Anti-Money Laundering Policy

ANTI-MONEY LAUNDERING POLICY

Last Reviewed on: January, 2023

Version 2.0

1. OBJECTIVES OF THE AML/CFT POLICY

The objectives of this AML/CFT Policy (“The Policy”) is to ensure compliance risks are identified, and adequately mitigated. Herconomy Limited (“Herconomy/The Organization”) seeks to reduce AML/CFT compliance risks considering the nature, scale, and complexity of its business.

The Policy has been derived from the general principles, laws, regulations and directives for combating money laundering and the financing of terrorism. The Organization is taking security measures and has adopted policies, practices and procedures that promote high ethical and professional standards and prevent the Organization from being used, intentionally or unintentionally, by criminal elements.

The Organization has also established Know Your Customer (KYC) programmes as an essential element for service, risk management and control procedures. The Organization is obliged not only to establish the identity of its customers, but also to monitor account activity to determine those transactions that do not conform with the normal or expected transactions for that customer or type of account.

The intensity of KYC programmes beyond these essential elements is tailored to the degree of risk. The Policy is also designed to meet the requirements of the Special Control Unit Against Money Laundry (“SCUML”) regulations and other directives issued by other regulators.

2. COMPLIANCE OFFICER

The Compliance Officer is primarily responsible for overseeing and managing the processes for ensuring compliance with the Organization’s internal rules and policies, statutory legislation, and regulation(s). The officer is responsible for ensuring that rendition of regulatory and other returns is carried out within the stipulated time frame. He is also responsible for ensuring that the activities of the Organization and its employees are conducted in accordance with all applicable laws and regulations, all external rules, policies and procedures and the highest ethical standards.

2.1 SCOPE OF THE COMPLIANCE FUNCTION

The scope of compliance function covers management of regulatory risk throughout the Organization, which comprises monitoring, and providing appropriate reports, on compliance with:

2.2 OBJECTIVES OF THE COMPLIANCE OFFICER:

The Compliance Officer’s objectives include the following:

a. To implement sound procedures and processes throughout the Organization for monitoring the prompt rendition of statutory returns
b. To ensure that every extant legislation, regulatory circulars, and directives are identified and incorporated in the Organization’s internal policies and processes, where appropriate
c. To ensure that the Organization and its employees comply with all extant legislations, regulatory circulars, directives, and best practices.
d. To establish appropriate standards for implementing procedures for ensuring that the compliance programs are effective and efficient throughout the Organization for identifying, detecting, preventing, and correcting non-compliance with applicable rules and regulations
e. To facilitate the establishment and enhancement of a strong compliance culture throughout the Organization
f. To coordinate all the relevant compliance activities throughout the Organization
g. To provide for a formal and structured monitoring of compliance
h. To support the Board and Management in the institution of a strong structure of governance throughout the Organization

3. APPLICABLE RULES & REGULATIONS

The Organization’s activities are regulated by the following legislations

4. INTERNAL COMPLIANCE

The Compliance Officer is responsible for compiling all applicable legislations and regulations and designing appropriate controls and monitoring procedures. The compilation process shall be a continuous process as new legislations and regulatory guidelines are issued.

4.1 REGULATORY ENVIRONMENT SCANNING AND UPDATES

The Compliance Officer shall daily scan the operating environment for updates by way of new circulars, directives, and other regulations. This is done by scanning through the websites of regulators, news media and other relevant sources.

The Compliance Officer shall in addition review every new regulatory update or enquiries received to check for the following:

a. How it affects the Organization’s business and operations. At times, this may require further consultations, including reaching out to compliance officers in other Organizations.
b. Awareness of the regulation to the appropriate department and other stakeholders within the Organization.
c. Disseminating the new regulations and sorting updates to an existing one from a new one.
d. Stating if the regulation requires a one-off compliance or a continuous/periodic reporting obligation.
e. Tracking the deadline for acting on or implementing the regulation.

5. MONEY LAUNDERING PREVENTION

Herconomy Limited shall take reasonable and necessary steps to ensure that members of staff who handle transactions which may involve money laundering are aware of their responsibilities, by designing internal rules to ensure that money laundering legislation is complied with. These includes the following:

• Ensure checks are carried out on customer’s name before opening of account.
• Investigate the sources of funds before accepting as a customer, a Politically Exposed Person (PEP) and the decision to open such accounts should be approved by Management
• Undertake regular reviews of existing records of customers especially when a transaction of significance takes place or when there is material change in the way the account is operated
• Ensure that all relevant information is obtained as quickly as possible on an existing customer’s account.

6. KNOW YOUR CUSTOMER (KYC)

A business relationship with the Organization will never be established until the identity of a potential customer is satisfactorily established.

The Organization must establish to its satisfaction that it is dealing with a real entity and persons and obtain satisfactory identification. Regular contact with the customer must be used to keep such knowledge up to date and appropriate notes must be placed in the customer’s file.

Know Your Customer (KYC) process does not stop at the account opening stage but should be updated on every possible occasion. This includes monitoring changes in the customer’s activities, verifying address changes etc. All these changes should be documented in the customer’s file. For every new customer, a risk-based approach to KYC should be adopted for carrying out customer due diligence. Enhanced due diligence should be carried out for high-risk customers. Ongoing due diligence should be carried out on all customers, based on their risk profile.

To prevent Money Laundering and Terrorist Financing, Herconomy will implement processes and procedures in its line of business to conduct appropriate User/Customer due diligence through the Herconomy Business Partner/User Screening Questionnaire, Identifying the User and verifying the User’s identity on the basis of the following “Know Your Customer” principles:

i. Herconomy must be reasonably satisfied as to the identity of User/Customer/Employee and satisfactory evidence of identity must be obtained and retained.
ii. User/Customer must provide documentation (Verification Checking such as obtaining BVN and valid ID for Nigerian users and for Non-Nigerian Users - Passport Next of Kin);
iii. Information on the User/Customer shall be obtained from reliable and independent sources (Ownership Checking)
iv. Ascertaining and verifying (if appropriate) the identity of the owners of a business/Directors of the Company, if there are any, so that the identity of the ultimate owners or controllers of the business is known.

User/Customer documentation can either be submitted in physical or electronic form. An appropriate record of the received documentation, steps taken and copies of, or reference to, the documentation of the customer must be kept. Records should be kept as long as the relationship endures with the User/Customer and for at least five (5) years after the relationship ends. Where the applicable laws impose a longer period, the provision of such law shall be applicable.

Customers that fall into the following types of businesses shall be required to provide a registration certificate issued by the Special Control Unit Against Money Laundering (SCUML) as part of the KYC process:

• Dealers in jewellery, cars, and luxury goods;
• Chartered accountants, audit Organisations and tax consultants;
• Clearing and settlement companies;
• Hotels, casinos, and supermarkets;
• Dealers in precious metals and stones;
• Trusts and company services providers;
• Estate agents;
• Pool betting and lotteries;
• Non-governmental organisations (NGOs); and
• Other businesses as may be designated by regulatory authorities from time to time.

7. RISK ASSESSMENT MATRIX

Risk assessment matrix shall be clearly defined in terms of the nature of business, location of customer and his clients/source of funds, etc. This will enable assignment of risk rating of customers into low, medium, and high risk as appropriate. Each customer shall be subjected to a risk assessment using a Risk Assessment matrix developed for this purpose. Customers shall be assigned risk rating as follows:

• Low Risk: These are customers whose risk assessment matrix score is low, and so by their risk profiles do not expose the Organization to material risk in the area of money laundering, terrorist financing, fraud, and economic crime.
• Medium Risk: These are customers whose risk assessment matrix score is moderate, and therefore expose the Organization to a moderate or average risk in the area of money laundering, terrorist financing, fraud, and economic crime.
• High Risk: These are customers whose risk assessment matrix score is high, and therefore expose the Organization to high and material risk in the area of money laundering, terrorist financing, fraud, and economic crime.

The following shall be the responsibilities of the Compliance Officer with respect to customer Risk Assessment:

 Ensure that the Risk Assessment Matrix truly provides sufficient information and parameters to assist in assigning a risk rating to each customer.
 Review and validate every such risk rating assigned to a customer using the Risk Assessment Matrix.
 Approve the opening and/or continuance of all business relationships with a medium risk rating.
 Collaborate with the Human Resources Department in carrying out periodic education of staff members on AML/CFT and KYC matters.

8. CUSTOMER RISK CATEGORIES

HIGH RISK:

Herconomy Limited shall consider customers that fall into the following categories as high risk:

 Non-resident customers and relationships held by foreign individuals.
 Legal persons or legal arrangements such as trusts that are personal-assets-holding vehicles (SPV).
 Government Parastatals
 Charities, non-governmental organisations (NGOs) and other organisations receiving donations, both from local and foreign sources
 Companies and Organisations that have nominee-shareholders, sleeping-partners, or shares in bearer form.
 Cash intensive businesses, such as, restaurants and fast-food businesses, liquor stores, large merchandise distributors, privately owned vending machines operators, car dealers, etc; Professional service providers such as Legal practitioners, accountants, or real estate brokers
 Leather goods stores and dealers in Jewel, gem, and precious metals.
 Import/ export companies.
 Hotels, casinos, and similar organisations;
 Politically and financially exposed persons (PEPs and FEPs).
 Other organisations that are required by regulation to obtain registration by the Special Control Unit against Money Laundering (SCUML).

MEDIUM RISK:

The Organization shall consider customers that do not fall into the category of High and low Risk as Medium Risk Customers.

LOW RISK:

The Organization shall consider customers that do not fall into the category of High and low Risk as Medium Risk Customers.

POLITICALLY EXPOSED PERSONS (PEPS)

The following categories of customers shall be classified as politically exposed persons (PEPs):

 Heads of State or Government.
 State Governors
 Local Government Chairmen and Councillors.
 Senators and Honourable members of the House of Representatives.
 Honourable members of State Houses of Assembly.
 Permanent Secretaries and Director Generals (DGs) of Federal and State Ministries and Parastatals.
 Ministers and Commissioners.
 Senior politicians.
 Senior government officials.
 Judicial or Senior military officials.
 Senior executives of Government (Federal, State and Local Govts.) owned corporations.
 Important political party officials.
 Family members or close associates of PEPs.
 Members of royal families.
 Persons who are or have been entrusted with a prominent function by an international organisation, including members of senior management, i.e., directors, deputy directors and members of the board or equivalent functions other than middle ranking or more junior individuals.

9. SUSPICIOUS AND UNUSUAL TRANSACTIONS

Suspicious transaction is that which is unusual because of its size, volume, type, or pattern, or otherwise suggestive of known money laundering methods. It includes any transaction that is inconsistent with the customer’s known, legitimate business or personal activities or normal business for the type of relationship or that lacks obvious economic rationale.

9.1 CRITERIA FOR DETERMINING SUSPICIOUS AND UNUSUAL TRANSACTIONS

The following criteria shall provide guidance in determining suspicious and unusual transactions in Herconomy Limited :

• Customers who are unwilling to co-operate with the KYC process and deliberate refusal to provide relevant documentations.
• Transactions which are inconsistent with the pattern observed over time.
• Numerous transactions involving amounts that are just below the stipulated reporting threshold with deliberate intention to evade reporting
• Customer uses a personal account for business purposes.

A report on suspicious activity should contain, at least, the following information, which will be confirmed by the Compliance Officer:

i. Identity of the person raising the suspicion;
ii. Date of the report;
iii. Who is suspected of money laundering or terrorist financing activities;
iv. Other individuals involved otherwise;
v. Deliverance of facts;
vi. What is suspected and why; and
vii. Any possible involvement of the Organization.

Without prejudice to the generality of the foregoing, Herconomy shall have an obligation to report any suspicious transaction to the appropriate regulatory authority. More specifically, Herconomy shall;

i. Prior to any transaction involving a sum exceeding US$1,000 or its equivalent, identify the customer by requiring him to fill a standard data form and present his international passport, driving license, national identity card or such other document bearing his photograph as may be prescribed by the Special Control Unit Against Money Laundering and shall submit such report to the regulatory authority within seven (7) days from the date of the transaction;
ii. Where a transaction;
(a) involves a frequency which is unjustifiable or unreasonable,
(b) is surrounded by conditions of unusual or unjustified complexity,
(c) appears to have no economic justification or lawful objective,
(d) is inconsistent with the known transaction pattern of the account or business relationship, or
(e) in Herconomy’s opinion, involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing, that transaction shall be deemed to be suspicious

Herconomy shall immediately and in any event not later than 24 hours after the transaction report to the regulatory authority.

iii. Report to the regulatory authority in writing within seven (7) days, any single transaction, lodgement, or transfer of funds in excess of
(a) N5,000,000 or its equivalent, in the case of an individual ; or
(b) N10,000,000 or its equivalent, in the case of a body corporate.
iv. Herconomy may voluntarily give information to the regulatory authority on any transaction, lodgement, or transfer of funds in excess of
(a) N1,000,000 or its equivalent, in the case of an individual ; or
(b) N5,000,000 or its equivalent, in the case of a body corporate.

9.2 PROCESS FOR FILING A SUSPICIOUS AND UNUSUAL TRANSACTION

To ensure Herconomy Limited ’s compliance with regulatory requirements on suspicious and unusual transactions, the following procedures shall apply

• The Compliance Officer shall compile a list of such transactions in line with criteria stated in 9.1 above.
• The listing shall be in accordance with the reporting format prescribed by NFIU, SCUML and other applicable regulatory authority.
• The Compliance Officer shall review all affected transactions and validate their qualification as suspicious or unusual.
• The Compliance Officer and/or any other employee shall maintain strict confidentiality in respect of such qualifying transactions and are prohibited from disclosing to the customers that such transactions shall be reported to competent authorities.
• All qualifying transactions shall be reported regardless of the amount involved
iii. Report to the regulatory authority in writing within seven (7) days, any single transaction, lodgement, or transfer of funds in excess of

10. TRAINING

Training encompassing applicable AML/CFT laws and recent trends in money laundering and terrorist financing activities as well as Herconomy Limited’s policies and procedures to combat money laundering shall be provided to all relevant staff as needs arises. Trainings on AML/CFT shall be carried out as per regulatory requirement. Trainings shall be conducted using either of the following means:

11. POLICY REVIEW AND AUDITS

Regular reviews of the effectiveness of this Policy are carried out in addition to audits periodically undertaken by Herconomy’s internal audit unit. This provides the Executive Management with the necessary assurance and information regarding the operating effectiveness of Herconomy’s controls and processes relating to this Policy.