Transactions Monitoring Policy
This Transactions Monitoring Policy (the “Policy”) has been developed by TETO Bank Inc. (“TETO Bank”), incorporated in Canada, British Columbia province, Reg. Nr. BC1406818, and registered with the Financial Transactions and Reports Analysis Centre (“FINTRAC”) in Canada as Money Service Business.
1. General Provisions
1.1. TETO Bank shall follow the ongoing monitoring requirements under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and associated regulations.
1.2. When entering into a business relationship with a client TETO Bank shall, based on the risk assessment set forth in PCMLTFA, perform ongoing monitoring of that business relationship for the purpose of:
1.2.1. detecting any transactions that are required to be reported in accordance with PCMLTFA to the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”);
1.2.2. keeping client identification information and the information referred to in PCMLTFA up to date;
1.2.3. reassessing the level of risk associated with the client’s transactions and activities; and
1.2.4. determining whether transactions or activities are consistent with the information obtained about their client, including the risk assessment of the client
1.3. Ongoing monitoring is a process that TETO Bank shall develop and use to review all the information TETO Bank has obtained about the clients with whom TETO Bank has a business relationship, in order to:
1.3.1. detect any suspicious transactions that TETO Bank is required to report to FINTRAC;
1.3.2. keep client identification information, beneficial ownership information, and the purpose and intended nature of the business relationship record up to date;
1.3.3. reassess the level of risk associated with a client’s transactions and activities; and
1.3.4. determine whether transactions or activities are consistent with the client information TETO Bank obtained and risk assessment of the client.
1.4. TETO Bank identifies, recognizes, evaluates and documents the money laundering and terrorist financing risks associated with the business relationships or the occasional transaction.
1.5. All personnel involved in monitoring unusual or suspicious transactions or activities must be diligent in their monitoring activities. Sufficient tools should be implemented that enable and facilitate monitoring to the fullest extent and minimize any human failure as much as reasonably possible.
2. Risk Assessment
2.1. TETO Bank, when assessing risks, should consider all the relevant risk factors before determining the level of overall risk and the appropriate level of mitigation to be applied.
2.2. Transaction monitoring involves taking actions leading to an assessment of whether:
2.2.1. the performance of transactions by a client does not show the characteristic of permanence (especially repetition and regularity);
2.2.2. the client’s transactions do not violate regulations related to PCMLTFA;
2.2.3. funds, virtual currencies used for transactions do not come from undisclosed or illegal sources;
2.2.4. identification data and verification documents held are updated on an ongoing basis;
2.2.5. there are no other irregularities resulting in possible violations of applicable regulations.
2.3. When TETO Bank enters into a business relationship with a client TETO Bank periodically conduct ongoing monitoring of that business relationship, based on TETO Bank risk assessment.
2.4. The frequency at which TETO Bank conducts ongoing monitoring depends on the risk level assigned to clients in TETO Bank risk assessment. Clients identified as posing a low risk may require less frequent ongoing monitoring whereas those in your high-risk category will require that you take enhanced measures.
2.5. Due diligence on existing relationships is to be conducted at appropriate times, taking into account any previous client due diligence measures being undertaken and the adequacy of the information obtained then.
2.6. TETO Bank will conduct periodic ongoing monitoring whenever a business relationship is established with a client, in line with the terms fixed in the AML/CTF Policy of TETO Bank.
3. Transaction Monitoring Details
3.1. The ongoing monitoring includes the following:
3.1.1. analysis of transactions carried out within the framework of the business relationship to ensure that these transactions are consistent with TETO Bank’s knowledge of the client, the type and scope of its business, and consistent with the money laundering and terrorist financing risks associated with that client,
3.1.2. investigating of the source of funds, virtual currencies at the disposal of the client – in cases justified by the circumstances,
3.1.3. ensuring that the documents, data or information held regarding business relationships are kept up to date.
3.2. In the case of disclosure of transactions which:
3.2.1. are complicated or
3.2.2. involve large amounts that are not justified by the circumstances of the transaction, or
3.2.3. are conducted in an unusual manner, or
3.2.4. appear to have no legal or economic justification
TETO Bank takes measures to clarify the circumstances under which the transactions were carried out (in particular, it may request the sending of documents constituting the basis and source of the funds, virtual currencies), and, in the case of transactions carried out within the framework of business relationships, intensifies the application of the financial security measure with respect to the business relationships under which the transactions were carried out.
3.3. Such review and monitoring, based upon a risk-based approach, will basically entail the monitoring of patterns, for example, a sudden increase in transactions volumes, uncharacteristic transactions not in line with the known activities of clients, and strange peaks.
3.4. TETO Bank shall take enhanced measures and conduct enhanced ongoing monitoring of a client that TETO Bank has identified as posing a high risk in TETO Bank risk assessment. This means that TETO Bank must take extra measures in addition to what is required, as appropriate for the level of client risk.
3.5. TETO Bank could consider the following methods to conduct enhanced ongoing monitoring of the high-risk clients:
3.5.1. reviewing transactions based on an approved schedule that involves management signoff;
3.5.2. developing reports and reviewing these reports of high-risk transactions more frequently;
3.5.3. flagging certain activities or those that deviate from TETO Bank expectations and raise concerns, as necessary;
3.5.4. setting business limits or parameters on accounts or transactions that would trigger early warning signals and require a mandatory review; or 3.5.5. reviewing transactions more frequently against suspicious transaction indicators relevant to business relationships.
4. Transactions Screening
4.1. TETO Bank is committed to screening clients’ transactions. These transactions are automatically screened against sanctions lists, blacklists, forbidden countries list, other lists and rules designated by TETO Bank (the “Focused Lists”).
4.2. TETO Bank uses screening and monitoring tools. Screening logic divides transactions in two following types: Attempted Transactions, Processed Transactions.
4.3. All the transactions that are being initiated at first are in scope of “Attempted Transactions” type. When a transaction is being initiated, it is automatically screened against the applicable Focused Lists. If a screened transaction does not match any entity in the Focused Lists, the transaction is allowed. If the screening tool matches a transaction with any of the aforementioned Focused Lists, the transaction is kept on hold, stopped for a review by a monitoring employee.
4.4. When the screening tool does not match the transaction with any of the Focused Lists and there are no any other concerns occur, such transaction could be performed.
4.5. In case a transaction is processed, such transfer will also be subject to scanning against the Focused Lists. 4.6. TETO Bank utilizes online (real-time) and post-time (retrospective) monitoring in order to comply with applicable laws and regulations and properly monitor transfers being made through TETO Bank.
5. Real-time Monitoring
5.1. Online (real-time) monitoring is used by TETO Bank in order to comply with legal regulations and avoid transactions which are related to Focused Lists etc.
5.2. All the transactions are being screened against the Focused Lists and if the system matches the transaction with any value, the transaction is kept on hold, stopped for the investigation.
5.3. A monitoring employee is needed to review the transaction kept on hold, stopped.
5.4. A responsible monitoring employee will have 3 options:
5.4.1. False Positive;
5.4.2. True Positive;
5.4.3. Under Review.
5.5. Overall flow of transactions is the following:
5.6. A responsible employee investigates the transaction and decides if it is True Positive or False Positive. The employee takes into account all necessary information, including, but not limited to, screening results, previous transactional activity, client information, geography etc.
5.7. A responsible employee is eligible to ask for further information, if needed.
5.8. If a responsible employee decides that a particular transaction is not a true match, the employee indicates the exact reason and supporting arguments why, marking it as False Positive in the system afterwards. This status will provide the execution of the transaction. Pending Review False Positive True Positive False Positive True Positive Under Review (not real time) True Positive False Positive Closed Reported Status False Positive Closed Reported Status True Positive
5.9. If a responsible employee observes a positive hit on sanction screening or other Focused Lists of a transaction or the transaction has particularities which may require such due diligence that even though it is performed, it may not be possible to properly clear suspicion on the match, employee marks transaction as True Positive. After this, the transaction popsup for investigation of the MLRO.
5.10. The MLRO investigates transactions escalated by employees and makes an ultimate decision. After the investigation, the MLRO has two options: confirming the transaction as True Positive or False Positive match.
5.11. If the MLRO has enough grounds to believe it is not a positive hit, the MLRO closes the case with supporting arguments of the decision. Such a transaction is marked as Verified False Positive. This status will provide the execution of the transaction.
5.12. If after investigation the MLRO confirms the transaction as True Positive match, the case is marked as Verified True Positive. This status will provide the suspension of the transaction.
6. Post-time (Retrospective) Monitoring
6.1. Post-time (retrospective) monitoring is made by TETO Bank in order to investigate the transactions against the Focused Lists and the transaction suitability given the client’s profile.
6.2. All the transactions that are not kept on hold, stopped via online monitoring, are processed, and afterwards could be screened against the Focused Lists designated by TETO Bank.
6.3. TETO Bank develops business processes for the Focused Lists, related to these segments:
6.3.1. geography,
6.3.2. jurisdictions,
6.3.3. volumes of transactions,
6.3.4. frequency of transactions,
6.3.5. correspondence of designated activity in questionnaires with actual activity,
6.3.6. transaction description checks etc.
Each segment may be covered by multiple business rules. One business rule also may cover more than one of the mentioned segments.
6.4. If a transactional activity matches with the Focused Lists, the transaction must be reviewed in order to estimate its suitability given the client profile.
6.5. A monitoring employee investigates and decides if a transaction appears to be suspicious or reporting worthy. If the employee decides that a transaction is False Positive or a particular transaction could be justified, makes economic sense and no further documentation is needed at this time, the employee closes the case leaving evidence of its review and indicating the status of False Positive. For decision making, a responsible employee takes into account all necessary information, including, but not limited to, screening results, previous transactional activity, client information, geography, volumes, client’s designated transactional activity in KYC questionnaires correspondence with actual transactional activity, etc.
6.6. If the monitoring employee is unable to justify the transaction, it is qualified to send a request for information to the client in order to gather supporting documentation or information about the transfer.
6.7. If a client is reluctant to provide information, provided information is superficial or the monitoring employee is able to make a decision of the transaction being True Positive match without asking additional information, the employee escalates the transaction for investigation of the MLRO.
6.8. The MLRO investigates the transaction and makes the ultimate decision. If there are enough grounds to reject an escalated transaction, the MLRO closes it as not reported and documents the arguments behind the decision.
6.9. If the MLRO qualifies a transaction as suspicious, he/she confirms this status and closes the case as Reported Status.
7. Records-keeping for Ongoing Monitoring
7.1. TETO Bank must keep records of the measures TETO Bank takes and of the information obtained from the ongoing monitoring of clients, transactions with whom TETO Bank has a business relationship.
7.2. TETO Bank must keep a record of the ongoing monitoring measures taken and the information obtained from that ongoing monitoring for at least five years from the date the record was created.
7.3. Reports to FINTRAC are provided in line with the AML/CTF Policy of TETO Bank.
7.4. If the sanctioned, terrorist property is defined, detected during the transactions monitoring, TETO Bank takes appropriates measure required by the regulation and FINTRAC, makes appropriate effective reporting as required by FINTRAC.
7.5. If required by the regulation, TETO Bank shall obtain and review criminal record checks of their agents and to submit information related to these criminal record checks upon registration (and reregistration) every two years with FINTRAC. If required by the regulation, in addition, for agents of TETO Bank that are ‘entities’ (i.e. corporations), the chief executive officer, the president, the directors and any person who owns or controls, directly or indirectly, 20% or more of the entity or the shares of the entity, must also undertake a criminal record check and TETO Bank must submit information related to these checks to FINTRAC during registration (and re-registration) every two years. All information related to the criminal record checks must have been obtained from the relevant authority within the last six months (relative to the time of registration of reregistration). If provided by the regulation, TETO Bank may enjoy the retention period for associated record-keeping requirements.
8. Document Control
8.1. The Policy must be kept up to date. It should be periodically reviewed and appropriate changes made, if there have been changes to structure, processes, personnel movements, the systems used, etc.
8.2. This Policy and all related documentation will be also updated as necessary to reflect changes in the business environment, regulations, and industry best practices.
