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

This extract replaces the “Code of Conduct” as referenced in Banking Circle’s General Business Terms (defined in clause 44.ix).

Purpose and Scope

Accepted Business

Countries

Purpose and Scope

Banking Circle S.A. (“Banking Circle” or the “organisation”) is a European credit institution authorised in Luxembourg, which also operates a branch network.

The organisation 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 centre. 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. However, in some circumstances the Onboarding Committee may approve such Clients undertaking a Risk Based Approach, depending on the facts and merits of the sanction.

Note: Within this document, “Correspondent Banking” is the provision of services to a Payment Services Provider (“PSP”) Client, for the purpose of facilitating the payment flows of their underlying customers.

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

a. Payment flows include:

i. A remitter (not a Client of Banking Circle), sending funds to a Client of Banking Circle

ii. A beneficiary, (not a Client of Banking Circle), receiving funds from a Client of Banking Circle

2. A customer of a PSP Client of Banking Circle

a. Payment flows include:

i. A remitter (not a customer of Banking Circle’s PSP Client), sending funds to a customer of Banking Circle’s PSP Client

ii. 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:

  • Groups, legal bodies or similar subject to international sanctions or embargoes, in particular as issued by the Commission de Surveillance du Secteur Financier (“CSSF”), HM Treasury (UK),the European Union (“EU”), the United Nations (“UN”) or the US Office of Foreign Assets Control (“OFAC”);
  • “Non-standard” or “non transparent” activities – those carried out through special-purpose or assimilated legal entities (special purpose vehicles) (structures) or in jurisdictions that impede transparency or which do not meet international banking standards;
  • 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;
  • 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);
  • Shell companies; (a company with no physical presence involving effective decision-making, operations or assets other than cash or equivalents of cash);
  • 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);
  • 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 whether it is legal in the specific country involved;
  • Unregulated or offshore holding/investment companies involved in managing or investing own- or third-party funds (This does not include regulated investment companies or regulated investment funds in Countries permitted for Correspondent Banking relationships);
  • Any involvement in the sale or marketing of Binary Options;
  • Weapons of war, automatic weapons, ammunitions or defence equipment: Includes merchants involved in the sales, intermediation or commerce of war or automatic weapons, including but not limited to chemical weapons, cluster bombs, ammunitions, or other defence equipment or similar.

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:

  • Adult services that are not physically present, this includes dating sites, websites with adult content or products, 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:
    • Have no suggestions of escort services, or the sale of physically present sexual services (solicitation/prostitution);
    • Have no material negative media which could result in material reputational damage for Banking Circle and/or the Luxembourg financial centre; and
    • Be incorporated within UK, North America or Europe.
  • Any business involved with Cannabidiol “CBD”. These businesses must:
    • Be able prove that the Tetrahydrocannabinol “THC” content is within legal limits, and prove that this is continually monitored and tested;
    • Possess the appropriate licenses in those jurisdictions where they are established, or sell products into; and
    • Have been onboarded by the PSP Client with appropriate onboarding procedures and controls to address the risks associated with this Business type. These procedures and controls may be assessed by Banking Circle before approval to proceed is provided.
  • Charities, social service organisations and other non-profit or political organisations. These businesses must:
    • Be registered, or local equivalent, in the country of incorporation;
    • Not be located in high-risk countries (as defined by Banking Circle), and must not use Banking Circle to pay to any restricted countries;
    • Not sponsor or support any act of violence or hate.
  • Gambling. These businesses must:
    • Be incorporated in one of the following jurisdictions: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, 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;
    • 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;
    • 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;
    • Be registered on the local countries gambling commission;
    • Be subject to European MLDs or UK equivalent;
    • Have no material negative media which could result in material reputational damage for Banking Circle and/or the Luxembourg financial centre.
  • Holding companies of private individuals. They must:
    • Be onboarded by Banking Circles’ Clients, who must be a Private Bank.
    • For the avoidance of doubt, if the holding company of a private individual is a party in a transaction, that entity must be onboarded as a customer of one of Banking Circles’ Private Bank Clients.

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:

  • Affiliate Marketing schemes, including network marketing, referral marketing, multilevel marketing. These businesses must:
    • Not be established as a multilevel scheme for the purpose of circumventing credit card schemes rules;
    • Comply, in letter and in practice, with distant marketing or online selling legislation, including US negative option features and EU withdrawal rights, or equivalent;
    • 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;
    • Not have unfair pricing or charges, or withdrawal / cancellation rights that cannot be effectively exercised without unfair costs or penalties.
  • Corporate service provider and other legal and accounting services. To be a direct Client of Banking Circle or a customer of a PSP Client of Banking Circle these businesses must:
    • Have licensing/registration in an AML/CTF regime in the UK/EEA.

NOTE: If any payments are to be made to, or received from, a Corporate service provider and other legal and accounting services on behalf of a direct Client of Banking Circle, or on behalf of a customer of a PSP Client of Banking Circle, the above restriction does not apply to the payment.

  • 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:
    • Hold the appropriate license in the country or territory where they are established and provide services to;
    • Have three full years´ or more track record; and
    • Be established within the countries permitted for Correspondent Banking relationships.

NOTE: If any payments are to be made to, or received from, a Crowdfunding, crowdlending and similar activities businesses on behalf of a direct Client of Banking Circle, or on behalf of a customer of a PSP Client of Banking Circle, the above restriction does not apply to the payment.

  • Virtual Currencies / Cryptoasset firms (i.e. firms engaged in exchange services between virtual currencies and fiat currencies). These businesses must:
    • Be registered / authorised and under supervision by a competent authority in the UK/EEA/equivalent countries area and comply with AMLD 5 regulation (or equivalent) and FATF recommendation relevant for virtual currencies;
    • 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);
    • Not offer any privacy coins or any encrypted transactions adding anonymity. The list of prohibited products is maintained by the Compliance department of Banking Circle;
    • Have in place appropriate transaction monitoring tools, which includes identifying signs of mixers/tumblers. These tools must be deemed satisfactory upon review be accepted by Banking Circle’s Business AML department and ratified by Banking Circle’s Compliance department. An expectation is that the monitoring must have solid Know Your Transaction (“KYT”) methodologies.
  • Pharmaceuticals (includes any drug paraphernalia, pseudo-pharmaceuticals, and any other associated product, service or equipment.) These businesses must:
    • Possess the appropriate licenses in those jurisdictions where they are established or sell products into.
  • Precious metals and stones, arts and antiques, other valuable commodities, sale of vehicles or other merchants dealing with high value goods. If any payments are to be made to, or received from, a business providing these services the following restrictions also apply. These businesses must:
    • Be located in the UK/EEA.
  • Weapons (i.e. knives and accessories for weapons intended for hunting, fishing and recreational activities; antique weapons or collectibles). If any payments are to be made to, or received from, a business providing these services the following restrictions also apply. These businesses must:
    • Be evidenced to be for legitimate sport or recreational activities and not for military or dual use purposes.
  • Financial services firms, where Correspondent Banking is provided by Banking Circle:
    • Banking Circle’s direct Clients must be licensed in one of the Countries Permitted for Correspondent Banking Relationships (noted below):
      • 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.
      • If the firm provides CFDs or any investment products (an investment firm), these firms must:
        • Undergo Enhanced Due Diligence to ensure they perform Suitability and Appropriateness testing;
        • Be located in a country permitted for Correspondent Banking Services.

Note: If the investment firm Client is directly onboarded by Banking Client, they must:

  • Be serviced by the relationship personnel designated as being able to support these types of Clients.

NOTE: If any payments are to be made to, or received from, financial services firms on behalf of a direct Client of Banking Circle, or on behalf of a customer of a PSP Client of Banking Circle, the above restrictions do not apply to the payment.

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

NOTE: If any payments are to be made to, or received from, Marketplaces on behalf of a direct Client of Banking Circle, or on behalf of a customer of a PSP Client of Banking Circle, the above restrictions do not apply to the payment.

Countries permitted for Correspondent Banking 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.