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Bank Secrecy Act and Anti Money Laundering Compliance Program


COMPANY POLICY STATEMENT
Consistent with its corporate commitment to be in regulatory compliance at all times, the Board of Directors hereby declare it to be (as it has been) the policy of PNB REMITTANCE CENTERS, INC. and its authorized agent, XCHANGED LLC (hereinafter referred to as the “Company”) to comply with the requirements of the anti-money laundering laws and regulations, including the Currency and Foreign Transactions Reporting Act, also known as the Bank Secrecy Act (“BSA”); the Money Laundering Suppression Act; the “Drug Kingpin Law” under the Foreign Narcotics Kingpin Designation Act of 1999; and the Money Laundering and Financial Crimes Strategy Act of 1998.

Additionally, the Company and its staff understand that they must comply with the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, Title III of the USA PATRIOT Act of 2001, Public Law 107-56 as enacted on October 26, 2001, and with the Office of Foreign Assets Control (“OFAC”) Rules and the Executive Orders blocking property and prohibiting transactions with persons who commit, threaten to commit, or support terrorism, issued under the International Emergency Economic Powers Act.

It is the policy of the Company to share information with other financial institutions and any association of financial institutions so it submitted to FinCEN a notification of its intention to share information with other financial institutions. This notification is good for one year to be resubmitted every year. Section 314 (b) of the USA Patriot Act refers to the sharing of information among financial institutions regarding individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities. Upon notice provided to the Secretary of Treasury, two or more financial institutions and any association of financial institutions may share such information with one another.

As the anti-money laundering regulatory landscape changes often, this Company Policy Statement is intended to be evolutionary. Consequently, all directors, officers, employees, agents and contractors are encouraged to propose changes intended to better achieve the Company’s stated goal of “full compliance” with all applicable laws in each endeavor of the Company.

The Board of Directors designates the Regulatory Compliance Officer (RCO) as the BSA/Regulatory Compliance Officer (RCO) of the Company. Such designation shall remain in force until it is changed by the Board with another designee.

Requisite training on this program and in compliance with the program outlined in this Company Policy Statement shall be undertaken in the manner and during the times prescribed in this program.

Compliance with this BSA Program by all members of the Board, officers and personnel of this Company is mandatory and, without waiving any of its rights under the “At Will” policy of employment and without intent to amend said “At Will” policy, any violation of this Program by omission without reasonable explanation or by commission, shall be a ground for termination.

GENERAL PROVISIONS OF THE BANK SECRECY ACT
The Bank Secrecy Act is one of the principal tools the federal government uses to fight money laundering and other related crimes. Enacted by Congress in 1986, the BSA criminalizes the “laundering” of funds derived from the drug trade as well as any of the 176 “specified unlawful activities” or “SUAs” listed in the BSA.

Violations of the BSA may result in severe criminal and civil penalties. Civil penalties may arise from civil lawsuits which the government may file to recover up to double the value of funds or property involved in the transaction or offense. Criminal penalties include prison terms of 20 years per violation.

The provisions of the BSA and the other anti-money laws are made applicable to money transmitters through regulations issued by FinCEN, which was created in April 1990.

A modification to the BSA, entitled the Money Laundering and Financial Crimes Strategy Act of 1998, requires the Treasury Department annually to issue the United States National Money Laundering Strategy. Under this Act, the Treasury Department must identify High Risk Money Laundering Areas every year.

The Treasury Department has complied with this requirement by designating “high-risk money laundering and related financial crimes areas” (HIFCAs”). The HIFCA program involves the creation of national-local task forces intended to deal solely with financial crimes. With this designation, the government has effectively determined that certain areas possess disproportionately high incidences of financial transactions involving dirty money and thus require closer monitoring. The first four HIFCAs are the areas of New York-New Jersey; Puerto Rico; Los Angeles, CA and the Southwest Border region of the United States. Two other HIFCAs have been added as a result of the 2001 Money Laundering Strategy; San Francisco, and Chicago.

With the HIFCA designation comes a commitment by the federal government to make available up to $200 million dollars to combat money laundering in those areas. The designation brings unparalleled cooperation between federal, state and local enforcement authorities. The BSA authorizes Geographic Targeting Orders (“GTOs”) when necessary to carry out the purposes of the BSA and prevent evasion of its requirements. A GTO can impose additional record-keeping and reporting requirements concerning “any transaction for the payment, receipt, or transfer of United States coins or currency.” Although in concept, GTOs are valid for 180 days, under the USA Patriot Act, the Treasury Department easily may renew them.

Under GTOs, the federal government has required that money transmittals originating in or destined to be paid in a specific city or country be carried out under certain restrictive rules. For example, for a period of time the government required that customers remitting funds payable in the Dominican Republic and Colombia must provide identification if the amounts reach or exceed $750.

To enforce the provisions of the GTO, the federal government has often formed task forces composed of law enforcement agencies of varying expertise and jurisdictions. One such task force, the “El Dorado Task Force” has been particularly effective in bringing high profile prosecutions of MSBs found to operate in violation of the money laundering laws in New York.

In addition to conducting traditional investigative searches of businesses and individuals, law enforcement under the GTOs and outside the GTO’s conduct sting operations. During those operations, government agents or persons acting at their behest attempt to conduct illicit transactions through targeted business. They do so, utilizing all means available to real launderers to determine whether the target company possess sufficient controls to detect and may report the illicit transactions. Failure to detect those transactions can invite the punitive measures of the BSA.

THE USA PATRIOT ACT of 2001
Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, enacted on October 26, 2001 as a result of the September 11, 2001 attacks against the United States, provides requirements that apply directly to the operations of the Company. Many of the requirements are amendments to the BSA or other related laws.

Section 311 adds to the BSA Section 31 U.S.C. 5318A entitled “Special Measures for jurisdictions, financial institutions, or internal transactions of primary money laundering concern. Under that Section, the Treasury Secretary may impose up to five “special measures” against foreign financial institutions or jurisdictions and transactions involving such institutions or jurisdictions. Such measures may include the requiring of additional record-keeping or reporting for particular transactions and additional identification of persons who use certain services from or to locations abroad. For money remittances, those requirements may be imposed through a geographic targeted order, which under this Act may be issued for 120 days. Section 312(a) provides requirements that initially apply to banks but may affect money transmitters’ transactions involving foreign correspondents. The Act requires enhanced due diligence procedures that are reasonably designed to detect and report instances of money laundering through the use of services of those correspondents.

Section 314 requires the Treasury Secretary to issue regulations before February 23, 2002 encouraging cooperation among financial institutions, financial regulators and law enforcement officials, and to permit the sharing of information by law enforcement and regulatory authorities with such institutions regarding persons reasonably suspected of engaging in terrorist acts or money laundering activities. The regulations to be promulgated by FinCEN will allow money transmitters, with prior notification to FinCEN, to exchange information about potential money launderers or terrorists.

Section 315 of the Act adds offenses such as export control violations and foreign corruption to the list of SUA’s that trigger violations of the BSA.

Section 351 indicates that the safe harbor provisions of the BSA apply to financial institutions, including money transmitters that provide information about possible violations of the BSA. It also extends the safe harbor provisions to financial institutions that provide employment references indicating possible BSA violations by the person referred.

Importantly, Section 352 provides that each money transmitter in the United States must have an anti-money laundering program, at a minimum, providing for the following:

• The development of internal policies, procedures and controls

• The designation of a AML Compliance Officer

• An ongoing employee training program; and

• An independent audit functions to test the programs.

Under Section 353, violations of the BSA and its regulations apply to violations of Geographic Targeting Orders issued under 31 U.S. C. 5326, and to certain record keeping requirements relating to funds transfers.

Under Section 358, the Act allows money transmitters to provide certain information requested by federal agents without violating certain provisions of the Bank Secrecy Act and the Financial Privacy Act, in an effort to protect the government against international terrorism.

Under Section 359, all money transfer systems, licensed or not, are treated as financial institutions which are subject to the record keeping rules applicable to licensed money transmitters.

Section 361 elevates FinCEN from its previous status of a Division of the Treasury Department to a Bureau of that Department.

Lastly, Section 373 of the USA PATRIOT Act amends 18 U.S.C. 1960 to clarify the terms of the offense stated in that provision relating to knowing operation of a money remittance business unlicensed (under state law) or unregistered (under federal law). This section amends 19 U.S.C. 981 (a) and authorizes seizure of funds involved in a violation of 18 U.S.C. 1960.

THE OFFICE OF FOREIGN ASSETS CONTROL (OFAC)
The Office of Foreign Assets Control administers and enforces economic trade sanctions against targeted foreign countries, terrorism sponsoring organizations and individuals, and international narcotics rings. (31 CFR 500 3t. seq.) OFAC acts through special presidential powers conferred by specific legislation to impose controls of transactions and freeze foreign assets under U.S. jurisdiction. All MSBs must comply with the laws and OFAC-issued regulations.

As a result of the attacks against the United States on September 11, 2001, the Company’s OFAC obligations have come under heightened scrutiny and have gained importance. After 9/11, the President of the United States has continually added the names of terrorists, including individuals, organizations, and countries expanding the substantially large list of persons with whom no U.S. entity can conduct business.

In general, the OFAC regulations required the blocking of all transactions with specified countries, entities and individuals. They also prohibit unlicensed trade and financial transactions with specified countries, entities and individuals.

To ensure that no Company transaction is conducted with OFAC-prosecuted countries, entities or individuals, the Company has developed and will maintain an OFAC compliance program. Under this program, the Company –
    Designates the BCO/RCO as the person responsible for day-to-day OFAC compliance
Uses a Third Party OFAC verification program that cross-references the names and addresses of senders and recipients against the OFAC’s list.

COMPANY POLICIES
The Company has adopted policies to adhere strictly and invariably to the legal and regulatory requirements governing its activities.

Specific Policies

The company will appoint a qualified employee as BCO/RCO who shall have a day-to-day responsibility for managing all aspects of the BSA compliance program. The BCO/RCO may delegate certain BSA duties to other employees, but not compliance responsibility. Pursuant to the authority contained in the Corporate Resolution approving this BSA Compliance Program, the BCO/RCO shall have a sufficient authority and resources to administer effectively a comprehensive BSA compliance program. He is authorized to take all steps required to ensure complete compliance with the applicable anti-money laundering requirements.

The company shall file CTRs (FinCEN Form 112) for all cash transactions exceeding $10,000 in currency (inclusive of commissions) incurred in one day.

The company shall secure record and maintain for five (5) years the identification of all persons and entities sending payment orders and all transactions which individually equal or exceed $3,000 inclusive of commissions, ($1,000 in Arizona) incurred in one day.

The Company shall evaluate all transactions to identify any transaction rendered suspicious because of missing, inaccurate or unusual information. Immediately upon detection and after the evaluation of the facts, the Company will report and file Suspicious Activity Reports (“SARs”) for all transactions rendered suspicious because of missing, inaccurate or unusual information.

The Company shall use technology, software, trained personnel and all available tools to continuously monitor all transactions processed by the Company.

If questions arise or should arise about the legality of the source of the funds being remitted, the Company’s staff, where applicable, shall inquire from the customers about the source of the funds, the customer’s job, and if appropriate follow procedures for filing Suspicious Activity Reports, in coordination with the Company’s BCO/RCO.

Once a year, the Company shall require all personnel and agents to undergo the BSA Compliance Training.

The Company shall train, test and evaluate the knowledge of employees and agents in all aspects of the regulatory requirements of the BSA and the Company’s internal BSA compliance program. The training program shall ensure that:

All Company personnel, including senior management, who have contact with customers (whether in person or by phone), who see customer transaction activity, or who handle cash in any way, receive appropriate training.

Training is ongoing and incorporates current developments and changes to the BSA, anti-money laundering laws and FinCEN regulations.

New and different money laundering schemes involving customers and money transmitters are addressed.

Training includes examples of money laundering schemes and cases tailored to the Company’s operations and the ways such activities can be detected or resolved, with the employees and agents in attendance,

Training focuses on the consequences of an employee’s failure to comply with established policies & procedures (e.g., fines, termination, and incarceration).

The program provides guidance and direction in terms of the Company’s policies and available resources, including direct contact information to the Company’s BCO/RCO.

No person connected with the Company or its agents shall counsel or instruct customers on “structuring” transactions to avoid filing a CTR. Employees or agents who assist or willfully ignore customer efforts to avoid filing and reporting requirements violate the law and may be subject to criminal penalties of up to $500,000, possible incarceration, and civil fines of up to $25,000. The Company has adopted a “zero tolerance” policy subjecting employees to immediate dismissal and agents to immediate termination of the agency agreements for any such violation.

All persons and entities, including employees, agents and contractors found to violate the provisions of the BSA shall be summarily reported to the appropriate authorities.

INTERNAL CONTROLS
The Chief Executive Officer of the Company is responsible for ensuring the viability and effectiveness of the Risk Management and Compliance Program. Consequently, this Policy mandates that all management personnel, especially the CEO, must be kept informed about the compliance efforts of the company, audit reports, identified compliance deficiencies, and corrective action taken.

To achieve the above-stated goals, the Company shall designate a BCO/RCO who shall be responsible for all BSA related compliance activities. The BCO/RCO, who shall report directly to the Board’s Audit Committee, shall have oversight of the Compliance Department. He shall recommend to the Compliance Committee, suspension and termination of any transaction that violates the provisions of the BSA and the anti-money laundering commitment of the Company.

TRAINING
All of our employees and officers will receive BSA/AML training, as well as position-specific training. They must repeat this training at least once every twelve (12) months to ensure they are knowledgeable and in compliance with all pertinent laws and regulations. New employees receive training within thirty (30) days of their start date. All documentation related to compliance training including materials, tests, results, attendance and date are maintained. In addition, our compliance training program is updated as necessary to reflect current laws and regulations.

WE IMPLEMENT E-KYC
WHAT IS E-KYC?

E-KYC or Electronic Know Your Customer is the ELECTRONIC PROCESS of filing documents that relate to a customer’s identification and enables an entity to know the customer. These services enable a customer to share his/her necessary demographic and personal information in a secure and transparent manner. A customer has to furnish details such as identity details, contact details, address details, DOB, gender, SSN and these MUST match the information in the submitted identity documents such as driver’s license, US passport or state ID.

APPLICABILITY OF E-KYC
E-KYC is mandatory for customers or clients of banks, financial institutions and Money Service Business Providers or as stipulated by the US Department of Treasury through circulars from time to time. E-KYC applies to or can be used for the following (that have regulatory compliance):
  1. Banks
  2. Financial Institutions
  3. Money Service Business
  4. xFI's situated abroad
  5. Mobile Service Provider and Telecom
  6. Utility connections (Gas, water and electricity)
  7. Apps that deal with financial transaction such as XCHANGED LLC's web based remit software and android/IOS apps

BENEFITS of E-KYC?
Benefits of E-KYC to the public and to institutions are:
  1. Consent Based
    eKYC is consent-based in the sense an individual can share data based on any approved authentication for verification. An individual that requires a service or utility must file for E-KYC of his or her own accord and consent. This protects the individual’s right to privacy which is a fundamental right bestowed upon us by our constitution.

  2. Paperless System
    E-KYC is a paperless system that replaces the need for document management with paper-based documents. This enables a company, state or country to reduce their carbon footprints by going eco-friendly and using a cloud-based online system. Not only does going paperless save the planet, it also helps in reducing costs associated with normal KYC compliance.

  3. Instantaneous
    The E-KYC service is completely automated online. This means that E-KYC data can be transferred in real-time without the need for any manual intervention. The paper-based KYC process can take days up to weeks to get verified, but the E-KYC process takes just a few minutes or hours to verify and issue.

  4. Transparency Of Transactions Or Usage
    E-KYC enables all records and data to be stored permanently online. Any misuse, illicit gain or illegal activity can be traced back to the individual or parties involved in such transactions or usage of services.

  5. Regulator friendly
    All E-KYC requests are recorded on the system and all submitted Personal Identity documents are secured for each customer for future use and reference as needed by law enforcement agencies.

ADVANTAGES OF E-KYC
  1. Secure System
    A customer’s account, data and information are secure because the entire process is online. Identity theft, fraud, loan scams, money laundering, the flow of black money, etc. are all minimized with a secure online digital system of KYC.

  2. Efficient Communication
    Effective information can be relayed in an efficient and timely manner. Generally, with any automated system, there is no need to constantly go back and forth because most details are published automatically, unlike having to fill in a KYC form manually.

  3. ‘Free of Cost’ Process
    Usually, customers that opt to undergo eKYC aren’t required to pay any additional amount for doing so. A company or institution may have to undergo automation costs officers installing verification devices and systems which are beneficial in the long-run.

ACCOUNT OPENING PROCESS
In order to open an account and use www.xchangedremit.com, your identity must be verified, authenticated, and checked against government watchlists, including the Office of Foreign Assets Control (“OFAC”). Failure to complete any of these steps will result in your inability to use the service.

Individual customer — Prior to opening an account for an individual customer, we attempt to collect, verify, and authenticate the following information:

  • Email address;
  • Mobile phone number
  • Full legal name
  • Social Security Number ('SSN') or any comparable identification number issued by governament;
  • Date of birth ('DOB')
  • Proof of identity (e.g., driver’s license, passport or government-issued ID);
  • Home address (not a mailing address or P.O. Box); and
  • Additional information or documentation at the discretion of our Compliance Team.
If you successfully meet and complete our Customer Identification Program (CIP) requirements and do not appear on the OFAC or any other government watchlist, then we will provide you with account opening agreements electronically.

SUSPICIOUS ACTIVITY / CURRENCY TRANSACTION REPORTS
We file Suspicious Activity Reports (SARs) if we know, suspect or have reason to suspect suspicious activities have occurred on use of the service on www.xchangedremit.com. A suspicious transaction is often one that is inconsistent with a customer’s known and legitimate business, personal activities or personal means. We leverage our compliance department, which performs transaction monitoring to help identify unusual patterns of customer activity. Our RCO reviews and investigates suspicious activity to determine if sufficient information has been collected to justify the filing of a SAR. In addition, all currency transactions over a determined USD value are be reported to FinCEN via a Currency Transaction Report (CTR) filing. Our RCO maintains records and supporting documentation of all SARs and CTRs that have been filed.

RECORD RETENTION
The Company shall retain copies of the SARs and CTRs and the original or business records or any supporting documentation for a period of five (5) years from the date of filing the SARs and the CTRs.

These records must be kept in the Branch and shall be made available to the auditor or the regulatory agency when requested..

WIRE TRANSFER RECORD KEEPING PROCEDURES FOR REMITTANCES OF $3,000 (1,000 for ARIZONA) AND ABOVE
For each remittance of $3,000 ($1,000 in Arizona) and above, regardless of the type of payment, these procedures shall be followed by the Operations Officer and/or Sales and Service Associate:

• Obtain the information of the remitter and beneficiary before completing the transaction and enter them in the system

• Examine an acceptable ID document of the remitter at the time of remittance and record the ID document (e.g., CA Drivers License No., place of issue, expiry date) in the system

• Remember and apply the 10 elements of “Know Your Customer” policy.

Remitter’s Information
• Name
• Address
• Date of birth
• Telephone number
• Occupation/business
• Source of funds and wealth
• Purpose of remittances

Identification Required
• Social security number
• Driver’s license/state ID
• Resident alien card
• Passport

All ID documents presented must be in current form and must be issued in the state where the Branch is located. Out-of-state driver’s license may be accepted for new remitters subject to verification of other ID documents. Except for the Philippine passport, no other Philippine-issued ID shall be accepted. Documents must be clear and legible.

Other Information required
• Relationship of remitter to beneficiary
• Complete street address of beneficiary
• Occupation/business of beneficiary

Before payment of the remittance to the beneficiary, said beneficiary shall be properly identified by the paying agent through the acceptable identification documents.

Under the Arizona Revised Statutes, the Company shall retain a record of each of the following:

• the name and social security or taxpayer identification number, if any, of the individual presenting the transaction and the person and the entity on whose behalf the transaction is to be effected.

• the type and number of the customer’s verified photographic identification, as described in 31 Code of Federal Regulations Chapter X Section 1010.312.

• the customer’s current occupation.

• the customer’s current residential address.

• the customer’s signature.

The requirements shall be observed for remittances of $1,000 and above conducted by the company’s agents in Arizona.

If the remitter is unable to provide the necessary information at the time of transaction, advise remitter that remittance cannot be accepted. The Sales and Service Associate should report the incident to the Operations Officer/Officer-in-Charge. If remitter’s refusal is suspicious (i.e., remitter is not just being “difficult”), the Operations Officer/Officer-in-Charge should report the matter to the BCO/RCO who will review the incident together with all available facts to determine whether the incident is in fact reportable as suspicious.