Instruction COSOB No. 25-01 of February 26, 2025, Establishing Rules for Implementing Competence and Honorability Tests for Executives of Entities Subject to COSOB Supervision in the Fight Against Money Laundering, Terrorist Financing, and Proliferation Financing

Instruction COSOB No. 25-01 of February 26, 2025, Establishing the Rules for Implementing Competence and Honorability Tests for Executives of Entities Subject to COSOB Supervision in the Framework of the Fight Against Money Laundering, Terrorist Financing, and Financing of the Proliferation of Weapons of Mass Destruction.

Article 1. — In accordance with the provisions of COSOB Regulation No. 24-01 of 11 Moharram 1446 corresponding to July 17, 2024, relating to the prevention and fight against money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction, this instruction aims to establish the rules for implementing competence and honorability tests for the executives of entities subject to the control of the Commission for the Organization and Supervision of Stock Market Operations, hereinafter referred to as "the Commission".

Article 2: Competence and honorability tests must be conducted for all executives of the entities, including members of the board of directors, senior management, and senior executives, before they assume their functions, in order to ensure compliance with good governance principles and regulatory requirements.

Section 1: Competence and Honorability Tests

Article 3: The competence tests for executives aim to evaluate their ability to identify, prevent, and react effectively to risks related to:

1. Money Laundering: The tests must include:

• Knowledge of money laundering typologies and mechanisms;
• Ability to recognize alert signals (suspicious transactions, fund structuring, use of shell companies, etc.);
• Mastery of legal and regulatory obligations regarding suspicious activity reporting.

2. Terrorist Financing: The tests must include:

• Understanding of financing techniques used by terrorist organizations (donations, illicit trade, etc.);
• Ability to detect unusual transactions or behaviors that may suggest an attempt to finance terrorist activities;
• Mastery of sanctions and asset freezing measures applicable to persons and entities suspected of terrorism.

3. Financing of the Proliferation of Weapons of Mass Destruction: The tests must include:

• Knowledge of regulatory frameworks and international treaties relating to non-proliferation (e.g., United Nations Security Council Resolutions);
• Identification of sensitive sectors and products susceptible to diversion for proliferation purposes;
• Ability to implement control and verification procedures for clients, partners, and transactions involving states or entities at risk.

Article 4: Honorability tests aim to ensure that executives possess impeccable personal and professional integrity, in order to prevent any risk of abuse or conflict of interest. These tests cover:

1. Absence of judicial and disciplinary records: The tests must include:

• Verification of the existence of criminal convictions for serious offenses (fraud, corruption, money laundering, breach of trust, etc.);
• Control of any disciplinary sanctions pronounced by regulatory authorities or professional orders;
• Examination of the criminal record extract or administrative documents that could call into question the executive's morality.

2. Professional history and reputation: The tests must include:

• Analysis of previously held positions and reasons for any departures (resignation, dismissal, etc.);
• Verification of the executive's reputation with regulatory bodies, former employers, and professional partners;

3. Financial and tax transparency: The tests must include:

• Examination of the executive's personal financial situation to detect potential conflicts of interest or corruption risks;
• Verification of compliance with tax and social obligations;
• Detection of any suspicious operations related to tax havens or opaque financial structures.

Section 2: Procedures for Implementing Tests

Article 5: Competence and honorability tests for executives must be carried out by the entities themselves. Each entity is responsible for implementing tests for its executives before they assume their functions and at regular intervals throughout the exercise of their functions.

Entities must develop and implement executive competence evaluation programs, covering the areas cited in Article 3 above.

These programs may include written assessments, case studies, and simulations. Entities must ensure that these tests are adapted to the responsibilities and functions of each executive.

Article 6: Entities must conduct an honorability verification of their executives as stipulated by Article 4 above.

Article 7: Entities must document the results of these tests, which must be preserved, secured, and accessible to the Commission in the event of an inspection. They must include:

• Detailed results of competence tests;
• Supporting documents regarding honorability (criminal record extract, verification of professional background).

It is incumbent upon the entity to ensure that competence and honorability tests are conducted rigorously and in compliance with the requirements set forth in this instruction.

Article 8: Entities must submit to the Commission a report on the competence and honorability tests conducted for the executives cited in Article 2, before they assume their functions.

The Commission may, where appropriate, carry out necessary verifications to control their accuracy.

Section 3: Monitoring and Updating of Tests

Article 9: Competence and honorability tests for executives must be conducted:

• Before they assume their functions;
• At least every five (5) years, unless there is a substantial change in regulation or particular circumstances justifying an early update;
• In the event of a modification of the executives' functions.

Section 4: Final Provisions

Article 10: This instruction enters into force from the date of its publication.

Done in Algiers on February 26, 2025

The President Youcef BOUZENADA