Anti-Money Laundering

1. Firm Policy

It is the policy of the firm 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 the Bank Secrecy Act (BSA) and its implementing regulations.

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.

Although cash is rarely deposited into securities accounts, the securities industry is unique in that it can be used to launder funds obtained elsewhere, and to generate illicit funds within the industry itself through fraudulent activities. Examples of types of fraudulent activities include insider trading, market manipulation, ponzi schemes, cybercrime and other investment-related fraudulent activity.

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 AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules 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.

2. AML Compliance Person Designation and Duties

The firm has designated Aline Gialluisi Seripieri de Abreu as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the firm’s AML program. Aline Gialluisi Seripieri de Abreu has a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge and training, including bachelor’s degree in business administration with over 15 years of experience in finance and customer credit assessment. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligations, overseeing 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 (SARs) 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.

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

a. FinCEN Requests Under USA PATRIOT Act Section 314(a)

We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning accounts and transactions (a 314(a) Request) 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 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure website. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, Aline Gialluisi Seripieri de Abreu will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), Aline Gialluisi Seripieri de Abreu will structure our search accordingly.

If Aline Gialluisi Seripieri de Abreu searches our records and does not find a matching account or transaction, then Aline Gialluisi Seripieri de Abreu will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search for 3 years.

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. Aline Gialluisi Seripieri de Abreu 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 314(a) Request to the requesting federal law enforcement agency as designated in the request.

Unless otherwise stated in the 314(a) 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 314(a) Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.

b. National Security Letters

We understand that the receipt of a National Security Letter (NSL) is highly confidential. We understand that none of our officers, employees or agents may directly or indirectly disclose to any person that the FBI or other federal government authority has sought or obtained access to any of our records. To maintain the confidentiality of any NSL we receive, we will process and maintain the NSL at a safety file cabinet. If we file a SAR after receiving an NSL, the SAR will not contain any reference to the receipt or existence of the NSL. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.

c. 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). 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 in accordance with the SAR 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 a safe box. If we file a SAR after receiving a grand jury subpoena, the SAR will not contain any reference to the receipt or existence of the subpoena. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.

d. Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)

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. Aline Gialluisi Seripieri de Abreu will ensure that the firm files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s website. Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even to financial institutions with which we are affiliated, and that we will obtain the requisite notices from affiliates and follow all required procedures.

We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the firm’s other books and records.

We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:

• identifying and, where appropriate, reporting on money laundering or terrorist activities;
• determining whether to establish or maintain an account, or to engage in a transaction; or
• assisting the financial institution in complying with performing such activities.

4. Checking the Office of Foreign Assets Control Listings

Before opening an account, and on an ongoing basis, Aline Gialluisi Seripieri de Abreu will check to ensure that a customer does not appear on the SDN list or is not engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC.

If we determine that a customer is on the SDN list or is engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC, we will reject the transaction and/or block the customer’s assets and file a blocked assets and/or rejected transaction form with OFAC within 10 days. We will also call the OFAC Hotline at (800) 540-6322 immediately.

Our review will include customer accounts, transactions involving customers (including activity that passes through the firm such as wires) and the review of customer transactions that involve physical security certificates or application-based investments (e.g., mutual funds).

5. Customer Identification Program

a. Required Customer Information

In addition to the information we must collect under FINRA Rules 2090 (Know Your Customer) and 2111 (Suitability) and the 4510 Series (Books and Records Requirements), and Securities Exchange Act of 1934 (Exchange Act) Rules 17a-3(a)(9) (Beneficial Ownership regarding Cash and Margin Accounts), 17a-3(a)(17) (Customer Accounts) and Regulation Best Interest, we have established, documented and maintained a written Customer Identification Program (CIP). We will collect certain minimum customer identification information from each customer who opens an account; utilize risk-based measures to verify the identity of each customer who opens an account; record customer identification information and the verification methods and results; provide the required adequate CIP notice to customers that we will seek identification information to verify their identities; and compare customer identification information with government-provided lists of suspected terrorists, once such lists have been issued by the government.

Prior to opening an account opening officer will collect the following information for all accounts, if applicable, for any person, entity or organization that is opening a new account and whose name is on the account:

• the name;
• date of birth (for an individual);
• an address, which will be a residential or business street address (for an individual), an Army Post Office (APO) or Fleet Post Office (FPO) box number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office, or other physical location (for a person other than an individual); and
• an identification number, which will be a taxpayer identification number (for U.S. persons), or one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard (for non-U.S. persons).

b. Customers Who Refuse to Provide Information

If a potential or existing customer either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, our firm will not open a new account and, after considering the risks involved, consider closing any existing account. In either case, our AML Compliance Person will be notified so that we can determine whether we should report the situation to FinCEN on a SAR.

c. Verifying Information

Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our customers by using risk-based procedures to verify and document the accuracy of the information we get about our customers. Aline Gialluisi Seripieri de Abreu will analyze the information we obtain to determine whether the information is sufficient to form a reasonable belief that we know the true identity of the customer.

We will verify customer identity through documentary means, non-documentary means or both. We will use documents to verify customer identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever necessary.

Appropriate documents for verifying the identity of customers include:

• For an individual, an unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and
• For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement or a trust instrument.

6. Customer Due Diligence Rule

We have established, documented and maintained written policies and procedures reasonably designed to identify and verify beneficial owners of legal entity customers and comply with other aspects of the Customer Due Diligence (CDD) Rule. We will collect certain minimum CDD information from beneficial owners of legal entity customers. We will understand the nature and purpose of customer relationships for the purpose of developing a customer risk profile. We will conduct ongoing monitoring to identify and report suspicious transactions, and, on a risk basis, maintain and update customer information.

7. Correspondent Accounts for Foreign Shell Banks

We do not establish, maintain, administer or manage correspondent accounts for foreign banks, this is the firm’s policy and the firm will implement internal controls to detect any attempt to open a correspondent account.

8. Due Diligence and Enhanced Due Diligence Requirements for Private Banking Accounts/Senior Foreign Political Figures

We do not open or maintain private banking accounts.

9. Compliance with FinCEN’s Issuance of Special Measures Against Foreign Jurisdictions

We do not maintain any accounts with any foreign jurisdiction or financial institution. However, if FinCEN issues a final rule imposing a special measure against them, we will follow any prescriptions or prohibitions contained in that rule.

10. Monitoring Accounts for Suspicious Activity

We will monitor account activity for unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags appropriate to our business. The customer risk profile will serve as a baseline for assessing potentially suspicious activity.

We will document our monitoring and reviews. The AML Compliance Person or designee will conduct an appropriate investigation and review relevant information before a SAR is filed.

11. Suspicious Transactions and BSA Reporting

a. Filing a SAR

We will file SARs with FinCEN for any transactions involving $5,000 or more where we suspect illegal activity, evasion of BSA requirements, or no apparent lawful purpose. SARs will be filed within 30 days of detection (60 days if a suspect is not identified).

12. AML Recordkeeping

We will create and maintain SARs, CTRs, CMIRs, FBARs, and relevant documentation on customer identity and verification. Records will be maintained for at least five years, or six years as required by certain SEC rules.

13. Clearing/Introducing Firm Relationships

We will work closely with our clearing firm to detect money laundering, exchanging information and data as necessary to comply with AML laws.

14. Training Programs

We will provide annual AML training for employees, covering how to identify red flags, escalation procedures, and disciplinary consequences for non-compliance.

15. Program to Independently Test AML Program

Our AML program will be independently tested at least annually to ensure its effectiveness. Findings will be reported to senior management.

16. Monitoring Employee Conduct and Accounts

Employee accounts will be subject to the same AML procedures as customer accounts, monitored by the AML Compliance Person.

17. Confidential Reporting of AML Non-Compliance

Employees must report potential violations to the AML Compliance Person or the CEO. Reports will be confidential, with no retaliation.

18. Additional Risk Areas

The firm reviews its business regularly for potential money laundering risks. No additional issues have been identified at this time.

19. Senior Manager Approval

Senior management has approved this AML compliance program as reasonably designed to meet BSA requirements.