IMPLEMENTING PROCEDURES

1 ISSUED BY THE FINANCIAL INTELLIGENCE ANALYSIS UNIT IN TERMS OF THE PROVISIONS OF THE PREVENTION OF MONEY LAUNDERING AND FUNDING OF TERRORISM REGULATIONS ( ) PART IFIRST ISSUED ON 20 MAY 2011 LAST AMENDED ON 18 OCTOBER 2021 IMPLEMENTING PROCEDURES Financial Intelligence Analysis Unit, 2021 65C, Tower Street, Birkirkara BKR 4012, Malta No part of this document may be reproduced or copied without adequate reference being made to the source. Telephone: (+356) 21 231 333 Fax: (+356) 21 231 090 E-mail: Website: CHAPTER 1 OVERVIEW9 is money laundering?9 definition of money laundering in the PMLA10 laundering in practice12 is funding of terrorism?

2 13 Funding of Terrorism in practice14 initiatives in the fight against money laundering and the funding of terrorism15 Legislation on money laundering and funding of terrorism17 Prevention of Money Laundering Act18 Prevention of Money Laundering and Funding of Terrorism Regulations19 National Co-ordinating Committee on Combating Money Laundering and Funding of Terrorism20 Financial Intelligence Analysis Unit21 FIAU s compliance monitoring function23 CHAPTER 2 THE IMPLEMENTING PROCEDURES26 are the Subject Persons ?27 of the IMPLEMENTING Procedures30 and application of the IMPLEMENTING Procedures32 CHAPTER 3 THE RISK-BASED APPROACH33 of Risk33 Factors35 Risk35 Risk36 , Service and Transaction Risk38 Channels Risk39 Risk Factors39 Specific Risk Factors40 of Information40 Business Risk Assessment41 Basic Steps42 Table 1 Likelihood scale43 TABLE OF CONTENTS3 IMPLEMENTING PROCEDURES3 Table 2 Impact Scale44 Table 3 Inherent Risk44 Table 4 Effectiveness45 out the Business Risk Assessment46 of the Business Risk Assessment48 the Business Risk Assessment49 Measures, Policies.

3 Controls and Procedures50 Customer Acceptance Policy52 Customer Risk Assessment52 of the Customer Risk Assessment56 the Customer Risk Assessment57 out the Customer Risk Assessment57 Table 5 Risk-scoring grid60 Table 6 Risk score61 of CDD on a Risk-Sensitive Basis63 CHAPTER 4 CUSTOMER DUE DILIGENCE65 of CDD measures66 Customer69 Beneficial Owner73 Table 7 Definition of a beneficial owner76 and Verification90 nature of identification and verification of a natural person92 and Verification of Customers other than Natural Persons111 Agent130 purpose and intended nature of the business relationship and the Customer s Business and Risk Profile133 and Intended Nature of the Business Relationship134 Customer s Business and Risk Profile134 Source of Wealth and the Source of Funds136 monitoring of the business relationship137 of the duty to conduct ongoing monitoring137 Monitoring138 that documents.

4 Data and information held on the customer are kept up to date147 TABLE OF CONTENTS CONTINUED4 IMPLEMENTING of Due Diligence Procedures151 of CDD when establishing a business relationship152 of CDD when an occasional transaction is carried out155 of CDD in case of suspicion of ML/FT156 the subject person doubts the veracity or adequacy of CDD documentation156 of CDD in relation to existing customers156 of the business of one subject person by another159 to complete CDD measures laid out in Regulation 7(1)(a)-(c)161 Due Diligence163 situations in which SDD may be applied165 where SDD cannot be applied170 Due Diligence171 presenting a High Risk of ML/FT172 in which EDD is prescribed by law175 on Other Subject Persons or Third Parties196 that may be relied on199 out reliance201 reliance agreement202 reliance is not permitted203 Screening203 CHAPTER 5 REPORTING PROCEDURES AND OBLIGATIONS205 Money Laundering Reporting Officer205 Role of the MLRO205 Can be Appointed as MLRO?

5 206 and Resignation of the MLRO212 Designated Employee213 Monitoring Function213 Reporting Procedures216 Reporting Procedures220 After Reporting223 obligation to refrain from carrying out a transaction that appears to be suspicious225 TABLE OF CONTENTS CONTINUED5 IMPLEMENTING the Execution of a suspicious Transaction226 Orders219 Privilege228 and Permissible Disclosures230 for Compliance Purposes233 under Regulation (EU) 2015/847234 Protection of the Whistleblower Act235 from Detrimental Action237 CHAPTER 6 OUTSOURCING238 is to be considered as Outsourcing?238 of the Subject Person238 of Outsourcing239 to which Outsourcing is subject240 within a Group Context244 CHAPTER 7 AWARENESS, TRAINING AND VETTING OF EMPLOYEES245 and training.

6 The obligation and purpose behind it245 Officials and Employees to be Provided with Training246 of Training248 of delivery of training249 of new employees250 CHAPTER 8 DEALING WITH NON-REPUTABLE JURISDICTIONS & HIGH-RISK JURISDICTIONS, AND GROUP-WIDE POLICIES & PROCEDURES251 the concepts of Non-Reputable Jurisdictions and High-Risk Jurisdictions251 Non-reputable jurisdictions252 Table 8 Categories identified by FATF253 Table 9 Categories identified by Commission Delegated Regulations254 High-risk jurisdictions255 and managing the ML/FT risk posed by non-reputable jurisdictions and high risk jurisdictions 258 Policies and Procedures261 TABLE OF CONTENTS CONTINUED6 IMPLEMENTING .

7 Majority-owned Subsidiaries and Branches261 and Sharing of Information262 suspicious Transactions263 to the Application of Group-wide Policies and Procedures263 CHAPTER 9 RECORD KEEPING PROCEDURES265 of keeping records265 to be retained265 of retention of records268 documentation269 on the business relationship and on the transactions carried out in the course of a business relationship or in relation to an occasional transaction270 Reports made to the MLRO and STRs270 submitted together with an STR270 training271 Screening Records271 Records271 Records271 of records272 of records272 Requirements272 and Categorisation of Records273 Keeping Obligations and Data Protection274 ANNEX A ADMINISTRATIVE SANCTIONS AND CRIMINAL OFFENCES FOR BREACHES OF AML/CFT OBLIGATIONS277 Sanctions under the PMLFTR277 Table 10 Administrative Penalties278 for the imposition of administrative sanctions279 from Administrative Penalties280 of Administrative Penalties and other Measures281 Offences282 TABLE OF CONTENTS CONTINUED7 IMPLEMENTING PROCEDURES4th AML DirectiveEuropean Union Directive 2015/849 of 20 May 2015 AML/CFTAnti-money laundering/combating the funding of terrorism BRAB usiness risk assessment CAPC

8 Ustomer acceptance policy CDDC ustomer due diligence CRAC ustomer risk assessment EBAE uropean Banking Authority EDDE nhanced customer due diligence ESAE uropean Supervisory Authority EUEuropean Union FATF Financial Action Task Force FATF Recommendations The FATF Recommendations on Money Laundering and Terrorist Financing adopted in 2012 FSRBFATF-Style Regional Body FIAUF inancial Intelligence Analysis Unit FIUF inancial Intelligence Unit MFSAM alta Financial Services Authority MGAM alta Gaming Authority ML/FTMoney laundering and funding of terrorism MLROM oney Laundering Reporting Officer MONEYVALThe Council of Europe Select Committee of Experts on the Evaluation of anti-Money Laundering Measures and the Financing of Terrorism PEPP olitically exposed person PMLAP revention of Money Laundering Act (Cap.)

9 373, the Laws of Malta) PMLFTRP revention of Money Laundering and Funding of Terrorism Regulations ( ) RBARisk-Based Approach SDDS implified customer due diligence SMBS anctions Monitoring Board STRS uspicious transaction report UNUnited NationsABBREVIATIONS8 IMPLEMENTING WHAT IS MONEY LAUNDERING? Generally, money laundering is described as the process by which the illegal nature of criminal proceeds is concealed or disguised in order to give a legitimate appearance to these illegal proceeds. This process is of crucial importance to criminals since it enables the perpetrators to make seemingly legitimate economic use of their criminal proceeds.

10 When a criminal activity generates substantial income, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention. Illegal arms sales, smuggling, activities of organised crime (such as drug trafficking and prostitution rings), bribery, corruption, fraud and insider trading are typical examples of criminal activities that could generate large profits. The source of these proceeds would need to be disguised for the criminal to be able to enjoy the ill-gotten gains made.