Global Anti-Money Laundering & Counter-Terrorist Financing Policy
Effective date: April 22nd, 2024
- Introduction
- Purpose & Objective
TXN Holdings Limited is the parent company of the TXN PRO group of companies (hereinafter referred to as “TXN PRO” or the “Firm”). The TXN PRO Group is a virtual asset service provider, supplying payment processing and exchange services to mid-sized companies based in the United Kingdom and European Union.
As a financial service provider, TXN PRO might be targeted by criminals to commit financial crimes. Financial crime is a term used to describe a variety of criminal acts, including money laundering, terrorist financing, tax evasion, sanctions violations, fraud, and other types. To mitigate those risks, TXN PRO established a Global Financial Crime Compliance Program, which includes several systems and controls, including this Policy.
The Global Anti-Money Laundering & Counter-Terrorist Financing Policy (“Global AML & CTF Policy” or “The Policy”) sets out the responsibilities of TXN PRO, its employees, and anyone who performs services for or on behalf of the Firm (collectively “Associated Persons1”) in observing and upholding the TXN PRO’s commitment to detecting and preventing money laundering, terrorist financing and other forms of financial crime. Additionally, it sets out the Firm’s standards in complying with applicable laws and regulations in every jurisdiction in which it operates.
- Background & Governance
This Policy sets the minimum standards of financial crime compliance to be met across all Firm’s entities. TXN PRO must meet the standards set by its regulators and adhere to local legislative and regulatory requirements in all jurisdictions in which it operates. TXN PRO also abides by standards set out by international organizations, including the European Union and the Financial Action Task Force (“FATF”), in particular:
- The Sixth Anti-Money Laundering Directive EU 2018/843
- The FATF Standards: FATF Recommendations (amended November 2023)
- FATF Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (October 2021)
- 12-Month Review of Revised FATF Standards on Virtual Assets and VASPs (July 2020)
- Second 12-Month Review of Revised FATF Standards on Virtual Assets and VASPs (July 2021)
If there is a conflict between the requirements of this Policy and local laws/regulations, the stricter rules will apply.
- Scope & Applicability
The Policy is applicable globally across the Firm and in line with the relevant global standards and international guidance. Each legal entity that forms part of the global TXN PRO group of companies may have appendices to this Policy which will set the implementation of additional relevant local rules and regulations. All TXN PRO’s employees and Associated Persons, regardless of department or job description, including consultants and contractors, must adhere to this Policy.
The Global Head of Compliance Policy & Governance owns the maintenance of this Policy. It is reviewed and, as needed, updated on an annual basis or whenever there is a material change to the Firm’s business practices, operations, or regulatory requirements that require Policy changes.
- Requirements, Compliance & Reporting
The Firm and its employees and Associated Persons are required to adhere to the Global AML & CTF Policy and the laws and regulations underpinning it. Failure to comply with this Policy and any underlying procedures may result in personal liability, such as fines and imprisonment, as well as consequences within the Firm itself, from an internal warning up to and including employment termination (for employees) and termination of the relationship (for relevant third parties). In addition, it may expose the Firm to civil and criminal liability, fines, reputational damage, operational risk, and other serious consequences.
Any circumvention of this Policy is absolutely prohibited. Any deviation from this Policy must be approved by the Policy Owner and appropriately documented. The Firm expects all employees and Associated Persons to report any violation or suspected violation of this Policy, as well as suspected financial crime or potentially suspicious activity to the CLRCO or the respective local Money Laundering Reporting Officer (MLRO). Material breaches, including, but not limited to situations in which a regulatory requirement has not been met, must also be reported to the MLRO for further review.
- Purpose & Objective
- Financial Crime Compliance Program
- Senior Management Oversight
TXN PRO has appointed a Head of Compliance and Head of Compliance Operations. They are responsible for the oversight of the Firm’s compliance with relevant laws, rules, and regulations. They have the day-to-day responsibility for overseeing the implementation and monitoring compliance with the Financial Crime Compliance Program.
In addition, the operational entity has appointed a local MLRO, who is responsible for the Firm’s compliance with local anti-money laundering and counter-terrorism financing laws and regulations. MLRO has the remit to receive and review internal disclosures of suspicious activity and file external reports with relevant authorities where appropriate.
- Financial Crime Risk Appetite Statement
As a financial services provider, TXN PRO may be exposed to a wide range of financial crime risks. The Firm views prevention of financial crime as more than just a regulatory obligation, but as a principle that is essential for the success of its business model. Therefore, TXN PRO has undertaken an assessment of such risks to ensure appropriate systems and controls are in place to identify and mitigate those risks. It is important to note here that TXN PRO does not establish relationships or open bank accounts with shell banks.
TXN PRO has embedded this risk appetite in its risk-based internal policies and procedures. Effective communication of financial crime policies is in place to ensure employees are aware of their responsibilities. All employees undergo regular training to maintain an appropriate level of competence and awareness of their obligations under applicable laws and regulations.
- Financial Crime Risk Assessment
TXN PRO regularly conducts a global financial crime risk assessment, including market changes, changes in products, customers, and the wider environment. Through the FCRA, the Firm identifies financial crime risks and assesses the effectiveness of its affiliated controls. When assessing risks, the Firm relies on the available international guidance on conducting effective risk assessments, including:
- FATF Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (October 2021)
- European Banking Authority’s The ML/TF Risk Factors Guidelines (2021)
- The Wolfsberg Group Guidance on a Risk-Based Approach for Managing Money Laundering Risks (2006)
- Financial Conduct Authority’s Financial Crime Guide: A firm’s guide to countering financial crime risks (2024))
- Parts 1, 2 and 3 of Joint Money Laundering Steering Group (“JMLSG”) Guidance (2023)
TXN PRO methodology for Financial Crime Risk Assessment (FCRA) considers the following risk factors:
- Nature, scale, and complexity of the business, including its processes and operations, as well as the volume and size of transactions
- Geographical locations of the customers and of the TXN PRO business
- Customer Characteristics
- Products and services the Firm offers
- Delivery channels used to onboard customers and conduct the transactions
Transactions
The FCRA is carried out on an annual basis, or whenever there has been a major change in the nature of the business (for example, acquisition of new customer segments or delivery channels, or launch of new products and services, etc), to ensure that the Firm stays up-to-date with new risks and appropriately assesses current risks in line with the internal trends and external environment. Where the FCRA identifies gaps within existing controls or a requirement for new controls, the MLRO ensures that the gaps are appropriately addressed, and new controls are implemented.
- Internal Controls
- Designation of an MLRO
In order to oversee the effective implementation of the internal compliance policies and procedures, the Firm has a designated Money-Laundering Reporting Officer (“MLRO”) in the relevant jurisdiction, who has an obligatory reporting duty to the local Executive Board (the “Board”) and the local supervisory authority. The MLRO is responsible for coordinating, managing, and monitoring the Financial Crime Compliance Program; and ongoing compliance with the applicable local AML rules and regulations to ensure that the Firm is in full compliance with all the necessary requirements.
- Know-Your-Business Program
- Merchant Due Diligence (MDD)
The fundamental basis of effective AML/CTF controls is complete, accurate, and up-to-date customer due diligence. Appropriately completed MDD allows the Firm to check that its customers are who they say they are and that the transactions and activities carried out with or on behalf of each customer are consistent with the Firm’s expected nature of the business relationship.
TXN PRO ensures it appropriately identifies and verifies each customer based on the documents provided and/or other reliable resources as applicable per jurisdiction. Where a prospective customer does not possess the standard documents or cannot produce the information required under the risk-based approach, consideration will be given as to whether there are other ways of being reasonably satisfied with the prospective customer’s identity.
The Firm will not establish a relationship with a new customer and will cease activity, including all the transactions, and terminate all relationships with an existing customer where it cannot apply appropriate MDD standards.
- Enhanced Due Diligence
In addition to standard MDD applied to all customers, the Firm applies Enhanced Due Diligence (“EDD”) in situations where the risk level requires additional scrutiny, which includes obtaining approval from Senior Management to establish or continue business relations with the customer. EDD is applied to better understand the background and financial situation of the Firm’s higher-risk customers. It includes, but is not limited to:
- Verification of Source of Wealth / Source of Funds. Source of Wealth (“SoW”) is the origin of the customer’s accumulated wealth or total net worth, while Source of Funds (“SoF”) is the source of the initial and ongoing funds invested with the Firm. SoW / SoF collection and verification ensures that TXN PRO understands its customer’s financial background and the legitimacy of the funds, and establishes a base for performing ongoing monitoring of its customers
- Increased Frequency of Periodic Reviews – the application of EDD after onboarding requires more frequent periodic reviews to ensure customer activity is in line with the purpose and intended nature of the business relationship
- Client Screening
TXN PRO performs detailed screening of customers at onboarding against international sanctions, PEP, and/or negative media lists, as prescribed by each relevant jurisdiction. The Firm utilizes third-party data intelligence to screen its customers against sanctions and PEP lists. Screening is conducted at customer onboarding and periodically thereafter. As part of the Firm’s employee due diligence, all its employees are screened prior to onboarding.
Confirmed or ambiguous matches are escalated to the appropriate MLRO and next steps are considered, including termination or prohibiting the customer from doing future business with the Firm.
Appropriate records relating to initial and ongoing screening are maintained, including the details of any action taken. TXN PRO’s customer screening process is periodically checked to ensure that it is working correctly and fit for purpose, and that watch lists are regularly updated by the third-party provider. TXN PRO’s employees responsible for onboarding or ongoing screening are updated on any changes in procedure, systems, or controls in addition to refresher training.
- Ongoing Monitoring
The Firm undertakes ongoing customer due diligence and account monitoring in support of information gathered at customer onboarding and ongoing updates to customer information. Ongoing monitoring takes place on a periodic basis through a risk-based approach, as a result of a trigger event or within transaction monitoring throughout the lifecycle of the relationship.
Periodic Reviews are conducted based on customer risk assessment scores. High-risk customers are reviewed more frequently than those with lower-risk scores as per the following schedule:
- High-Risk Customers - every 1 year
- Medium Risk Customers - every 2 years
- Low-Risk Customers - every 3 years
Periodic review includes comprehensive scrutiny of customer’s transactional activity and other data or documentation. Where discrepancies or red flags are identified, further investigation is completed to determine an appropriate course of action.
Trigger Events are changes in customer information that initiate the review of a customer outside of the periodic reviews. They include, but are not limited to:
- Change of contact details
- Transactional activity
- Material changes which occur in the way the customer's account is operated
- This policy or standards relating to the documentation of CDD information change substantially or the Firm becomes aware that it lacks sufficient information about the customer concerned
A trigger event review includes an assessment of the event that triggered the review and an overall evaluation of the customer account activity. As necessary, further escalation may be initiated.
TXN PRO has established a risk-based Merchant Onboarding Program that ensures the appropriate Merchant Due Diligence (“MDD”) is executed to record information and obtain documents to identify and verify the identity of each customer and its beneficial owners, who open an account with the Firm and to assess the potential financial crime risks within those relationships. TXN PRO takes into consideration regulatory requirements, applicable industry best practices, and the latest developments in regulatory technology to design and implement its KYB program. A brief overview of the Firm’s customer due diligence processes is provided below.
- Merchant Due Diligence (MDD)
- Transactions Monitoring Program
TXN PRO has developed a multilayered transaction screening framework, Transactions Monitoring Program (“TMP”), that consists of an in-house proprietary tool and top industry-leading third-party vendors. The TMP shall, on a risk-based approach, screen for the applicable red flags. The Compliance Team will perform the necessary analysis of the alerted account’s information, including associated transactions, to determine if any unusual or suspicious activity was observed. For all activities that are identified to pose higher money laundering or terrorist financing risks, these customers will be subject to additional due diligence procedures described in the section “Enhanced Due Diligence”.
- Suspicious Activity Reporting
A suspicious activity can be defined as any action or activity which may result in the belief or knowledge that a customer is involved or planning to be involved in a crime or some other type of dishonest behavior. TXN PRO requires all its employees, irrespective of their location, grade, or function, who know, suspect, or have reasonable grounds for knowing or suspecting that a person (whether a customer or an employee) is engaged in money laundering, terrorist financing, or other form of financial crime to escalate the matter with urgency to the local MLRO. Failure to report is an offense, which might lead to serious consequences for the employee and the Firm.
Employees must follow any instructions given to them regarding the disclosure that they have made and must not make any further investigation themselves. Employees are prohibited from disclosing that they escalated suspicious activity, or that any report, internal or external, is filed to any person except their local MLRO. Violations of this principle might prejudice the investigation and would constitute the offense of “tipping off”.
Following the escalation, the MLRO must evaluate the activity and determine if there are sufficient grounds to file an external report. Where sufficient grounds exist, the MLRO in the relevant jurisdiction will submit an external report to the local financial intelligence unit as soon as practically possible.
A record must be kept of any internal reports submitted to the MLRO that have not been externally filed, including details of any action taken. Similarly, for all externally filed reports, the Firm must keep records, including any inquiries in respect to disclosures, and any communication that has been sent and received in relation to the submitted report.
The Firm must ensure that its internal systems and controls are reasonably designed to deter, detect, and require the reporting of known or suspected money laundering, terrorist financing, or any other form of financial crime. TXN PRO has implemented the following risk-based controls to address this:
- Designation of a Money Laundering Reporting Officer (MLRO)
- Know-Your-Business Program
- Transaction Monitoring Program
- Customer screening
- Suspicious Activity Reporting
- Designation of an MLRO
- Staff Awareness and Training
As part of the Firm's commitment to prevent financial crime, TXN PRO developed a global compliance training program. All employees, regardless of department or job description, including senior management, are required to undertake annual mandatory compliance training courses, which cover topics on financial crime prevention, anti-money laundering and counter-terrorist financing, anti-bribery and corruption, tipping off, sanctions compliance, and others.
The compliance training courses form part of the induction process for new hires and are subsequently provided to all existing employees on an annual basis. In addition, employees in roles involving AML-related tasks or involved with heightened AML risks receive bespoke training to ensure they understand their obligations, and can appropriately identify and take action on those risks. Records of attendance are kept to ensure all relevant staff have attended the mandatory training sessions.
- Independent Testing and Audit
Compliance with the Firm’s Financial Crime Compliance Program is subject to independent testing and audit on a regular basis. The Firm uses external auditor companies for monitoring and testing of the design and operational effectiveness of financial crime prevention systems and controls within each jurisdiction where it operates. The results of each of the audits are summarized in a written report and submitted to the Senior Management Team. A remediation program is implemented where necessary to ensure that any deficiencies in the Firm’s Financial Crime Compliance Program are addressed in a timely manner.
The Firm has established policies and procedures to mitigate and effectively manage the risks of money laundering and terrorist financing specific to the Firm. TXN PRO’s Financial Crime Compliance Program is a risk-based program designed to detect and address these risks. The Program includes the following elements:
- Senior Management Oversight
- Financial Crime Risk Appetite Statement
- Customer Due Diligence
- Internal Controls
- Employee Training Program
- Independent Testing and Audit
Each of the Program’s elements is described in the following sections.
- Senior Management Oversight
- Recordkeeping
It is the Firm’s policy to maintain relevant records for audit and compliance reasons. These records will be retained throughout the entire business relationship and for the required retention periods in each jurisdiction. Due to the nature of the business, most of the records are stored digitally or electronically. For this purpose, the Firm maintains a specially designated folder on a secure server with limited access for relevant employees, as well as an access audit trail.
In accordance with Data Protection and Privacy Laws, the Firm will only use customer information provided for the purpose and intended nature of the business relationship. All employees are prohibited from omitting, deleting, destroying, altering, or falsifying information and/or records for any reason, including for the purpose of evading the Firm’s policies and procedures or avoiding detection of that information by other firms, banks, or other non-bank institutions.