Garage Gym Anti-Money Laundering Policy & Procedures

Garage Gym Anti-Money Laundering Policy & Procedures

Introduction‍

It is the policy of Garage Gym and our affiliates to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under UK Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Money Laundering, Terrorist Financing and Transfer of Funds 2017. 

Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally-derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the “placement” stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler’s checks, or deposited into accounts at financial institutions. At the “layering” stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the “integration” stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.

Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.

Our anti-money laundering (AML) policies, procedures and internal controls are designed to facilitate compliance with Financial Services Act and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business. The provisions of this policy will apply to all directors, officers and employees of the Company and its subsidiaries worldwide. In addition, the Company will require independent third parties who represent the Company (such as agents, consultants, and contractors) to conduct themselves in a manner consistent with this Policy Statement.

 

‍Penalties & Fines‍

Failure to comply with this Policy may result in significant civil and criminal penalties for the Company and the individuals involved and is cause for disciplinary action against such individuals, up to and including termination.

Criminal and civil penalties may be assessed against both individuals (including jail time) and companies that violate FCA.

Compliance Person Designation and Duties‍

Garage Gym has developed a comprehensive program for implementing this Policy. Garage Gym has designated its Compliance Officer as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the firm’s AML program. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligation and ensuring communication and training for employees.

The AML Compliance Person will also ensure that the firm keeps and maintains all of the required AML records and will ensure that Suspicious Activity Reports (SAR) are filed with the Financial Crimes Enforcement Network (FinCEN) when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the firm’s AML program. The AML Compliance Person, in conjunction with the relevant compliance council, is responsible for giving advice on the interpretation and application of this policy, supporting training and education, and responding to reported concerns.

Responding to AML Information Requests:‍

‍Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions

FinCEN Requests

We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning accounts and transactions by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the request. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to Request. We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. The Compliance Officer will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of customers’ nonpublic information.

We will direct any questions we have about the Request to the requesting federal law enforcement agency as designated in the request.

Unless otherwise stated in the  Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.‍

National Security Letters‍

National Security Letters (NSLs) are written investigative demands that may be issued by the government authorities conducting counterintelligence and counterterrorism investigations to obtain, among other things, financial records of broker-dealers.

NSLs are highly confidential. No broker-dealer, officer, employee or agent of the broker-dealer can disclose to any person that a government authority or the FBI has sought or obtained access to records. If you file a Suspicious Activity Report (SAR-SF) after receiving a NSL, the SAR-SF should not contain any reference to the receipt or existence of the NSL.

Grand Jury Subpoenas‍

We understand that the receipt of a grand jury subpoena concerning a customer does not in itself require that we file a Suspicious Activity Report (SAR-SF). When we receive a grand jury subpoena, we will conduct a risk assessment of the customer subject to the subpoena as well as review the customer’s account activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that customer’s risk assessment and file a SAR-SF in accordance with the SAR-SF filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents or the information we used to respond to it. To maintain the confidentiality of any grand jury subpoena we receive, we will process and maintain the subpoena in our online password protected storage system and/or in a secure location in our offices. If we file a SAR-SF after receiving a grand jury subpoena, the SAR-SF will not contain any reference to the receipt or existence of the subpoena. The SAR-SF will only contain detailed information about the facts and circumstances of the detected suspicious activity.

We will share information with other financial institutions regarding individuals, entities, organizations and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. 

Implementation Procedures

Operational Directives‍

Garage Gym reviews trade transactions on an individual basis. The documents and specific terms are reviewed to examine the transaction not only for fraud but also for unusual and potentially suspicious activities. The complex nature of these transactions provides a large amount of information about the parties and the goods and services involved in the transaction. While certain elements of the process may be automated the overall process of reviewing trade documents by its nature cannot be successfully automated. Garage Gym relies on lists provided by various governments of known or suspected terrorists.

Customer Identification Program (CIP)‍

We have established, documented and maintain a separate written Customer Identification Program (CIP).

Lack of Verification‍

When we cannot form a reasonable belief that we know the true identity of a potential customer, we will do the following: (1) not enter into a transaction with the party; (2) impose terms under which a customer may conduct transactions while we attempt to verify the customer’s identity; (3) close an account after attempts to verify customer’s identity fail; and (4) determine whether it is necessary to file a SAR in accordance with applicable laws and regulations.

Record keeping‍

We will document our verification, including all identifying information provided by a customer, the methods used and results of verification, and the resolution of any discrepancies identified in the verification process. We will keep records containing a description of any document that we relied on to verify a customer’s identity, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to non-documentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a customer. We will also keep records containing a description of the resolution of each substantive discrepancy discovered when verifying the identifying information obtained. We will retain records of all identification information for five years after the account has been closed; we will retain records made about verification of the customer’s identity for five years after the record is made.

Comparison with Government-Provided Lists of Terrorists‍

At such time as we receive notice that a government agency has issued or updated a list of known or suspected terrorists and identified the list as a list for CIP purposes, we will, within a reasonable period of time after a potential transaction is evaluated (or earlier, if required by another law or regulation or directive issued in connection with an applicable list), determine whether a customer appears on any such list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators. We will follow all federal directives issued in connection with such lists. We will continue to comply separately with OFAC rules prohibiting transactions with certain foreign countries or their nationals.‍

Notice to Customers‍

We will provide notice to customers that the firm is requesting information from them to verify their identities, as required by federal law.‍

General Customer Due Diligence‍

It is important to our AML and SAR reporting program that we obtain sufficient information about each customer to allow us to evaluate the risk presented by that customer and to detect and report suspicious activity. When we review a customer transaction, the due diligence we perform may be in addition to customer information obtained for purposes of our CIP.

For each trade, Garage Gym performs a risk analysis, in the event there are circumstances in which we cannot perform appropriate due diligence with respect to a correspondent transaction, we will determine, at a minimum, whether to refuse to enter into, or suspend, the transaction, file a SAR SF, close the correspondent account and/or take other appropriate action.‍

Risk Assessment‍

Garage Gym applies a risk based approach to the assessment and management of risk in our due course of business. The assessment of risk and application of appropriate AML controls will depend on the role of Garage Gym in any trade transaction. Where Garage Gym has appropriate perspective and access, it is our policy to mitigate the risks identified by each transaction

Red Flags‍

Red flags that signal possible money laundering or terrorist financing include, but are not limited to:

Customers – Insufficient or Suspicious Information‍

  • Provides unusual or suspicious identification documents that cannot be readily verified.
  • Reluctant to provide complete information about nature and purpose of business, prior banking relationships, anticipated account activity, officers and directors or business location.
  • Refuses to identify a legitimate source for funds or information is false, misleading or substantially incorrect.
  • Background is questionable or differs from expectations based on business activities.
  • Customer with no discernable reason for using the firm’s service.‍

Efforts to Avoid Reporting and Recordkeeping‍

  • Reluctant to provide information needed to file reports or fails to proceed with transaction.
  • Tries to persuade an employee not to file required reports or not to maintain required records.
  • “Structures” deposits, withdrawals, transactions or purchase of monetary instruments below a certain amount to avoid reporting or recordkeeping requirements.
  • Unusual concern with the firm’s compliance with government reporting requirements and firm’s AML policies.

Certain Funds Transfer Activities‍

  • Wire transfers to/from financial secrecy havens or high-risk geographic location without an apparent business reason.
  • Many small, incoming wire transfers or deposits made using checks and money orders. Almost immediately withdrawn or wired out in manner inconsistent with customer’s business or history.

May indicate a Ponzi scheme.

  • Wire activity that is unexplained, repetitive, unusually large or shows unusual patterns or with no apparent business purpose.

Activity Inconsistent With Business‍

  • Transactions patterns show a sudden change inconsistent with normal activities.
  • Unusual transfers of funds or journal entries among accounts without any apparent business purpose.
  • Maintains multiple accounts, or maintains accounts in the names of family members or corporate entities with no apparent business or other purpose.
  • Appears to be acting as an agent for an undisclosed principal, but is reluctant to provide information.

Trade Related Red Flags‍

Prior to entering into a Specified Agreement and throughout the project, Garage Gym requires a thorough review of all applicable trade documentation (e.g., customs declarations, trade documents, invoices, etc.) to enable Garage Gym to monitor and report unusual and suspicious activity. In addition to OFAC filtering, the monitoring process should give greater scrutiny to:

  • A customer’s inability to produce appropriate documentation (i.e., invoices) to support a requested transaction.
  • Significant discrepancies between the descriptions of the goods on the transport document (i.e., bill of lading), the invoice, or other documents (i.e., certificate of origin, packing list, etc.).
  • A lack of evidence of legitimate business activity, or any business operations at all, undertaken by many of the parties to the transaction(s);
  • Items shipped that are inconsistent with the nature of the customer’s business (e.g., a steel company that starts dealing in paper products, or an information technology company that starts dealing in bulk pharmaceuticals).
  • Transactions that are not commensurate with the stated business type and/or that are unusual and unexpected in comparison with the volumes of similar businesses operating in the same locale;
  • Customers conducting business in higher risk jurisdictions.
  • Customers shipping items through higher risk jurisdictions, including transit through non-cooperative countries.
  • Customers involved in potentially higher risk activities, including activities that may be subject to export/import restrictions (e.g., equipment for military or police organizations of foreign governments, weapons, ammunition, chemical mixtures, classified defense articles, sensitive technical data, nuclear materials, precious gems, or certain natural resources such as metals, ore, and crude oil).
  • Obvious over or underpricing of goods and services.
  • Obvious misrepresentation of quantity or type of goods imported or exported.
  • Transaction structures that appear unnecessarily complex and designed to obscure the true nature of the transaction.
  • Customer directs payment of proceeds to an unrelated third party.
  • Third party payments for goods or services made by an intermediary (either an individual or an entity) apparently unrelated to the seller or purchaser of goods. This may be done to obscure the true origin of the funds.
  • Unusual financial nexuses and transactions occurring among certain business types (e.g., food importer dealing with an auto parts exporter);
  • Shipment locations or description of goods not consistent with letter of credit.
  • Significantly amended letters of credit without reasonable justification or changes to the beneficiary or location of payment. Any changes in the names of parties also should prompt additional OFAC review.

Responding to Red Flags and Suspicious Activity‍

When an employee of the firm detects any red flag, or other activity that may be suspicious, he or she will notify the AML Compliance Person. Under the direction of the AML Compliance Person, the firm will determine whether or not and how to further investigate the matter. This may include gathering additional information internally or from third-party sources, contacting the government, freezing the account and/or filing a SAR.‍

 

Training Programs‍

We will develop ongoing employee training under the leadership of the AML Compliance Person and senior management. Our training will occur on at least an annual basis. It will be based on our firm’s size, its customer base, and its resources and be updated as necessary to reflect any new developments in the law.

Our training will include, at a minimum: (1) how to identify red flags and signs of money laundering that arise during the course of the employees’ duties; (2) what to do once the risk is identified (including how, when and to whom to escalate unusual customer activity or other red flags for analysis and, where appropriate, the filing of SAR-SFs); (3) what employees’ roles are in the firm’s compliance efforts and how to perform them; (4) the firm’s record retention policy; and (5) the disciplinary consequences (including civil and criminal penalties) for non-compliance with the FSA. We will develop training in our firm, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures and explanatory memos. Currently our training program is administered via lecture from management. We will maintain records to show the persons trained, the dates of training and the subject matter of their training.‍

Confidential Reporting and Non-Retaliation‍

Employees will promptly report any potential violations of the firm’s AML compliance program to the AML Compliance Person, unless the violations implicate the AML Compliance Person, in which case the employee shall report to CEO. Such reports will be confidential, and the employee will suffer no retaliation for making them.

All questions and reports of known or suspected violations of the law or this policy will be treated to the extent possible with sensitivity and discretion. An employee’s supervisor, the Compliance Officer and the Company will protect an employee’s confidentiality to the extent possible consistent with law and the Company’s need to investigate an employee’s concern. The Company strictly prohibits retaliation against an employee who, in good faith, seeks help or reports concerns to the Company. If an employee believes he or she is being treated unfairly or retaliated against by anyone as the result of making a complaint under this policy, the Compliance Officer and the CEO should be immediately notified. Any employee who retaliates against an employee who, in good faith, sought help or filed a report will be subject to appropriate disciplinary action, up to and including termination of employment.

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