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Compliance Program


1. BUSINESS MODEL, OBJECTIVE AND SCOPE

1.1. Business Model

(“SWAP ONE”) is a money services business (“MSB”) registered with the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) under registration number M23223002.

SWAP ONE has a formally appointed Anti-Money Laundering Compliance Officer (“CAMLO”), registered with FINTRAC, who is responsible for implementing and updating the ML/TF Program for regulatory compliance management, regulatory requirements related to ML/TF and international sanctions.

SWAP ONE only operates online, with no physical branches, kiosks, agents or any kind of cash handling.

SWAP ONE provides the following services:

  1. Foreign exchange trading: carrying out transactions in which one type of currency is exchanged for another.
  2. Remittance or transfer of funds: remittance or transfer from one person or entity to another using an electronic funds transfer (“EFT”) network.
  3. Virtual currency trading: including foreign exchange and virtual currency transfer services.

Cash transactions are not accepted.

Client funds are only settled through:

  1. Canadian and foreign financial institutions;
  2. regulated payment service providers; and
  3. regulated virtual currency exchanges or custodians.

SWAP ONE is a lean, technology-oriented MSB. Certain operational and integration activities may be performed by third-party service providers acting on behalf of SWAP ONE under written agreements, appropriate due diligence and documented instructions. SWAP ONE, through its senior management and CAMLO, maintains full responsibility and accountability for compliance with Canadian AML/ATF, sanctions and proliferation funding obligations, including oversight of any service providers.

1.1.1. New products, services, partners and technologies

Before developing new products or services, or deciding to use new technologies or new partners, the risks of money laundering, terrorist financing and sanctions and their impacts must be assessed, among other things, by CAMLO, with input from relevant business and technology stakeholders, and approval by the Board of Directors (or other government body).

This assessment must consider, as a minimum, compliance with applicable laws and regulations, the clear identification of all relevant parties and the legitimate economic reason for operations related to new products, services or technologies, according to their nature, size, complexity, risk profile and business model.

Any additions should be reflected in:

  1. The company’s money laundering/terrorist financing (“ML/TF”) risk assessment and sanctions, and
  2. This Corporate Program and the relevant Level 2 Policies and Procedures.

1.2. Objective

This Corporate Compliance and ML/TF Policy describes how SWAP ONE complies in practice:

  1. the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”);
  2. the associated regulations and
  3. applicable FINTRAC guidelines for money service businesses (MSB), including those dealing with virtual currency.

This is the top-level program (“Level 1”). It defines principles, functions and minimum standards. The detailed “how to” steps are in the Level 2 Policies and Procedures, which are approved by the Anti-Money Laundering Compliance Officer (“CAMLO”) and kept up to date.

Level 2 documents are internal and operational documents. They are made available to the competent authorities and selected partners on a confidential basis, as required, but are not published publicly.

This Program enters into force on the date of its approval and will be reviewed at least every 2 (two) years. See section 6 for detailed information.

The ML/TF Program is routinely evaluated, updated and improved to reflect changes in SWAP ONE’s activities, as well as applicable supervisory standards and legal requirements.

1.3. Scope

This program applies to:

  1. all SWAP ONE activities that fall under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and its regulations,
  2. all relevant directors, executives, employees and contractors.

No one at SWAP ONE is exempt from this Program, and all relevant direct parties and contractors are expressly prohibited from engaging in or facilitating in any way any suspicious or illegal activity that could result in money laundering, terrorist financing or any other financial crime.

In addition, SWAP ONE encourages its employees to raise concerns in good faith, without fear of retaliation.

2. KEY CONCEPTS

2.1. Money laundering

Money laundering is the process by which criminals try to make the proceeds of crime appear to have a legitimate origin. It usually involves:

  1. placing illegal funds or virtual assets in the financial system (“placement”);
  2. moving them through different accounts, products, countries or assets to hide their origin (“layering”) and
  3. reintroducing them as apparently legitimate funds (“integration”).

For an MSB like SWAP ONE, the risk of money laundering can arise:

  1. customers who use exchange services, remittances or virtual currencies to move criminal proceeds;
  2. third parties who use the customer’s account to move funds, and
  3. use of complex structures, nominees or high-risk virtual asset services.

2.2. Terrorist financing

Terrorist financing is the raising, movement or use of funds or assets to support terrorist activities, organizations or individuals. The funds can come from:

  • criminal sources (e.g. fraud or drug trafficking) or
  • legitimate sources (e.g. salaries or donations).

Compared to money laundering, terrorist financing

  • may involve smaller amounts that still represent a high risk;
  • may involve funds that appear “clean” but are intended for illegal purposes, and
  • can depend on fast, cross-border transfers and virtual assets.

2.3. Lines of defense

To manage these risks, SWAP ONE uses a “three lines of defense” model:

2.3.1. First line – Business and operations

Own customer and transaction processes, application of controls in daily operations, following Level 2 procedures and escalating problems or unusual activities.

2.3.2. Second line – Compliance

It designs and maintains the ML/TF and sanctions framework, defines and updates Level 1 and Level 2 standards, monitors and questions the first line and oversees regulatory reporting and communication with FINTRAC.

2.3.3. Third line – Independent review/internal audit

Independently tests that this Program and the underlying controls are complete and functioning as described, and reports the results and recommendations to senior management and the Board.

Given SWAP ONE’s size and business model, this three lines of defense structure is applied proportionally: the compliance function is centered in CAMLO and may be supported, where appropriate, by other internal functions and duly regulated third-party service providers, but responsibility for the compliance program remains with SWAP ONE and CAMLO.

2.4. Sanctions and financing proliferation

Sanctions are legal measures that restrict or prohibit trade with certain countries, sectors, persons or entities, including those involved in terrorism or the proliferation of weapons of mass destruction (“WMD”).

Proliferation financing is the provision or collection of funds, financial services or other assets, knowing or having reasonable grounds to suspect that they are intended, in whole or in part, to support the development, acquisition or transfer of WMD or their means of delivery.

In practice, the risk of sanctions and proliferation financing can arise when clients, partners or counterparties use complex or opaque corporate structures, professional intermediaries, front or virtual companies or virtual currencies to conceal their involvement with sanctioned persons, listed entities or high-risk jurisdictions. This includes routing activities through intermediary countries, payment service providers or high-risk virtual assets and using rapid cross-border movements in order to avoid detection.

SWAP ONE recognizes that money services businesses and virtual currency dealers are specifically identified in Canadian assessments and guidance as higher risk sectors for sanctions and proliferation-related activities. Recent briefings and special bulletins emphasize the role of virtual assets, professional intermediaries and front companies in sanctions evasion and proliferation financing schemes. SWAP ONE incorporates these typologies into its risk assessment, client due diligence and transaction monitoring project.

SWAP ONE manages sanctions and proliferation financing risks alongside ML/TF risks through KYC/KYB, transaction monitoring, sanctions screening and risk-based controls.

Canada implements UN Security Council sanctions through its own sanctions regime. SWAP ONE’s Terrorist Property and Sanctions Control Procedure ensures screening against applicable UN, Canadian and other relevant lists.

3. LEGAL FRAMEWORK

3.1. Primacy of PCMLTFA and FINTRAC

SWAP ONE fully complies with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations, as well as FINTRAC guidelines related to:

  1. compliance programs;
  2. money services business and virtual currency trading;
  3. timely reporting obligations;
  4. customer identification;
  5. identifying and documenting relationships with third parties;
  6. ensuring that information and documentation are complete, retrievable and protected against unauthorized changes;
  7. keeping records for the minimum legal period required;
  8. Canadian sanctions and terrorist listing laws (including the implementation of United Nations sanctions), and applicable ministerial directives and foreign countermeasures.

Canadian law and FINTRAC guidelines are SWAP ONE’s primary and non-negotiable reference.

When foreign or corridor-specific requirements differ from Canadian requirements, SWAP ONE applies both when feasible, but never goes below Canadian standards.

In case of conflict, the PCMLTFA and FINTRAC guidelines prevail for SWAP ONE’s Canadian obligations as MSB.

International standards (e.g. FATF) and foreign regulations are used to improve controls and align with partner banks’ expectations, but they do not replace or dilute Canadian requirements.

3.2. Level 2 policies and procedures – key elements

To support operations in specific areas of applicability, our Level 2 Policies and Procedures include the key elements described below:

3.2.1. Know your customer/Know your business (“KYC/KYB”)

  • Customer acceptance processes;
  • Customer identification processes;
  • Due Diligence Processes and Enhanced Customer Due Diligence;
  • Identification of the corporate structure and the UBO;
  • Sanctions and WBS/HIO screening;
  • Third-party relations/determination;
  • Continuous monitoring and risk-based assessment;
  • keeping records in accordance with legal requirements;
  • updating/refreshing customer information;
  • suspicious activity and reporting obligations.

3.2.2. Know Your Trade (“KYT”)

  • data collection;
  • continuous monitoring and risk-based assessment;
  • document retention, information integrity, data access and record keeping;
  • Virtual currency and wallet controls;
  • Guidance on the travel rule: collection, transmission and retention of sender/beneficiary information in accordance with Canadian requirements;
  • Investigation: responsibility for the case, escalation paths and reporting deadlines;

3.2.3. Team training and preparation program

  • training recipients;
  • purpose and objectives;
  • scope and content;
  • frequency and delivery methods;
  • keeping records in accordance with legal requirements.

3.2.4. Risk-based assessment (“RBA”)

  • identification of ML/FT risks and typologies;
  • assessing and classifying risks and defining risk tolerance;
  • relationship-based risk assessment;
  • risk mitigation and assessment;
  • implementation and periodic review.

3.2.5. Systems and technology requirements

  • requirements for monitoring transactions,
  • analysis of virtual currencies,
  • sanctions and screening of terrorist properties and FINTRAC reporting systems, including data quality, aggregation logic (24-hour, 7-day and 30-day windows), performance, change control and audit trails.

3.2.6. Internal service levels and deadlines

  • internal deadlines for identifying and verifying customers,
  • periodic reviews,
  • triage and investigation of STR/LVCTR/EFT alerts and reports, defined in such a way that SWAP ONE consistently meets or exceeds regulatory requirements (e.g. “as soon as possible” for STRs and the 24-hour rule for aggregation and LVCTR/EFT reporting).

3.2.7. Sanctions, proliferation and types

  • Incorporate current Canadian sanctions and proliferation requirements, ministerial directives and evolving typologies (including those described in national risk assessments and FINTRAC special bulletins) into customer due diligence, partner selection and transaction monitoring rules.

Level 2 policies and procedures contain specific information on limits, deadlines, types of documents accepted, triggers for reports and escalation.

Level 2 policies and procedures have Canadian legislation and FINTRAC guidelines as primary and non-negotiable references and never fall below Canadian standards.

Level 2 documents are active operational documents, maintained under a defined change control process. They are drafted by the relevant commercial and operational managers and are approved by the CAMLO or under his authority, with version control and communication to the affected employees. They are available to relevant employees through internal channels, via the intranet and to FINTRAC and other competent authorities upon request, but are not publicly disclosed.

3.3. Sanctions and controls on terrorist property

SWAP ONE complies with all applicable Canadian laws regarding sanctions and requirements relating to terrorist assets.

At the very least, SWAP ONE:

  • verifies clients, beneficial owners and, where relevant, other related parties at the time of integration and periodically in relation to applicable sanctions and terrorist lists;
  • filter relevant payments and virtual asset activities, where technically feasible;
  • investigates all possible matches;
  • blocks or freezes assets when required by law; and
  • submits the required reports to FINTRAC and any other competent authority.

Recent Canadian guidance confirms that suspicious transaction reporting also applies to transactions suspected of involving sanctions evasion. SWAP ONE therefore treats sanctions verification alerts, sanctions-related anomalies and unusual patterns involving high-risk jurisdictions, shell or orange companies, professional intermediaries or certain virtual asset services as potential STR triggers, in addition to any mandatory reporting obligations for terrorist assets or listed persons.

Any real or suspected issue relating to terrorist sanctions or assets is immediately referred to CAMLO (or its delegate). CAMLO decides on the appropriate course of action, including reporting, blocking/freezing and possible termination of the relationship.

The detailed design of sanctions screening (lists, tools, correspondence handling process, escalation paths and record keeping) is described in SWAP ONE’s Level 2 Terrorist Property and Sanctions Control Procedure.

3.4. Record keeping

SWAP ONE maintains records in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”), its regulations and the applicable FINTRAC guidelines.

The records must be:

  • accurate, complete and legible;
  • recoverable within a reasonable time; and
  • protected against unauthorized access, alteration or deletion, at least for the minimum legal retention period.

At the very least, SWAP ONE keeps records of:

  • customer identification and verification (individuals and companies);
  • information on effective ownership and control, where applicable;
  • information on third-party determination and business relationships, where applicable;
  • customer risk ratings, enhanced due diligence reviews and KYC/KYB updates;
  • transaction records (including activities with fiduciary and virtual assets) sufficient to reconstruct the activity;
  • monitoring alerts, investigations, decisions and follow-up actions;
  • reports submitted to FINTRAC (including Suspicious Transaction Reports, Large Virtual Currency Transaction Reports and Electronic Fund Transfer Reports) and related internal analyses;
  • sanctions and results of terrorist property screening and associated decisions;
  • staff training and preparation (including frequency, content and tests); and
  • compliance effectiveness reviews and independent review documentation.

Unless a longer period is prescribed, records required by the PCMLTFA are kept for at least five (5) years from the relevant date (e.g., the date the record was created, the date of the last business transaction, or the date the report was filed), or longer when necessary to support investigations, regulatory requests, or legal obligations.

Records must be able to be submitted to FINTRAC or other competent authorities within thirty (30) days of the request, in a format that preserves integrity, authenticity and completeness.

The detailed retention schedule, including record types, retention start dates and any extended retention for high-risk cases, is defined in SWAP ONE’s Level 2 Recordkeeping and Evidence Procedures.

3.5. Virtual currency and travel rules

SWAP ONE trades virtual currency in accordance with Canadian legislation and FINTRAC guidelines.

Given the way virtual assets are used in activities related to money laundering, terrorist financing, sanctions evasion and proliferation, SWAP ONE treats its virtual currency services as a higher inherent risk and applies proportionately stricter due diligence and monitoring to these flows.

In principle, SWAP ONE:

  • distinguishes between hosted portfolios (controlled by SWAP ONE or a regulated partner) and non-hosted portfolios (self-custody, controlled by the client);
  • applies additional due diligence, limits or conditions to transfers involving non-hosted portfolios, based on the Risk Based Assessment and applicable guidelines;
  • uses appropriate tools and information sources, where feasible, to identify higher-risk virtual asset activity (such as exposure to sanctioned addresses, darknet marketplaces, mixers, high-risk exchanges or known scam/ransomware clusters).

For in-scope virtual currency transfers, SWAP ONE collects, transmits and retains sender and beneficiary information in accordance with Canadian requirements and applicable Travel Rule expectations. When SWAP ONE cannot meet these requirements or is not comfortable with the risk, it may refuse, restrict or terminate the transaction or relationship.

Detailed rules on wallet types, limits, scenario monitoring, Travel Rule data requirements and escalation criteria are set out in SWAP ONE’s Virtual Currency and Level 2 Wallet Controls and related KYT procedures.

4. GOVERNANCE AND RESPONSIBILITY

4.1. Board and senior management

The Board of Directors of SWAP ONE (or equivalent government body):

  • approves this Business Program and any material amendments;
  • defines and analyzes the company’s propensity to the risk of money laundering (ML), terrorist financing (TF) and sanctions;
  • ensures that the Compliance function has sufficient authority, budget, skills and access to data and systems;
  • receives ML/TF and sanctions reports from CAMLO at least quarterly.

4.2. Anti-Money Laundering Compliance Officer (“CAMLO”)

The Anti-Money Laundering Compliance Officer (“CAMLO”) appointed by SWAP ONE and senior management are jointly responsible for:

  • implement this Program in all its products, systems and operations;
  • ensure that commercial decisions and product launches reflect the company’s risk appetite and this Program;
  • respond promptly to questions, conclusions and recommendations.

The Anti-Money Laundering Compliance Officer (CAMLO) appointed by SWAP ONE:

  • reports directly to the Board of Directors;
  • is independent of sales and revenue targets;
  • has unrestricted access to relevant data, systems and employees.

CAMLO is responsible for:

  • maintain this Corporate Program and ensure that all Level 2 procedures are aligned and up-to-date;
  • lead the risk-based assessment of ML/TF and sanctions;
  • supervise:
  • identification, risk classification and acceptance of clients, in accordance with L2 – KYC/KYB and risk assessment procedures;
  • transaction monitoring and investigations;
  • sanctions and screening of terrorist properties;
  • establishing service level agreements (“SLAs”) for STR reports to FINTRAC;
  • execution of the ML/TF training plan;
  • receipt of all suspicious or unusual transaction reports;
  • analyze suspicious and unusual transaction reports, decide whether or not to file a report with FINTRAC and ensure that filing and “non-filing” decisions are documented, especially in higher risk or borderline cases;
  • establish and document internal deadlines for sending STRs;
  • coordinate independent reviews of effectiveness;
  • managing serious incidents and responding to requests from regulatory bodies.
  • Tasks can be delegated. Responsibility remains with CAMLO.

4.3. Customer and partner acceptance/risk appetite

SWAP ONE applies a risk-based approach to accepting clients and partners. It does not accept or maintain relationships that fall outside its risk appetite.

At the very least, SWAP ONE will not:

  • establishing or maintaining relations with persons or entities included on applicable sanctions or terrorist lists;
  • accept clients whose identity or beneficial ownership cannot be reasonably verified;
  • maintain relationships whose nature, purpose or origin of funds/wealth cannot be reasonably understood and proven by documentation, especially in cases of greater risk;
  • establish or maintain relationships with financial institutions, MSBs or virtual asset companies that do not have the required licenses/registrations or that have unacceptable ML/TF or sanctions deficiencies;
  • establishing or maintaining relationships that are clearly inconsistent with SWAP ONE’s stated risk appetite for certain high-risk sectors, products or jurisdictions.

In applying this risk propensity, SWAP ONE pays particular attention to relationships involving professional intermediaries (e.g. law firms, notaries or corporate service providers, especially when trust accounts or professional addresses are used as the primary banking or registered address) and to clients with opaque or multi-faceted corporate structures, shell or generic companies with limited observable economic activity. These relationships are treated as higher risk, subject to enhanced due diligence and stricter monitoring, and may be declined or terminated when SWAP ONE is unable to obtain sufficient transparency and comfort about the beneficial ownership, control and legitimacy of the activity.

For partners (such as banks, payment partners, payment service providers/PSPs and virtual asset exchanges/custodians), SWAP ONE conducts a Partner Due Diligence that considers licensing, ownership, control, ML/TF and sanctions framework, regulatory history and reputation. Higher risk partners are subject to stricter conditions, such as lower limits, enhanced information sharing, audit rights or termination triggers.

Detailed acceptance/denial criteria, onboarding checklists and partner due diligence procedures are defined in SWAP ONE’s Level 2 Partner Due Diligence, Onboarding and Review Procedures.

5. ELEMENTS OF THE PCMLTFA COMPLIANCE PROGRAM

5.1. Element 1 – Compliance Officer

This requirement is fulfilled through the appointment of the Anti-Money Laundering Compliance Officer (“CAMLO”), as described in section 4.2. The CAMLO is responsible for designing, implementing and overseeing the ML/TF Program and sanctions, has direct access to the Board of Directors and is independent of commercial and revenue objectives.

5.2. Element 2 – Written policies and procedures

This Level 1 Program is supported by Level 2 internal policies, procedures and standards (“Level 2 Documents”) which:

  • define who does what, when and in which system; and
  • describe the tasks in sufficient detail so that a trained employee can perform them consistently and in accordance with this Program.

As a minimum, Level 2 documents address the following areas:

  • Customer due diligence for natural and legal persons, including beneficial ownership and treatment of politically exposed persons (PEPs) and heads of international organizations (HIOs);
  • Risk assessment and classification of customers, products, services, delivery channels, geographical regions and partners;
  • Continuous monitoring of transactions and customer behavior, including specific controls for higher-risk products such as virtual currency;
  • Sanctions and controls on terrorist property, including screening, escalation and response;
  • Suspicious transactions and other required reports to FINTRAC and other competent authorities (including, as applicable, EFT reports, large virtual currency transaction reports and terrorist property reports);
  • Keeping records and evidence, including documentation of reasonable measures taken to comply with legal obligations and this Program;
  • Due diligence, integration and periodic review of banking, payment, virtual asset and other financial partners;
  • Training and awareness-raising for relevant employees and managers on their responsibilities in relation to ML/TF and sanctions; and
  • Independent review of the effectiveness of the ML/TF program and sanctions at appropriate intervals.

These documents are supervised and approved by CAMLO, reviewed regularly and kept under change control, with all changes recorded, versioned and made available to the relevant employees for implementation and to FINTRAC and other competent authorities upon request.

5.3. Element 3 – Risk-Based Assessment (RBA)

SWAP ONE maintains an ML/FT risk assessment and written sanctions that:

  • describes its inherent risk by:
    • types of clients (individuals, SMEs, sectors, PEPs, complex structures);
    • products (FX, remittances, virtual currency, stablecoins);
    • delivery channels (web, app, API – all non-face-to-face);
    • geographies/corridors;
    • partners (banks, payment partners, exchanges/custodians of virtual assets);
    • technology and data;
    • exposure to sanctions and risk of proliferation financing and relevant ML/TF typologies.
  • assesses the soundness of its controls; and
  • defines the residual risk explicitly:
    • which is treated as high risk;
    • which extra controls apply to high-risk areas (EDD, lower limits, stricter monitoring, higher-level approvals).

The identification of inherent risk is informed by Canada’s National Inherent Risk Assessment and the Federal AML/ATF Regime Strategy, FINTRAC’s strategic intelligence and Special Bulletins (including those on sanctions, proliferation financing and the legal profession), FATF guidance on virtual asset service providers and other industry-specific typologies.

The methodology, data sources, criteria and main assumptions used in the risk assessment are documented and maintained.

Risk-based assessment:

  • is led by CAMLO with contributions from the business, operations and technology areas;
  • is approved by senior management at least once a year;
  • is updated when there are major changes (new products, corridors, partners, serious incidents, regulatory changes).

The results of the risk assessment determine:

  • customer risk classification rules and EDD triggers;
  • integration and rejection/exit criteria;
  • transaction monitoring rules and limits (including corridor-specific parameters);
  • criteria, limits and conditions for accepting partners (for banks, payment partners, virtual asset exchanges/custodians and PSPs);
  • focus of the independent review; and
  • training priorities.

5.4. Element 4 – Continuous training

SWAP ONE maintains a written training plan that defines, in proportion to your size and risk profile:

  • topics, frequency and minimum hours of training per role;
  • how training is delivered and evaluated;
  • how the conclusion is followed up.

Minimum annual expectations:

  • Onboarding/operations/customer service staff – at least 4 hours training in ML/TF and sanctions;
  • Compliance/monitoring/investigations staff – at least 8 hours of training in ML/TF and sanctions (including typologies and use of the system);
  • Senior management/Board – at least 2 hours briefing on ML/TF risks and governance.
  • Content specific to each corridor is provided to employees working in these streams, where applicable, in addition to the basic Canadian content.

These minimum annual expectations apply under normal circumstances and may be adjusted by CAMLO based on SWAP ONE’s size, risk profile and regulatory developments.

New employees in relevant roles must complete basic ML/TF training before:

  • approve clients;
  • process transactions; or
  • dealing with alerts.

All relevant employees receive at least annual refresher training. The frequency and results of the tests are recorded.

5.5. Element 5 – Independent review

At least every 2 (two) years, SWAP ONE commissions an independent review of this Program and its implementation.

The auditor (internal or external audit):

  1. is not involved in the day-to-day operations of ML/TF;
  2. has the experience to evaluate the activities of MSBs and virtual currencies.

Each review must at least

  • evaluate the integrity and timeliness of this Level 1 Program;
  • evaluate the quality and use of risk assessment;
  • test a risk-based sample of customer files at:
  • risk levels (low/medium/high),
  • types of products and
  • main corridors (or all client files where the total population is small);
  • review a risk-based sample of STR cases (or all STRs where volumes are low);
  • test at least one main monitoring rule per main product and at least one specific virtual currency scenario, proportional to the size and activity of SWAP ONE;
  • verify a sample of large-value virtual currency transaction reports (“LVCTR”) and electronic funds transfers (“EFT”) for accuracy and timeliness, where applicable;
  • verify record-keeping standards; and
  • verify that the previous conclusions and recommendations have been complied with.

As SWAP ONE does not accept any type of cash transaction, there will be no reports related to Large Cash Transactions (“LCTR”).

The reviewer issues a written report. Senior management approves a correction plan with deadlines. CAMLO monitors the conclusion and reports the status to the Council.

5.6. Suspicious transaction reports (STRs)

SWAP ONE files a Suspicious Transaction Report (“STR”) when, after appropriate analysis, it has reasonable grounds to suspect that a transaction or attempted transaction is related to:

  • the commission or attempted commission of a money laundering crime;
  • the commission or attempted commission of a terrorist financing crime; or
  • evasion or attempted evasion of sanctions legislation.

There is no monetary limit for STRs; even relatively small transactions can require notification.

All employees are responsible for identifying and escalating unusual or suspicious activity to the CAMLO (or delegate) without delay. Employees should not decide for themselves whether a report should be sent to FINTRAC.

CAMLO (or his representative):

  1. analyzes the escalated cases;
  2. applies the “reasonable grounds for suspicion” test based on known facts, context and typologies;
  3. decides whether or not an STR should be submitted; and
  4. ensures that:
    1. any required STR is submitted to FINTRAC as soon as possible after the suspicion is formed; and
    2. the justification for presenting or not is documented, especially in higher risk or borderline cases.

Clients should never be informed that an STR is being considered or submitted (“without prior notice”).

The detailed STR workflow, including internal deadlines, analysis steps, documentation standards and quality assurance checks, is defined in SWAP ONE’s STR Level 2 and FINTRAC Reporting Procedures.

5.7. Politically Exposed Persons (PEP) and Heads of International Organizations (HIO)

SWAP ONE applies the requirements of the PCMLTFA, its regulations and FINTRAC’s guidelines on politically exposed persons (PEPs) and heads of international organizations (HIOs), including the guidelines for money service businesses and virtual currency dealers.

In terms of principles:

  • SWAP ONE takes reasonable steps to determine whether a person is a foreign PEP, a domestic PEP, an HIO or a family member or close associate of a PEP or HIO in the circumstances described in the FINTRAC guidelines. This may include determinations at the time SWAP ONE enters into a business relationship, during periodic monitoring, when certain prescribed large transactions occur or when SWAP ONE detects a new fact (e.g. media reports or database results) that suggests PEP/HIO status.
  • The provisions may apply to customers, beneficial owners, authorized users or other relevant parties, depending on the relationship and the service provided.

For this program:

  • A foreign PEP is a person who holds or has held a prescribed senior public office on behalf of a foreign state (e.g. head of state or government, senior member of the executive or legislature, deputy minister, ambassador or counselor, senior military officer, president of a state-owned enterprise or bank), as defined in Canadian law and FINTRAC guidelines.
  • A national PEP is a person who currently holds, or has held within the past five (5) years, a prescribed senior public position in or on behalf of the Canadian federal, provincial/territorial or municipal government, as defined in Canadian legislation and FINTRAC guidelines.
  • A Head of International Organization (HIO) is a person who currently holds, or has held within the last five (5) years, the principal leadership position (e.g. president or chief executive officer) of an international organization established by state governments or of an institution of such an organization, as defined in Canadian law and FINTRAC guidelines.
  • Family members and close associates of PEPs and HIOs are identified and treated in accordance with the definitions of the PCMLTFA and FINTRAC guidelines.

The deadlines for PEP/HIO status follow Canadian requirements:

  • Once SWAP ONE determines that a person is a foreign PEP, that person remains a foreign PEP continuously (including after death). Family members of a foreign PEP, once identified, also remain family members of a foreign PEP on an ongoing basis.
  • National PEPs and HIOs are treated as such while in office and up to five (5) years after they cease to hold the relevant office or five (5) years after their death. Family members of national PEPs and HIOs are treated as such until five (5) years after the PEP or HIO leaves office or dies.
  • Close associates are treated as such for as long as SWAP ONE has reasonable grounds to believe that the close associate exists.

Foreign PEPs, HIOs and their families and close associates are considered higher risk relationships. At a minimum, SWAP ONE applies enhanced measures to these relationships, which may include:

  • gain a more detailed understanding of the nature and purpose of the relationship;
  • take reasonable steps to establish the source of funds and the origin of wealth;
  • obtain approval from CAMLO or senior management to start or continue the relationship; and
  • improved continuous monitoring, including more frequent periodic reviews and specific monitoring scenarios.

National PEPs and HIOs, and their family members and close associates, are subject to a risk-based approach. SWAP ONE assesses the actual risk posed by the relationship (e.g. the type of public office, countries involved, expected transaction profile, products and channels, and any other risk factors such as adverse media) and applies enhanced measures where necessary. When relationships with national PEPs/HIOs are assessed as high risk, SWAP ONE applies measures comparable to those applied to foreign PEPs (e.g. CAMLO or senior management approval, checks on the source of funds/wealth and enhanced monitoring).

Even after the termination of the legal PEP/HIO status (e.g. after the five-year period for national PEPs or HIOs), SWAP ONE may continue to treat a customer as high risk based on the residual risk (e.g. ongoing influence or adverse media). In these cases, the high-risk classification and its justification are documented in the client’s file and reviewed with each KYC update.

6. DATE OF ENTRY INTO FORCE, REVISION AND UPDATES

This Program enters into force on the date of its approval and will be reviewed every 2 (two) years or whenever there are significant changes in applicable laws or regulations, as well as significant changes in the risk profile of SWAP ONE’s clients and business.

All revisions will be formally approved by the Anti-Money Laundering Compliance Officer (“CAMLO”) in a written, registered and versioned document and made available for consultation by regulatory authorities as well as internal and external auditors for a minimum period of 5 (five) years.

The ML/TF Program is routinely evaluated, updated and enhanced to reflect changes in SWAP ONE’s activities, as well as applicable supervisory standards and legal requirements.

7. REVISION HISTORY

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