KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM GROUP POLICY

Transcription

1 KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 1

2 CONTENTS 1. Document follow-up Distribution list Introduction Scope Definitions MINIMUM REQUIREMENTS APPENDIX Appendix 2 : list of KYC & Credit limits group approvers KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 2

3 1. Document follow-up Document reference Scope KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC.AMLCFT) SYSTEM - Main principles and rules detailing the AML/KYC on-boarding process of new clients/review of existing clients. This policy applies to the group. Amendments follow up Version Date Written by Modifications V0 12/2013 J. ALICHE (Risk Manager) Document creation. V1 03/2016 A. OTEKPO (AML-CFT Compliance Officer) Description of the Worldcheck monitoring system. Description of the monitoring process of high risk clients. V2 09/2016 T. LECOUTRE (Junior Risk and Compliance Officer) Modification regarding clients onboarding validation process. Release details Entity Surname NAME Function / Department Date Sent by to nominated persons and generic team addresses Stored on internal Kepler Cheuvreux network : W:\Financial Security\Procédures\Politique Group AML Validation follow-up Entity Surname NAME Function / Department Date Kepler Cheuvreux Philippe BABOULIN Global Chief Operating Officer Kepler Cheuvreux Marc THEVENIN Head of Risks, Compliance and Control Kepler Cheuvreux Fabrice IMBERT Deputy Head of Compliance KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 3

4 2. Distribution list Document recipients Function / Department Position Surname NAME Management Global Chief Operating Officer Philippe BABOULIN Risk & Compliance Head of Risks, Compliance and Control Marc THEVENIN Compliance Deputy Head of Compliance Fabrice IMBERT Management Senior Managing Director François MALLET Risk & Compliance AML-CFT Compliance Officer Amandine OTEKPO Risk & Compliance AML-CFT Compliance Officer Alexandre DEGA Risk & Compliance Junior Risk & Compliance Officer Constant CARNIS Risk & Compliance Junior Risk & Compliance Officer Thibaut LECOUTRE Risk & Compliance Senior Risk & Compliance Officer Hedi EL MECHAT All staff - intranet N/A N/A Public website N/A N/A KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 4

5 3. Introduction Kepler Cheuvreux (henceforth KC) is committed, as a leading financial intermediary, to uphold at all times the highest anti money laundering and fight against terrorism (AML-CFT) standards. KC hence requires employees at all levels to adhere to these standards to prevent the use of our products and services for money laundering and terrorism purposes. 4. Scope The standards and framework described in this Policy are the minimum requirements based on applicable legal, regulatory requirement. They apply for the entire Kepler Cheuvreux Group. According to the European Anti Money Laundering and Fight against terrorism (2005/60/EC) 1 directive and the directive related to Politically Exposed Persons (2006/70/EC) 2, the Kepler Cheuvreux Group must ensure that the legal duties resulting from the latter documents and the French Law are fulfilled by all its subsidiaries, branches and affiliates in France and abroad. Wherever Management or local requirements are stricter than the requirements set out in this Policy, the stricter standard has to be applied. If any applicable laws are in conflict with this policy, the relevant entity must consult with the Head of Risk, Compliance and Control (RCC) and the Deputy Head of Compliance to resolve the conflict. If the minimum requirements set out in this policy cannot be applied in a certain country because application would be against local low, or cannot be enforced due to other legal reasons, KC has to make sure that it will not enter into a business relationship or carry out any transactions. 5. Definitions Money Laundering is the introduction of assets derived from illegal and criminal activities into the legal financial and business cycle. In general, the money laundering process consists in three stages: - "Pre-laundering" or placement: to introduce unlawful proceeds into the financial system without attracting the attention of financial institutions or law enforcement; - "Laundering" or "layering": to move funds around the financial system, often in a complex series of transactions to create confusion and complicate the paper trail; - "Recycling" or integration: once the funds are in the financial system and insulated through the layering stage, the integration stage is used to create the appearance of legality through additional transactions. Terrorism Financing is the process that consists in using legal resources to finance operations of terrorism financing. Politically exposed person (PEP) are natural persons who are or have been entrusted with prominent public functions KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 5

6 6. MINIMUM REQUIREMENTS 1. Customer due diligence General principles What? a) Ascertain client s identity based on documentation coming from an independent and a reliable source. b) Identify the ultimate beneficial owner, where applicable. Identified beneficial owners must be screened in order to identify potential PEP. A search on Worldcheck must be done for each client no matter its risk assessment. c) Establish the purpose of the business relationship. d) Monitor on an ongoing basis the business relationship including: o a mandatory client review o an enhanced monitoring when transacting with a PEP e) Monitor all transactions and report any suspicious transactions How? Customer due diligence must be based on a KYC/AML-CFT risk assessment. Please refer to Appendix 1. Depending on the level of client s inherent risk or for a number of situations as defined by the law, different levels of diligences can be conducted. Three levels of diligence exist: standard simplified and enhanced. They directly derive from the laws and regulations as defined in the scope. When? Customer due diligence must be conducted every time a business relationship is started or before a transaction of any type is executed unless the KYC/AML-CFT risk is of the transaction is deemed to be low (in the latter case, the due diligence will be completed as soon as possible after the first contact). If the KYC/AML- CFT risk for a client changes in the course of the relationship, then due diligence must be performed in accordance with standards. When a Simplified Due Diligence is conducted for a client, we should be able to demonstrate that the client is the categories stated above. Impossibility If the requirements set out in this Policy cannot be applied, Kepler Cheuvreux has to assure that it will not enter or continue a business relationship nor execute a transaction. 2. Information exchanged inside the Group All entities of Kepler Cheuvreux Group work closely together regarding the exchange of information on AML. If Kepler Cheuvreux Paris needs to collect documents on a new entity or need any assistance on a client, they may ask to other KC subsidiaries if they already have a KYC file or any other information on the client. 3. Monitoring of the transactions All transactions of the entities of Kepler Cheuvreux Group must be monitored. The transaction monitoring is driven mainly by two systems: the OMS (on cash equity) and Money broker (other business lines). KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 6

7 Several transactions reports are checked by the compliance department on a daily basis, in order to identify any cases of money laundering or market abuse. Any suspicious trade is investigated further. 4. Reporting obligations All KC branches and subsidiaries have to report suspicious circumstances / transactions to the competent authorities according to local law and inform the Head of RCC and the Deputy Head of Compliance. The reporting must be appropriately documented. Locally, the Legal entity Compliance Officer is in charge of the reporting to the relevant financial intelligence unit (henceforth FIU). No transaction or business relationship should be undertaken until KYC/AML-CFT suspicions are waived. Where such a transaction is suspected of giving rise to money laundering or terrorist financing and where to refrain in such manner is impossible or is likely to frustrate efforts to pursue the beneficiaries of a suspected money laundering or terrorist financing operation, the institutions and persons concerned shall inform the FIU immediately afterwards. Employees shall not disclose to the customer concerned or to other third persons the fact that information has been transmitted to the FIU or that a money laundering or terrorist financing investigation is being or may be carried out except in some cases described in the article 28 of the 2005/60/EC. The Group Money Laundering Officer shall ensure that a list of: clients for which suspicions reporting was made and is circulated to the relevant staff (Legal Entity Compliance Officers) throughout the Group. beneficial owners identified as PEP and is circulated to the relevant staff (Legal Entity Compliance Officers) throughout the Group. 5. Record keeping All the documentation in relation to customer due diligence, business relationships and transactions should be retained at least for a period of 5 years. Wherever regulations are stricter than the requirements set out in this Policy, the stricter standards apply. The archiving system shall enable KC officers to respond promptly to any request by any relevant authority regarding transactions or business conducted in the last 5 years. 6. Maintenance of procedures All Kepler Cheuvreux branches must put together and frequently review their procedures. The latter will be covering at least the following topics: - client due diligences - suspicion declaration process - record keeping - internal control - risk assessment and risk management - reporting obligation Branches and subsidiaries procedures must be in line or stricter than the policy herewith described. KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 7

8 7. Organization KYC AML/CFT System Organisation Chart FRANCE TRACFIN recipient Responsible for the AML/CFT process towards the ACPR and the board of directors of Kepler Cheuvreux Operations Officer in charge of the follow-up and application of the AML/CFT process within the group Staff in charge of the controls of new and existing clients (Group process) TRACFIN registrant SWITZERLAND Registrant to Swiss Money Laundering Reporting Office Group Approvers for KYC & Credit Limits Staff in charge of local specific controls Declaration statement, local procedures, external services provision monitoring NEW YORK CITY US independant local system - integrated in the France's scope LONDON Independant local system - integrated in the France's scope KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 8

9 KYC AML/CFT System Roles and responsibilities Head of RCC and Deputy Head of Compliance for the Group (0) Group Approvers for KYC & Credit Limits (1) KYC-AML/CFT Managers (2) Processes KYC-AML/CFT Officers (3) Money Laundering Reporting Officers / Correspondents (4) Local KYC-AML/CFT Officers (AML/CFT fonction outsourced) (5) Overall review of the organisation, the risk assessment, the internal procedures and system adequacy Validation of documents circulated at Group Level Control on the correct implementation of the KYC-AML/CFT devices Drives communication to the Board and other stakeholders with respect to issues concerning AML Scrutinizes as required complex on-boarding cases where > (2) refuses an account and re-assessment is sought by the Front Office > Judgment leaves (2) with doubt on the quality of the client after full completion of relevant diligences. Proposes decision as regards the client s acceptance / reject throughout the relationship to (1) Represents the KYC- AML/CFT team in new business committees Maintains relationships between AML and the Group s external auditors, regulatory and other authoritative bodies Oversees AML related ITsystems, AML Risk Analysis, change projects, technology, operations, Management Information System (Reporting) and all AML-specific processes Are responsible for the fulfillment of all requirements imposed by local laws and regulations as well as global minimum standards Propose procedures updates in relation to business changes observed or procedures inadequacies Are in charge of the system of national reporting of suspicious transactions Are responsible to assess the local laws and regulations in relation to AML-CFT and KYC Are in charge of local procedures (mainly operational) Are in charge of ensuring that outsourced activities in relation to KYC-AML/CFT functions are properly maintained. KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 9

10 8. Training and Awareness Kepler Cheuvreux shall take appropriate measures so that their relevant employees are aware of the provisions in force on the basis of this Directive. Relevant employees shall attend specific programs in relation to KYC/AML-CFT. - Training of Front Office staff should be undertaken regularly - Cross-Training of key personnel in relation to the System should be organized. 9. Control The Group has implemented a Control Plan that covers the KYC-AML/CFT activities. It is placed under the responsibility of the Head of Risk, Compliance and Control. KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 10

11 7. APPENDIX 1 Subject Matter: ANTI MONEY LAUNDERING AND FIGHT AGAINST TERRORISM FINANCING RISK ASSESSMENT 1. OBJECTIVE The present KYC/AML-CFT risk assessment model aims at addressing the regulatory constraint requiring financial institutions to deploy KYC/AML-CFT procedures according to the level of KYC/AML-CFT risk level. The risk assessment model derives from both objective and subjective criteria. One of the objectives of this memorandum is to list those criteria and to rank them. For every transaction / business relationship, AML Officers will have to assess the latter against all the below criteria. Those criteria are defined by the French regulation in the Decree n FCPT A of 3 November The inherent level risk given to each criterion, as well as the risk weighting coefficient used to determine the overall risk rating of a transaction / business relationship are the result of an assessment. The Head of RCC and the Deputy Head of Compliance are jointly in charge of the regular review of those criteria against regulatory developments and new business practices. In all cases, AML Officers should use judgment in reviewing a transaction / business relationship, and document it accordingly. 2. CRITERIA AND ASSOCIATED RATINGS KC has developed a risk categorization of business relationships based on the 4 axis as defined by the regulation: i) type of client ii) services and products offered iii) specific conditions of operations iv) distribution channels Type of client KC deemed necessary to approach the type of client through two parameters as laws and regulations traditionally associate the latter. Clients business Description Regulated Bank Regulated Financial Institution Rating KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 11

12 Listed Corporate Corporate Institutional clients Sovereigns Financial Intermediaries Regulated Funds (FCP, SICAV) and Associated Investment / Asset Manager Funds and Associated Investment / Asset Manager Other Medium Medium Medium High Clients location Description European Country in the scope of the KYC/AML-CFT directive 2005/60/CE FATF 3 members Other Rating High Services and products offered Kepler Cheuvreux bases its rating of services offered on the knowledge of its clients. We have hence defined what our core recurring businesses were. Any exception to those recurring businesses should be regarded as a high risk. Kepler Cheuvreux assesses the following activities (conducted on any type of underlying product) to be its usual activities: Equities Fixed Income Derivatives Structured Products Reception and transmission of orders on X X X X behalf of clients Execution of orders on behalf of clients X X X Investment advice X X X X Underwriting of financial instruments X 3 FATF (GAFI) members only. KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 12

13 Placing of financial instruments on a firm X X X commitment basis Placing of financial instruments without a firm X X X commitment basis Operation of Multilateral Trading Facilities X Research X OTC brokerage (name giveup, matched principle) X X X X Corporate Finance Services X X X X Corporate Brokerage X Indicators: AML Officers should be able to classify the new transactions / business relationship in one of the above recurring activities. The above listed businesses are considered as usual recurring businesses, hence should be considered to be rated as a low inherent risk. Indicators that the new transactions / business relationship should be classified as a high risk: - The fact, for a client to require other types of services than those initially sought should be viewed by relevant employees as a potential indicator of rising risk level. - The fact for a client that is authorized in its jurisdiction to undertake a transaction, but would ask to make it in their name with no apparent reason - The fact for a client to open a line with KC and to request its closure shortly after - The fact to observe a client unusual securities sell and buy-back Example: A client brings a profitable transaction to Kepler and wants to be remunerated through retrocessions. Bank A requests from KC to clear a transaction for a client of theirs while, there is no apparent reason for the bank not to clear it themselves. Specific conditions of operations We have identified the following conditions to be aggravating from a risk perspective. All the conditions that could alter the transparence of the inflows, in particular: - Orders which are split between multiple accounts - Accumulation of intermediaries in the trading / operating structure KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 13

14 - Client requires a specific vehicle or model for trading The fact for a transaction / business relationship to present specific conditions should immediately raise the level of risk related to specific conditions of operations to high. If the model is known and recurring but still consists in a specific operating model, the level of risk can be lowered to Medium. Distribution channels KC mainly has a traditional business to business model, whereby they charge fees for their intermediation and other services or clear trades of behalf of their clients. When the model varies in that, but not only, are intermediaries added to the normal distribution channel, this should raise the level risk related to Distribution channels to high. For instance: - Orders coming through intermediaries (depositary banks, wealth managers, investment advisors) - Orders requiring the intervention of distributors or business introducers paying retrocessions In the situations previously described, KC should not delegate their KYC/AML-CFT obligations unless imposed by the conditions and after having validated in detail that the holder of the obligation was in a position perform diligences with due care. This implies, but is not limited to check that the holder has himself the obligation to undertake such diligences with the same level of care as required from KC (including the fact that the holder of the obligation has the capacity and the right process to apply all KYC/AML-CFT related). 3. RISK SCORING METHODOLOLGY The following risk scoring matrix, proposes differentiated weighting coefficients for each of the 4 criteria presented previously. They are based on our knowledge and practice KYC/AML-CFT controls. Risks level per criteria and associated mark: risk < 1 1< Medium Risk < 2 - High > 3 Weighting coefficient Type of client Services and products offered Specific conditions of operations Distributio n channels Business Zone Medium High overall rating KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 14

15 Implementation Rating 1 to 1.5: Rating to 2: Rating 2 to 3: low risk > simplified due diligence can be applied. standard > standard due diligence can be applied. high risk > enhanced due diligence must be applied. 8. Appendix 2 : list of KYC & Credit limits group approvers Kepler Cheuvreux Group approvers are responsible for reviewing and authorizing/refusing the on-boarding of new clients and the review of existing clients. Kepler Cheuvreux Group approvers agree on a client credit limit according to each client s profile and financial data, provided by local officers in a written document. The following list is comprised of Kepler Cheuvreux Group approvers for clients on the Equity and Listed Products business line : - Laurent QUIRIN (Chief Executive Officer) - Philippe BABOULIN (Global Chief Operating Officer) The following list is comprised of Kepler Cheuvreux Group approvers for clients on the Non-Equity business line : - Philippe BABOULIN (Global Chief Operating Officer) - François MALLET (Senior Managing Director) KNOW YOUR CUSTOMER -ANTI MONEY LAUNDERING, FIGHT AGAINST TERRORISM FINANCING (KYC-AML/CFT) SYSTEM 15