Racing FX Limited

 Anti Money Laundering Policies and Procedures

 Last Updated

January 2015

  Policy Statement

 Racing FX Limited (Racing FX) is committed to adopting best practices in all its operations.  This extends to the application of all policies and procedures which ensure the eradication of opportunities for the firm to be involved in any financial crime including Money Laundering, Terrorist Financing and Fraud.  To this end Racing FX will: 

  • Verify the identities of all potential clients before undertaking any business with them;
  • Ascertain the rationale for a business relationship both at the outset and throughout the relationship;
  • Train all staff of their responsibilities for controlling, monitoring, identifying and reporting actual or suspected financial crime.

 Racing FX seeks to mitigate its financial crime risk by:

  • Assessing the risk of the firm being used for financial crime
  • Apportioning responsibility for setting in place appropriate controls to the Board
  • Assigning the responsibility to the MLRO to ensure policies are developed and staff trained
  • Adopting enhanced due diligence techniques for high risk customers
  • Monitoring the effectiveness of the aml regime through thorough compliance monitoring

The UK legal and regulatory framework

 The UK approach to fighting money laundering and terrorist financing is based on a partnership between the public and private sectors.  Objectives are specified in legislation and in the FCA Rules, but there is usually no prescription about how these objectives must be met.  Instead the emphasis is placed on senior management to develop a ‘risk-based approach’ to both anti-money laundering and to combat terrorist financing.

 The key elements of the UK AML/CTF framework are:

 Proceeds of Crime Act 2002 (as amended)

  • Terrorism Act 2000 (as amended by the Anti-Terrorism, Crime and Security Act 2001)
  • Money Laundering Regulations 2007
  • Counter-Terrorism Act 2008, Schedule 7
  • HM Treasury Sanctions Notices and News Releases
  • FCA Handbook

 Senior Management

 The Senior Management of Racing FX, (the Board) are aware of their joint responsibility in ensuring that Racing FX has in place, effective control processes and procedures to ensure that Racing FX can manage the companies risk, including the risk of Racing FX being used to further financial crime.

 The Senior Management have appointed Andrew Rowland as the MLRO.  The MLRO reports directly to the Board.  Nick Tate is Deputy MLRO.

 Oversight and monitoring of the implementation of the AML policies and procedures, is the responsibility of the MLRO. 

 The MLRO, is a controlled function under section 59 of FSMA 2000.  The MLRO is an approved person.

 The key responsibilities of the MLRO are to monitor the day-to-day operations of SWFX’s  anti-money laundering policies and to respond promptly to any reasonable request for information made by the FCA.  In addition the MLRO is responsible for:

 ·         Making annual reports to senior management on the company’s compliance with the FCA’s requirements

·         Receiving and assessing internal reports of potentially suspicious transactions

·         Making external reports, where appropriate to SOCA

·         Ensuring that appropriate know your client (KYC) information, based on the money laundering risk for each client is collected, before the establishment of any relationship, and ensuring that the information is stored securely, either  electronically or paper form.

·         Taking reasonable steps to establish and maintain adequate arrangements for awareness and training

·         Obtaining and implementing appropriate national and international findings concerning countries with inadequacies in their approach to money laundering prevention (eg Financial Action Task Force alerts)

·         Identifying relevant Sanctions, Terrorist and PEP lists and keeping these up-to-date

 The MLRO will also ensure that the Company co-operates with all investigations undertaken by law enforcement authorities and provide all documentation and information requested by regulatory and government authorities.  The MLRO will also update the companies written procedures relating to money laundering, where necessary, for example, if Racing FX enters into a new business sector.

 What is money laundering and terrorist financing?

Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of their criminal activities, thereby avoiding prosecution, conviction and confiscation of the criminal funds.  It enables the criminal to convert ‘dirty money’ to clean money by passing it through the UK financial system.

 There are three key stages in the money laundering process.  They are placement, layering and integration. 

  •  Placement

This is the first stage of the cycle.  Cash from illegal activities is placed into the financial system or retail economy or is smuggled out of the country.  The aims of the launderer are to remove the cash from the location of acquisition so as to avoid detection from the authorities and to then transform it into other asset forms.

  • Layering

In the course of layering, there is the first attempt at concealment or disguise of the source of the ownership of the funds by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity.  The purpose of layering is to disassociate the illegal monies form the source of the crime by purposely creating a complex web of financial transactions aimed at concealing any audit trail as well as the source and ownership of funds.

  • Integration

The final stage in the process.  It is this stage at which the money is integrated into the legitimate economic and financial system and is assimilated with all other assets in the system.  Integration of the ‘clean’ money into the economy is accomplished by the launderer making it appear to have been legally earned.

  •  Terrorist Financing

 The definition of ‘terrorism’ (Section 1 Terrorism Act) requires a person to be acting’ for the purpose of advancing a political, religious, (racial) or ideological cause’

 Given the current global threat posed by terrorism, combating the funding of such activity is high priority for both law enforcement and the financial services industry.

Terrorist financing may involve funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organisations, as well as from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.  Terrorists often use techniques like those of money launderers to evade authorities attention and to protect the identity of their sponsors and of the ultimate beneficiaries of the funds.

However, financial transactions associated with terrorist financing tend to be in smaller amounts than is the case with money laundering, and, as such, it is unlikely that Racing FX will be targeted as we do not offer low value services to Retail clients. 

  Anti Money Laundering and terrorist financing risk assessment

 The FCA requires firms to take a risk based approach to anti money laundering and terrorist financing efforts in order to take account of the different risks and vulnerabilities of their clients, coupled with the products and services they offer.  Racing FX key business line is currency conversion and payment.

Our client base provides us with variable levels of risk, and our approach to customer identification and verification is tailored ensure that a more rigorous enhanced identification process is applied to those clients.

A key component of our efforts to combat money laundering and terrorist financing is the process of identifying and collecting sufficient ‘know your client’ (KYC) information before entering into business relationships.

 The information gathered to meet identity and KYC requirements will enable us to stop short of activating accounts for known terrorists or sanctioned persons or organisations, as the review of all potential clients against sanctions lists is a key part of the process.

 If the worst should occur and suspicious transactions are subsequently reported on an active account, the firm will have a core set of information to provide to the NCA or other investigating bodies.  This information will in turn help them to track and identify activity or accounts elsewhere, and build a case against the suspicious person.

 The risks of failure

 It is an offence under regulation not to have adequate systems and procedures in place to combat money laundering and terrorist financing.

 It is a crime to provide facilities for a known money launderer or terrorist (person or organisation) who appears on the sanction list.

 It is a crime to knowingly assist (in a number of specified ways) in money laundering or other financial crimes.

 It is a crime to fail to report knowledge or suspicion of money laundering and it is a crime to have failed to report where there are ‘reasonable grounds’ for suspicion.

 It is a crime to tip off a suspected money launderer or otherwise prejudice an investigation.

 If it is determined that a crime has been committed, the repercussions could fall both on the company, in the form of sanctions or fines, and also on the individuals deemed to have offended, leading to fines, jail terms and the loss of industry qualification.

 Risk based approach

 The FCA requires regulated companies to take a risk-based approach to anti-money laundering and terrorist financing efforts in order to take account of the different risk and vulnerabilities of their clients coupled with the products and services that they offer. 

 The majority of these clients are UK private clients and UK corporate entities therefore the money laundering risk is relatively low.  In cases of UK private clients and corporate entities Racing FX will undertake simplified due diligence and screening.

 However, equivalence only provides Racing FX with the exception of applying full customer due diligence, it does not exempt us from Sanctions Checking and monitoring procedures (Proceeds of Crime Act 2002)

 Racing FX may also offer their services to a small number of other financial companies.  The appropriate levels of CDD will be applied to these accounts.  In addition Racing FX will carry out sanctions/PEP checking which will be ongoing and monitoring procedures.

 We will in all cases ensure that we never establish a relationship with a ‘Shell Bank’

 Risk

 To assist in the levels of CDD to be undertaken Racing FX have decided to adopt a low/medium/high system.

 UK - Low Risk

Where equivalence - Medium Risk

Other jurisdictions - High Risk

 Basis for these categories

 Low- Racing FX understands in detail the regulatory environment and the facilities and systems available to carry out checks.  The information is all in English.  PEP/Sanction checking will be undertaken and monitoring will be ongoing.

 Medium- Where equivalence refers to a similar level of AML laws and regulations.  These laws and regulations are incorporated into the procedures of the financial sector.  Documents will be translated into English where applicable. PEP/Sanction checking will be undertaken and monitoring will be ongoing.

 Furthermore, Racing FX has compared the ‘equivalent’ comparable jurisdictions list to Transparency International Corruption Perception Index to ensure that each country has a score of at least 6.  The list has been modified to include Italy, Greece and Portugal who had scored less than 6 on the basis that they are member of the core European Union.  The combination of equivalence and a corruption score of 6, or more leads Racing FX to confirm the following countries are deemed to be of medium risk.

  •  Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, USA

 **Israel, St Vincent, UAE, Slovenia, Estonia, Cyprus, Uruguay, Chile, Saint Lucia and Qatar have been excluded.

 High Risk  All other countries.  Full/enhanced DD PEP/Sanctions checking will be undertaken.  A broader identification requirement has also been implemented.  Full list of identification requirements are listed in the Enhanced Due Diligence section.

 Think risk

 The nature of a risk-based approach is that it is judgemental, within a broadly defined framework of minimum requirements.  Where overall risk appears low, exceptions to identification requirements maybe appropriate, however a risk based approach also means that where risk appears higher than normal, or where there are inconsistencies or other grounds for doubt, additional checks should be performed beyond the minimum.

 Within that framework ‘thinking risk’ means not just mechanically collecting and processing documentation, but reviewing materials thoughtfully and thoroughly.  The anti-money laundering/counter terrorist financing gathering requirements are cumulative, all the pieces should add up and provide a consistent set of information.

 Enhanced due diligence

 It is anticipated that EDD will usually be undertaken on Corporate clients and individuals in high risk jurisdictions.

 The principles for EDD are in accordance with the Joint Money Laundering Steering Group (JMSLG) Guidelines.

 Before entering into any relationship Racing FX will ensure that there is a proper business rationale for it and make further enquiries if required.

 EDD will include, but not be limited to:

  •  Nature and details of the business
  • Address-both registered and postal
  • History of the companies involved
  • Full identification of directors/controllers/shareholders/beneficial owners
  • Initial and ongoing sources of proprietors wealth
  • Financial statements (Report & Accounts)
  • Website searches
  • PEP/Sanction checking for all parties involved

 Monitoring and reporting suspicious transactions

 Racing FX is the registered name and parent company of SWFX Limited which in turn is regulated and authorised by the FCA, and is therefore obligated to make reports in respect of information that comes to our attention in the course of our business where we know, suspect or have reasonable grounds for knowing or suspecting that the person/s in question is engaged in money laundering.

 Racing FX recognises the need to monitor customer activity throughout the relationship even where DD has been undertaken.

 Monitoring will therefore be undertaken for all clients, and enhanced monitoring will be undertaken for any clients known to be associated with PEP’s

 The basis of monitoring will depend on the nature of the client and business line.

 Transaction monitoring will be undertaken on clients on an on-going regular basis.  In addition, the trading team will be involved in a pro-active regime of reporting any unusual account activity to the MLRO.  Trade monitoring/telephone monitoring is currently a manual process.

 Where the MLRO determines that a report gives rise to grounds for knowledge or suspicion, a report will be made to the NCA.

 Racing FX will ensure that staff are encouraged to report their suspicions to the MLRO.  They will have the experience to identify transactions which are unusual.

 Monitoring will be regularly undertaken and a full audit trail produced.

 Obligation to report

 Proceeds of Crime Act (POCA) and the Terrorism Act introduce criminal liability for failing to disclose information when reasonable grounds exist for knowing or suspecting that a person is engaged in money laundering.  The objective test of suspicion is likely to be met when there are demonstrated to be facts or circumstances, known to the member of staff, from which a reasonable person engaged in business subject to the AML Regulations would have inferred knowledge, or formed a suspicion, that another person was engaged in money laundering.

 What is defined as suspicion?

 To have suspicion you do not need concrete evidence that money laundering has taken place, but clear reasoning behind the suspicion, for example:

  •  ‘Something that is inconsistent with perceived normal activity’
  • ‘A state of conjecture or surmise where proof is lacking’

 Awareness and Training

 Under POCA and the Terrorism Act, individual members of staff can face criminal penalties if they are involved in money laundering or terrorist financing, if they do not report their knowledge or suspicion of money laundering or terrorist financing where there are reasonable grounds for their knowing or suspecting such activity.

 Racing FX is therefore aware that one of the most important controls over the prevention and detection of money laundering is to ensure that staff are alert to the risks of money laundering and are well trained in the identification of unusual activities or potentially suspicious transactions.

 All staff therefore receive training.

 Senior management (the Board) retain overall responsibility for the establishment and maintenance of effective training arrangements.

 The MLRO has responsibility for the oversight of the company’s compliance with its requirements on staff training, including ensuring that adequate arrangements for awareness and training of employees are in place.  Racing FX acknowledges that as a newly authorised firm training of staff is of paramount importance.  The MLRO is responsible for ensuring that training is offered, and that the standards and scope of training is appropriate.  Records are kept.

 Racing FX has taken reasonable steps to ensure that relevant employees are aware of the following, through the training programme:

  •  Their responsibilities under our arrangements for the prevention of money laundering, including those for obtaining verification of identity, recognising and reporting knowledge or suspicion of money laundering.
  • Who the MLRO is.
  • How to identify and deal with Politically Exposed Persons (PEP’S)  and individuals or entities on Sanctions and Terrorist lists
  • What is ‘suspicion’ in respect of reporting obligations
  • What is defined as ‘tipping off’
  • What to do once the risk is identified

 Training will be tailored dependant on the role undertaken by the individual.  For those staff in roles deemed a higher risk, directors, senior management and some operational staff, the importance of KYC requirements, both standard and enhanced, as well as the importance of customer id procedures and monitoring client activity will be given. 

 Training will be refreshed at least on an annual basis.

 By utilising the risk-based approach to training Racing FX will provide staff with an online training system and manual training.

 Documentation retention

 As a regulated and authorised company, Racing FX is obliged to retain records and the FCA SYSC requirements

 Racing FX will retain the following records:

  •  Customer information
  • Transactions
  • Internal and External suspicion reports
  • MLRO annual, and other reports
  • Information not acted on, and the reasons for not escalating the matters further
  • Training and compliance monitoring

 In relations to client’s identification, Racing FX will keep the following records:

  • Copies of the information collected and verification evidence obtained
  • Evidence of identification records will be kept for a minimum of 5 years after the relationship with the client has finished and will be kept accessible to the MLRO and to all areas of the business that have contact with the client.
  • Copies of all reports made to the NCA will be retained indefinitely.  Where Racing FX has considered making a report to the NCA and further evidence or information has been considered concluding in no report to the NCA, records of all the evidence or information will be retained indefinitely.
  • All records will be retained by way of either photocopies of original documents or the original documents themselves.
  • Storage of all documentation in relation to anti-money laundering systems and controls will be either stored electronically or by hard copy files which are held securely.

   Comparable jurisdictions

 Article 11 (1) of the 3rd Money Laundering Directive, and Regulation 13 (1) of the Money Laundering Regulations 2007, state that identification evidence for money laundering purposes is not required where the applicant for business is itself a credit or financial institution that is subject to national legislation, or is based or incorporated in a country who law contains ‘equivalent requirements’ or ‘comparable provisions.

 The countries that HM Treasury has determined can be regarded as being ‘comparable’ for customer identification purposes fall into one of the following categories: EU Member States, EEA Countries, UK Crown Dependencies, and Non UK Financial Action Task Force.

 EU Member States- Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands (inc Antilles) Portugal, Spain, Sweden

 EEA Member Countries- Iceland, Norway, Switzerland

 Non EU FAFT Member Countries- Australia, Canada, Hong Kong******, Japan, New Zealand, USA

 *****Not currently granted equivalence by Racing FX

  Approved January 2015