Risk Appetite Policy

Extract from Banking Circle’s AML/CTF Risk Appetite Policy detailing the Prohibited and Restricted Business activities.

• Purpose and Scope
• Accepted Business
• Countries

Purpose and Scope

Banking Circle S.A. (“Banking Circle” or the “the company”) is a European credit institution authorised in Luxembourg, which also operates a branch and subsidiary network. The company provides foreign exchange (“FX”), banking and payment services to banks, non-bank financial institutions (“NBFIs”) and mid-to-large corporates. The organisation does not provide investment services. The purpose of this Anti-Money Laundering / Counter Terrorist Financing (“AML/ CTF”) Risk Appetite Policy (the “Policy”) is to define Banking Circle’s risk tolerance and the guiding principles governing Money Laundering and Terrorist Financing (“ML/TF”) risk identification, measurement, reporting, management and monitoring, as required by applicable laws because of its business model, Banking Circle carries also the reputational risk that some of its Clients process funds that are connected with Money Laundering or Terrorism Financing activities, and that some of those funds are processed through it.

Accepted Business

As a general principle, Banking Circle shall not onboard Clients carrying out businesses or activities that are illegal, conducted in absence of required licenses or permissions, or present an excessive reputational risk (which includes any material adverse media) for Banking Circle and/or the Luxembourg financial centres, where Banking Circle operates. In the case of Correspondent Banking relationships, Banking Circle’s Clients’ underlying customers must also comply with this requirement. In general, Banking Circle will not do business with groups, legal entities, bodies, and similar which have been sanctioned for major offences irrespective of when the Client was sanctioned and the jurisdiction(s) in which it was sanctioned. This implies, inter alia, that:

• As required, Clients (and in the case of Correspondent Banking relationships, Banking Circle’s Clients’ underlying customers) must hold the appropriate licenses or permissions to operate and provide services/sell goods in their countries/territories of establishment, and in the countries/territories they provide services or sell goods to;
• As required, products and services sold or provided by Banking Circle’s Clients (and in the case of Correspondent Banking relationships, Banking Circle’s Clients’ underlying customers) must comply with applicable legal or regulatory standards.

Scenarios:

There are several scenarios in relation to Clients and Payment flows. Some include:

1. A direct Client of Banking Circle
   1. Payment flows include:
      1. A remitter (not a Client of Banking Circle), sending funds to a Client of Banking Circle
      2. A beneficiary, (not a Client of Banking Circle), receiving funds from a Client of Banking Circle
      3. Deposit taking and custody services

2. A customer of a PSP Client of Banking Circle
   1. Payment flows include:
      1. A remitter (not a customer of Banking Circle’s PSP Client), sending funds to a customer of Banking Circle’s PSP Client
      2. A beneficiary, (not a Client of Banking Circle), receiving funds from a customer of Banking Circle’s PSP Client

Prohibited Client Types and Prohibited Payment Flows:

Banking Circle does not permit pay in or pay outs from its accounts in physical cash. Banking Circle does not onboard, nor will it process the payment flows for its PSP Clients, for the following:

1. Groups, legal bodies or similar subject to international sanctions or embargoes, in particular as issued by regulatory bodies of the jurisdictions where Banking Circle operates, and the United Nations (“UN”), the US Office of Foreign Assets Control (“OFAC”) or other applicable international bodies;/li>
2. Non-transparent or high-risk structures – Activities conducted through special-purpose vehicles (SPVs) or similar legal entities, particularly those established in jurisdictions that limit transparency, hinder regulatory oversight, or fail to meet international banking standards.
3. Bidding fee auctions, penny auctions, or any type of all-pay auction in which all participants must pay a non-refundable fee to place each small incremental bid;
4. Shell banks; (banks based in countries where they have no physical presence involving decision-making and management and which are typically not connected to wider regulated financial groups);Banking Circle shall take appropriate measures to ensure that they do not conduct any business relationships with undertakings allowing shell banks to use their accounts, custody accounts, or products and services.
5. Shell companies; (a company with no physical presence involving effective decision-making, operations or assets other than cash or equivalents of cash);
6. Bearer share corporations and companies connected to nominee or similar arrangements for the purpose of hiding or mask the true beneficial ownership (some trust structures may be permitted, depending on the merits of the case and there is no suggestion of untoward behaviour);or holding savings books, accounts or custody accounts payable to bearer;
7. Physically present Adult Services – this includes, but is not limited to, Escort services, Solicitation thereof, sale and/or advertising or suggestion of any physical sexual services that may imply or suggest prostitution, regardless of whether it is legal in the specific country involved;
8. Unregulated investment companies involved in managing or investing third-party funds
9. Any involvement in the sale or marketing of Binary Options;

Weapons of war, automatic weapons, ammunitions or military vehicles: Includes merchants involved in the sales, intermediation or commerce of war or automatic weapons, including but not limited to chemical weapons, bombs, ammunitions and vehicles suited or intended for military use.

Banking Circle’s restrictions on directly onboarded Clients:

Banking Circle will not directly onboard any of the following Client types. Banking Circle’s PSP Clients may have the following as their underlying customers, subject to additional due diligence and approvals:

1. Adult services that are not physically present, this includes dating sites, websites with adult content, and pornography businesses. If any payments are to be made to, or received from, a business providing these services the following restrictions also apply. These businesses must:
   1. Have no suggestions of escort services, or the sale of physically present sexual services (solicitation/prostitution);
   2. Have no material negative media which could result in material reputational damage for Banking Circle and/or the Luxembourg financial centre as well as any other jurisdiction, where Banking Circle is present; and
   3. Be incorporated within UK, North America or Europe.

2. Any business involved with Cannabidiol “CBD”. These businesses must:
   1. 1. Have been onboarded by the PSP Client with appropriate onboarding procedures and controls to address the risks associated with this Business type;
      2. Possess the appropriate licenses in those jurisdictions where they are established, or sell products into; and
      3. Be able prove that the Tetrahydrocannabinol “THC” content is within legal limits, and prove that this is continually monitored and tested
   If the business is engaged in the legal sale of cannabis (such as coffee shops), only bullet 1 and 2 apply.

3. Charities, social service organisations and other non-profit or political organisations. These businesses must:
   1. Be registered, or local equivalent, in the country of incorporation;
   2. Must not support activities in countries considered prohibited by Banking Circle;
   3. Not sponsor or support any act of violence or hate

4. Holding companies of private individuals. They must:
   1. Be onboarded by Banking Circle’s Clients, who must be a Private Bank.

Restricted Client Types and Restricted Payment Flows (applicable both for directly and indirectly onboarded Clients):

Banking Circle has placed restrictions on the Client types listed below. The Client types and restrictions are:

1. Affiliate Marketing schemes, including network marketing, referral marketing, multilevel marketing. These businesses must:
   1. Not be established as a multilevel scheme for the purpose of circumventing credit card schemes rules;
   2. Comply, in letter and in practice, with distant marketing or online selling legislation, including US negative option features and EU withdrawal rights, or equivalent;
   3. Not engage in aggressive tax planning or transfer pricing, make use of nominees or similar structures to hide or mask true beneficial ownership of the entities involved in the scheme;
   4. Not have unfair pricing or charges, or withdrawal / cancellation rights that cannot be effectively exercised without unfair costs or penalties.

1. Corporate service provider and other legal and accounting services, including the following
   1. Auditors, External Accountants, and Tax Advisors
      1. Professionals providing auditing, accounting, and tax advisory services.
   2. Notaries and Other Independent Legal Professionals
      1. When acting on behalf of or for their clients in financial or real estate transactions.
      2. When assisting in the planning or execution of transactions related to:
      3. Buying and selling of real property or business entities.
      4. Managing client money, securities, or other assets.
      5. Opening or managing bank, savings, or securities accounts.
      6. Organizing contributions necessary for the creation, operation, or management of companies.
      7. Creating, operating, or managing trusts, companies, foundations, or similar structures.
   3. Trust or Company Service Providers
      1. Where not already covered under categories (a) or (b).

1. Crowdfunding, crowdlending and similar activities businesses. To be a direct Client of Banking Circle or a customer of a PSP Client of Banking Circle these businesses must:
   1. Hold the appropriate license in the country or territory where they are established and provide services to;
   2. Have three full years´ or more track record; and
   3. Be established within the countries permitted for Correspondent Banking relationships.

1. Crypto-asset service providers matching the following definition: Offering professional services offering any of the following services or carrying out any of the following activities:

1. 1. (a) providing custody and administration of crypto-assets on behalf of clients;
   2. (b) operation of a trading platform for crypto-assets;
   3. (c) exchange of crypto-assets for funds;
   4. (d) exchange of crypto-assets for other crypto-assets;
   5. (e) execution of orders for crypto-assets on behalf of clients;
   6. (f) placing of crypto-assets;
   7. (g) reception and transmission of orders for crypto-assets on behalf of clients;
   8. (h) providing advice on crypto-assets;
   9. (i) providing portfolio management on crypto-assets;
   10. (j) providing transfer services for crypto-assets on behalf of clients
       1. These businesses must:
   11. 1. Be authorised by a competent authority in the UK/EEA or in countries approved for correspondent banking and comply with FATF recommendation relevant for virtual currencies;
       2. The experience of the senior management and leadership team must be of an acceptable risk profile, including the experience and qualifications of the MLRO, Compliance team and Onboarding team. (The MLRO, Compliance team and Onboarding team must not have any conflicts of interest, for example they should be independent of any income generating departments);
       3. Not offer privacy coins or any encrypted transactions which does not support travel rule. The list of prohibited products is maintained by the Compliance department of Banking Circle;
   12. 1. Note: If the crypto-asset service provider is directly onboarded by Banking Circle, they must in addition:
   13. 1. Be serviced by the relationship personnel designated as being able to support crypto-asset service providers.
       2. Have in place appropriate transaction monitoring tools, which includes identifying signs of mixers/tumblers. These tools must be deemed satisfactory upon review by Banking Circle’s Business AML department. An expectation is that the monitoring must have solid Know Your Transaction (“KYT”) methodologies.
       3. Institutional proprietary trading companies, blockchain related projects and similar that are not VASPs i.e., does not provide regulated activity in the jurisdiction they operate in can be onboarded as corporate client subject to enhanced due diligence, which includes additional focus on source of wealth, adverse media and tax compliance.
       4. Any stablecoin issued by Banking Circle, may only be marketed to crypto-asset service providers already onboarded by Banking Circle.
   14. 1. Pharmaceuticals. These businesses must:
          1. Possess the appropriate licenses in those jurisdictions where they are established or sell products into.
   15. 1. Gambling. These businesses must:
          1. Be incorporated in one of the following jurisdictions: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Liechtenstein, Estonia, Finland, France, Germany, Gibraltar, Greece, Greenland, Hungary, Isle of Man, Italy, Latvia, Malta, Poland, Portugal, Romania (subject to the business holding 2nd Class Gambling license), Spain, Slovakia, Sweden and United Kingdom. Additional countries may only be accepted with explicit approval from Banking Circle’s Compliance department;
          2. Only perform the following activities: online gambling, betting, poker, sport, horse racing, skill games (except for Portugal where such activity is prohibited), casino, lottery, arcade;
          3. Have a relevant license (as required) where they are established or provide services to, including by means of a website in a country-specific language;
          4. Be registered on the local countries gambling commission;
          5. Be subject to EU or UK equivalent AML requirements;
          6. Have no material negative media which could result in material reputational damage for Banking Circle and/or the Luxembourg financial centre.
   16. 1. Note: If the Gambling Client is to be directly onboarded by Banking Circle, the Gambling Client must:
          1. Be established more than five years;
          2. Be serviced by the relationship personnel designated as being able to support gambling Clients; and
          3. The payment flow for all directly onboarded Gambling Clients must not exceed 5% of Banking Circle’s overall processed payment flow in any rolling 12 month period.
   17. 1. Import/export and cross-border logistics companies including maritime and land based shipping. These businesses:
          1. Must exercise supply chain due diligence to ensure that recipients and counterparties to a transaction are not sending or receiving commodities that may trigger sectoral sanctions.
          2. May not have activities involving countries considered prohibited by Banking Circle,
          3. May not deal with goods or counterparties considered prohibited by Banking Circle.

If a bank/NBFI Client wishes to process transactions through Banking Circle on behalf of customers in the category of import/export and cross-border logistics, the Client must ensure that their customers meet the above requirements. In addition, the Client must be able to demonstrate knowledge of trade-based money laundering and sanctions/proliferation risk and have adequate controls in place.

2. 1. High value goods (defined by Banking Circle as goods sold for 10,000 EUR or more), including precious metals and stones, arts and antiques, other valuable commodities, sale of vehicles. These businesses must:
      1. Be located in countries approved for correspondent banking relationships.

1. Weapons for hobbies(i.e. knives and accessories for weapons intended for hunting, fishing and recreational activities; antique weapons or collectibles). These businesses must:
   1. Be evidenced to be for legitimate sport or recreational activities and not for military or dual use purposes.
   2. Banking Circle wishes to support the ReArm Europe defence plan as laid out by the European political leaders and will in this respect support payments and expenditures supported by our clients related to weapons of war, automatic weapons, ammunitions, military vehicles or military hardware such as military drones or radars, including merchants involved in the sales, intermediation or commerce of arms and weapons conditional upon the arms/weapons manufacturer being domiciled in EEA or a jurisdiction where BC Group is present
   3. If manufacturer/merchant is onboarded by a client, the client must:
      1. Demonstrate due diligence aimed to ensure that customers within this restricted industry adhere to all relevant export restrictions, including but not limited to the obligation to contractually prohibit the re-export from third countries to countries subject to the export restrictions.
   4. Have a suitable ABC program, including an enterprise-wide risk assessment of bribery and corruption and targeted mitigation measures against bribery and corruption for areas/activities identified as high risk in the enterprise-wide risk assessment

1. Financial services firms, where Correspondent Banking is provided by Banking Circle:
   1. Banking Circle’s direct Clients must be licensed in one of the Countries Permitted for Correspondent Banking Relationships (noted below):
      1. If the Client has customers who are Financial services firms, the locations of these underlying customers are subject to review and their acceptance will be determined case by case on a risk based approach taking into consideration their license, and their risk profile, which will include reviewing the underlying customer base, and locations, and risk of the services provided.
      2. If the firm provides CFDs or any investment products (an investment firm), these firms must:
         1. Undergo Enhanced Due Diligence to ensure they perform Suitability and Appropriateness testing;
         2. Be located in a country permitted for Correspondent Banking Services, or if located outside, adapting a global AML program with requirements similar to the EU and where the client also holds a license in a country permitted for correspondent banking services which is a client of Banking Circle.

1. Note: If the investment firm Client is directly onboarded by Banking Circle, they must:
   1. Be serviced by the relationship personnel designated as being able to support these types of Clients.
2. 1. Special Purpose Vehicles (SPVs), trust or holding companies
      1. May be onboarded directly by Banking Circle as part of Banking Circle’s investment funds offering. The SPV, trust or holding company, must:
         1. Be introduced and where relevant managed by a licensed CSP/li>
         2. The introducer/manager must be subject due diligence and approved by Banking Circle’s Onboarding Committee
         3. If there is no CSP that is appropriately licensed, the SPV, fund or holding company must be subject to Banking Circle’s highest level of due diligence.

1. Marketplaces. These businesses must:
   1. Have a three year or more track record;
   2. Onboard sellers under financial services-equivalent standards; and
   3. Not process flows through Banking Circle that relate to goods or services that are prohibited within this policy.

1. UK and Ireland Limited Partnerships. This includes Limited Partnerships (LP), including Scottish Limited Partnerships (SLP) and Limited Liability Partnerships (LLP). These businesses must:
   1. Have all partners/ownership in the country of domicile.

LPs, SLPs and LLPs with a legitimate nature and purpose of business and transparent ownership/control are within appetite, but subject to restrictions. Examples include Fund structures that often use these formations.

Countries within risk appetite for correspondent service relationships

All Clients of Banking Circle, making use of Correspondent Banking services offered by Banking Circle, will exclusively be regulated entities subject to AML/CTF professional obligations and situated in:

• European Economic Area (i.e. European Union Member States plus Iceland, Liechtenstein and Norway);
• United Kingdom (including Gibraltar, and excluding Crown dependencies such as: Isle of Man, Guernsey, Jersey);
• Switzerland;
• United States of America;
• Canada;
• Australia;
• New Zealand;
• Hong Kong;
• Singapore;
• Japan;
• China;
• India;
• Malaysia;
• South Korea;
• Thailand.