Regulation on Countering Money Laundering and Terrorism Financing

Approved by
the Board of Directors of “Fora Capital” Ltd

N. K. Karapetyan
Chairman of the Board of Directors

Approved by Decision of
the Board of Directors of “Fora Capital” Ltd № 1
as of 16.01.2017

Chapter 1. General Provisions

1. The present Regulation (hereinafter referred to as ‘Regulation’) is an internal legal act and is adopted based on part 1 of Article 23 of the Republic of Armenia Law on Combating Money Laundering and Terrorism Financing (hereinafter referred to as ‘Law’).
2. The Regulation consists of the following chapters: “Chapter 1. General Provisions”, “Chapter 2. Procedure for Reporting to the Authorized Body”, “Chapter 3. Customer Due Diligence”, “Chapter 4. Risk-Based Approach”, “Chapter 5. Internal Monitoring”, “Chapter 6. Information Maintenance”, “Chapter 7. Training of Employees”.
3. Within this Regulation the “Fund” shall be the “Investors Club of Armenia” closed-end nonpublic contractual investment fund.
4. Terms used in the Regulation shall have the same meaning as stated under the Law, unless it follows otherwise from the content of the Regulation.

Chapter 2. Procedure for Reporting to the Authorized Body

5. Reports on the following transactions shall be submitted to the authorized body:
1. non-cash transactions exceeding AMD 20 million (or an equivalent in foreign currency), as well as cash transactions exceeding AMD 5 million;
2. suspicious transactions and business relationship irrespective of the amount.
6. Reports stated under Clause 5 of the present Regulation shall be submitted to the authorized body according to the procedures, timeframes and templates specified in the Decision of the Board of the Central Bank of Armenia No 269‐N from October 7, 2014, which approves the reporting template No. 106 on transactions and suspicious transitions or business relations subject to mandatory reporting by persons providing investment services, corporate investment funds and non-public contractual investment funds without a manager licensed by the Central Bank of Armenia in compliance with the RA Law on Securities Market; and the procedures for its completion and submission.
7. The internal monitoring officer shall recognize a transaction or a business relationship, including an attempted transaction or an attempt to establish a business relationship as suspicious and shall submit a report on suspicious transaction as prescribed under sub-clause 2 of Clause 5 of the Regulation, in case there are suspicions that:
1. the property involved in the transaction or business relationship is the proceeds of a criminal activity; or
2. is related to terrorism, terrorist acts, terrorist organizations or individual terrorists, or to those who finance terrorism, or was used in or is intended to be used for terrorism, or by terrorist organizations or individual terrorists, or by those who finance terrorism.
8. The internal monitoring officer should consider recognizing a transaction or business relationship, including an attempted transaction or an attempt to establish a business relationship as suspicious, if:  
1. the circumstances fully or partially match the criteria or typologies of suspicious transactions or business relationships; or
2. the logic and pattern (dynamics) of implementation or other characteristics of the performed or attempted transaction or business relationship provide grounds to assume that it may be carried out for the purpose of money laundering or terrorism financing, although the proposed or signed transaction, or established business relationship do not raise any suspicions based on specific criterion or typology of a suspicious transaction or business relationship.
9. In the presence of one or several grounds stated under Clauses 7 and 8 of the Regulation for submitting reports stated under sub-clause 2 of Clause 5 of the Regulation, the internal monitoring officer shall conduct analysis of the given transaction or business relationship and prepare a conclusion on the day when the grounds for a suspicious transaction or business relationship were detected.
10. In the event that the internal monitoring officer adopts a decision on recognizing a transaction (business relationship) as suspicious, they immediately submit a report to the authorized body, as prescribed in sub-clause 2 of Clause 5 of the Regulation.

Chapter 3. Customer Due Diligence

11. When the Fund’s manager conducts a one-time transaction, or establishes a business relationship with customers, as well as in case suspicions arise with regard to the veracity or adequacy of previously obtained customer (authorized person) identification data, or with regard to money laundering and/or terrorism financing, the Fund’s manager is obliged to conduct customer due diligence as stated under Article 16 of the Law, including:
    1. verification of customer’s (including authorized person’s) identification and verification of their identity prior to conducting a transaction or establishing a business relationship, except in the cases stated under Clause 1 of Article 16 of the Law;
    2. identification and verification of the identity of the customer’s beneficial owner;
    3. collection of information regarding participants and authorities of the governing bodies of a customer as a legal entity;
    4. identification of the customer’s business profile, objective of the business relationship and the nature of the intended transaction;
    5. ongoing due diligence throughout the entire business relationship.
12. Verification of the identity of the customer, the authorized person and the beneficial owner (if any) as stated under sub-clauses 1 and 2 of Clause 11 of the Regulation is carried out based on reliable and valid documents issued by state authority and other relevant data. Particularly,  
    1. The information required for natural persons or private entrepreneurs based on an identification document or another valid official document exceptionally with a photo and issued by a respective authorized state body shall at least include the first and last names of the person, citizenship, registration address (if available), the date and place of birth, the details of the identification document, including the identification number, the serial number of the document, and the date of issuance, the customer’s place of residence; for private entrepreneurs also the number of the state registration certificate and the taxpayer identification number;
    2. The information required for legal persons on the basis of the state registration document or other official documents shall at least include the company name, the location, the individual identification number (the number of the state registration certificate, recording number, etc.), the first and last names the chief executive officer and the taxpayer identification number, if available;
    3. The information required for government agencies or local self-government bodies, the information shall at least include the full official name and the country of the government agency or the local self‐government body.
13. In case of foreign legal or natural persons, as well as entities without a status of legal persons in accordance with foreign legislation, actions stated under sub-clauses 1-3 of Clause 11 of the Regulation involve also acquisition of information regarding the person’s core of vital interests.
    If the customer is a foreign legal or natural person, or a legal person or an entity without the status of a legal person under foreign legislation, actions stated under sub-clauses 1-3 of Clause 11 of the Regulation shall include also acquisition of information regarding the center of these persons’ vital interests.
14. Business profile of the customer stated under sub-clause 4 of Clause 11 of the Regulation shall include information concerning the nature, impact, and significance of the customer’s activities; the existing and expected dynamics of business relationships and one-time transactions; volumes and sectors of activity; existence, identity, and the nature of interrelations of authorized persons and beneficial owners; as well as other facts and circumstances regarding the customer’s activities;
15. To carry out activities stated under sub-clause 5 of Clause 11 of the Regulation, the internal monitoring officer shall implement the following actions:
    1. verify connections between transactions, reveal possible liaison schemes between transactions, as well as determine the aim of the given transactions;
    2. verify whether the nature of the transaction corresponds to the type of activities performed by the customer;
    3. collects available information on the sources of income and property of the Customer;
    4. compares and consolidates sources, dynamics, and volumes of resources from various transactions of the customer;
    5. evaluates the possible risks in the transaction (business relationship) while comparing with the grounds and standards of suspicious transactions (business relationships);
    6. verifies whether there are any business relationships or one-time transactions through which the Customer wants to avoid reporting to the authorized body;
    7. clarifies types, frequency and chronology of transactions during a certain timeframe;
    8. other actions that according to the internal monitoring officer are necessary for conducting a satisfactory and complete due diligence of the customer.
16. Activities for the customer due diligence prescribed under the Regulation include also comparison of identification data of legal and natural persons with the lists of persons linked to terrorism published in or in compliance with the resolutions of the UN Security Council.
17. If, as a result of implementation of the activities stated under Clause 16 of the Regulation, the customer’s identification data matches with those of terrorism-related persons included in the lists published in or in compliance with the resolutions of the UN Security Council, the internal monitoring officer shall immediately carry out the following actions, without a prior notice to the customer:  
    1. freezing property owned or controlled by the customer;
    2. reporting to the authorized body about the suspicious transaction or business relationship.
18. When it is impossible to conduct customer due diligence as stated under the present chapter, or a directive was issued by the authorized body, the transaction or the business relationship shall be rejected or terminated, and the issue of reporting on a suspicious transaction shall be considered.

Chapter 4. Risk-Based Approach

19. Prior to executing a transaction or establishing a business relationship with the customer, and if need be after the execution of the transaction or establishment of the business relationship, the customer, transaction or business relationship is classified based on following risk criteria:
    1. high risk criterion;
    2. medium risk criterion;
    3. low risk criterion.
20. In addition to high risk criteria defined by the Law and Decision No. 279‐N of the Board of the Central Bank of the Republic of Armenia from October 7, 2014 “On Repealing the Decision of the Board of the Central Bank of the Republic of Armenia no 269‐N from September 9, 2008 and Approving the Regulation on Minimum Requirements to Reporting Entities in the Field of Preventing Money Laundering and Terrorism Financing”, the following are considered high risk criteria as well:   
    1. charity organizations;
    2. cases when there are suspicions about the accuracy and adequacy of previously obtained identification data, including suspicions related to the existence of beneficial owners and authenticity of their data;
    3. cases when there is a customer or business relationship circulating large amounts of cash;
    4. other criteria determined by the internal monitoring officer.
21. When criteria of high risk are identified, additional activities of the customer due diligence shall be taken, including:
    1. obtaining approval of the senior management for execution of a transaction or establishment of a business relationship and for their further development;
    2. identifying the source of the customer's income and property;
    3. collecting data on preconditions and objective of the transaction or business relationship;
    4. conducting additional ongoing due diligence in case of politically exposed persons.
22. Low risk criteria are:
    1. financial institutions which are effectively controlled in regard to countering money laundering and terrorism financing;
    2. state agencies, local self-government bodies, state non-profit organizations, and public administration institutions, excluding bodies or organizations located in non-compliant countries or territories;
    3. payments to the state budget of the Republic of Armenia or the community budget;
    4. payments for public services;
    5. payments related to social benefits from salaries, pensions or known sources.
23. When criteria of low risk are identified, simplified activities of customer due diligence are carried out, particularly the following information is gathered during the process of identification and verification of identity:
    1. for a natural person – name, surname, and data of the identification document;
    2. for a legal person – company name and individual identification number (state registration, recording number, etc.);
    3. for a government agency and a local self-government body – complete official name.
24. The risk shall be assessed as medium if there are no high or low risk criteria.

Chapter 5. Internal Monitoring

25. The Fund’s functions for prevention of money laundering and terrorism financing shall be carried out by the internal monitoring officer.
26. The reserved functions of the internal monitoring officer are conferred by the Fund’s manager.
27. While performing their functions stipulated by the Law, the normative legal acts adopted based on the Law, and the present Regulation, the internal monitoring officer is independent and has a status of senior management.
28. The internal monitoring officer shall:
    1. elaborate internal legal acts on countering money laundering and terrorism financing and present the drafts to the relevant body for approval;
    2. conduct scrutiny of effectiveness of legal acts on countering money laundering and terrorism financing, and offer recommendations for increasing their effectiveness;
    3. liaise the Fund and the authorized body;
    4. ensure that reports and other information on transactions subject to mandatory notification are submitted to the authorized body on behalf of the Fund;
    5. conduct research and analysis to identify suspicious transactions or business relations;
    6. monitor the ongoing scrutiny of business relationships and regularly revise the process of validating and updating the information;  
    7. ensure classification of the Fund’s customers according to their risk level;
    8. organize internal training in countering money laundering and terrorism financing, and implement scrutiny of the process and results of the training programmes;
    9. adopt a decision on rejecting a transaction or business relationship, and on freezing terrorism-related property;
    10. implement scrutiny of data recording and information maintenance;
    11. conduct research and other tasks.
29. Once in every six months the internal monitoring officer shall review the compliance of the Fund’s activities with the Law and to the requirements of legal acts adopted based on the Law, and shall present the results of the reviews to the authorized body within a week after the approval of the competent body.

Chapter 6. Information Maintenance

30. The Fund shall require all the necessary information stated under the Regulation while entering into a business relationship or conducting a transaction with the customer (authorized person).
31. The information stated under the Regulation shall be recorded. Recording shall be performed by the internal monitoring officer electronically by registering all the documents submitted by the customer (authorized person) while entering into a business relationship or conducting a transaction with them.
32. Updating information prescribed under the present chapter shall happen taking into account the risk class of the customer, transaction or business relationship.
33. Updating data collected within the scope of customer due diligence (except the data acquired for verification of the customer identification and identity, which are updated at least once a year) shall happen in the following frequency:
    1. once a year in case of a medium (standard) risk;
    2. once in six months in case of a high risk;
    3. once in three months in case of a politically exposed person,
    4. once in two years in case of a low risk.
34. The following are subject to recording and maintenance:
    1. the customer identification data, including data on their account and account flows;
    2. data on the main conditions of the transaction (business relationship) which will permit to restore the real nature of the transaction (business relationship);
    3. report on suspicious transaction, as well as data underlying the report and minutes of the discussions on preparing and submitting the report;
    4. data and assumptions regarding a suspicious transaction or business relationship, for which a report on suspicious transaction or business relationship has not been submitted to the authorized body;
    5. results of the review of compliance of the Fund’s activities with the Law and requirements of the legal acts adopted based on the Law;
    6. materials of the training courses on prevention of money laundering and terrorism financing, participant information and documents proving their participation.
35. Data (including documents) stated under Clause 34 of the Regulation shall be maintained for at least 5 years following the termination of the business relationship or the implementation of the transaction, or longer if required by the Law.

Chapter 7. Training of Employees

36. Regular courses on prevention of money laundering and terrorism financing shall be organized for employees with functions of preventing money laundering and terrorism financing.
37. Timeline and themes of the courses shall be worked out based on the findings of the study conducted in accordance with Clause 29 of the Regulation.