information on the operations / areas of activity of the similar customer group.

In establishing procedures of monitoring the activities of Customers the Bank should take into account frequency, volume, turnover and character of Customers' transactions in the context of the risk level assigned to a Customer and the products/services of the Bank being used by a Customer.

Monitoring systems can be manual and/or automated. However, it is essential to keep the staff of the Banks alert, since such factors as staff intuition, contacts with a Customer face-to-face or by telephone, and the ability, through practical experience, to identify transactions that do not seem to make sense for that customer, cannot be automated.

RISK-BASED APPROACH

By implementing a reasonably designed risk-based approach, the Bank determines the criteria to measure and mitigate potential money laundering and terrorism financing risks.

Bank takes the following steps to determine the risks of involvement in the laundering of proceeds from criminal activity and financing of terrorism:

• identifies and assesses the money laundering and terrorism financing risks that are relevant to the Bank;
• creates and implements controlling tools to manage and reduce the identified risks associated with the laundering of proceeds from criminal activities and terrorism financing;
• monitors and improves the application of these tools.

The Bank determines and uses its own criteria considering the main areas of evaluation:

• customer base;
• products and services offered by the Bank;
• delivery channels used by the Bank;
• geographical areas of the Bank’s operation.

To manage and reduce risks associated with the money laundering and terrorism financing the Bank takes the following measures:

• verify a customer’s identity;
• collect additional KYC information about a Customer, and
• monitor transactions and activity of a Customer to determine a reasonable basis or evidence to suggest that the ongoing operations may be linked to the laundering of proceeds of criminal activity or terrorism financing.

The Bank decides, on the basis of its assessments of the risks posed by different customer/product combinations, the level of verification that is applied at each level of risk set to a Customer. Should also take into account all the information collected about a customer, as part of the normal business and vetting processes.

valuation of all available information may alter the risk profile of a customer.

REPORTING PROCEDURES

There are two types of transactions, which are to be reported to the Authorized body:

• transactions subject to mandatory control according to Russian law;
• transactions and activities, in respect to which occurred a confidence, suspicion, or reasonable grounds for confidence or suspicion that a person carrying these transactions/activities is engaged in money laundering, or terrorism financing.

Responsible Officer of the Bank examines all internal reports on transactions subject to reporting to the Authorized Body.

Responsible officer sends a report to the Authorized body in the timeframe set by Russian legislation.

All the actions in respect of transactions subject to reporting procedures to Authorized body are to be documented and retained under regular review;

details of transactions which are subject to reporting to the Authorized body and all contacts with the Authorized body and other authorities in relation to these transactions are documented;

transaction reports forwarded to the Authorized body should contain as much information about a Customer, transaction or the activities as is determined by Russian legislation.

CONFIDENTIALITY

The information about Customers and their transactions obtained in the course of fulfilling AML/CFT internal control is confidential. Bank employees are not entitled to inform Customers and other persons on the forms, techniques and methods of implementation of the Bank’s internal control procedures for AML/CFT.

Disclosure of information to other persons that the Bank reported to the Authorized body information on a Customer’s transactions or activities, is strictly prohibited.

STORAGE OF DOCUMENTS AND INFORMATION

The Bank keeps records, including:

• Information and documents containing information about a Customer;
• Information about the transactions;
• Internal and external reports on transactions subject to compulsory monitoring, and reporting of suspicious transactions;
• Annual and other reports of the Responsible Officer;
• Information not executed upon,
• Information on training activities and their effectiveness, in particular information about:
  • dates AML/CFT trainings were given,
  • the nature of the training,
  • staff trained,
  • results of testing of employees after training;
• compliance monitoring containing, in particular:
  • Reports of the Responsible Officer to senior management,
  • Records of consideration of those reports and of any action taken as a consequence.

Records concerning customer identification and transactions are stored as evidence of the work that the Banks have undertaken in complying with legal and regulatory obligations for AML/CFT and for use as evidence in any investigation conducted by law enforcement.

Records on Customer’s identification are kept for a minimum period of five years after the relationship with the customer has ended.

The date of termination of the relationship with a customer is the date:

• a one-off transaction, or the last in a series of linked transactions, is carried out;
• the business relationship ended, i.e. the closing of the account or accounts.

In addition, the Bank records and stores information about all actions taken in connection with the requirements of the receipt from the staff and submitting to the Authorized body reports on the ascertained transactions.

When the Responsible officer has considered information or other material concerning possible money laundering or terrorism financing, but has not made a report to the Authorized body, a record of the material that had been considered is stored as well.

STAFF TRAINING

One of the most important tools used for AML/CFT, and in particular, to identify cases of laundering of proceeds from criminal activity and terrorism financing is to have staff alert to the risks of money laundering/terrorism financing, as well as the high level of training of staff in identifying customers' transactions subject to mandatory control, as well as unusual transactions and activities of customers.

In this regard, members of the relevant units of the Bank should be given appropriate training to be aware of:

• the current legislation relating to money laundering and terrorism financing,
• the documents relating to the prevention of money laundering and terrorism financing issued by national regulating and supervising authorities,
• the Bank’s policies and procedures of internal control in relation to the prevention of money laundering and terrorism financing,
• the potential adverse effects to the Bank, its staff and Customers of any breach of the AML/CFT rules,
• their responsibilities in connection with the prevention of money laundering and terrorism financing, including the receipt from a Customer all required identity documents, documents to identify transactions in respect of which arose the suspicion that they may be linked to the laundering of proceeds of criminal activity or terrorism financing and reporting about these transactions, etc.
• the identity and responsibilities of the Responsible Officer.

Extra trainings are conducted in the case of change of Russian legislation on AML/CFT, the change of Bank’s policies and procedures of internal control in relation to the prevention of money laundering and terrorism financing.

Employees are trained in the light of their functions. Staff involved in Customers attracting, Customer servicing, as well as those involved in settlement are trained in various programs tailored to their functional responsibilities. Training programs may include awareness of the importance of the KYC requirements for money laundering prevention purposes, and of the respective importance of customer identification procedures, obtaining additional information about a Customer and monitoring its activities.

The necessity of AML/CFT training also occurs when transferring employees to other work within the Bank or change of their functional responsibilities.