Bank of the Republic of Haiti

CIRCULAR

No. 107-3

TO MONEY TRANSFER HOUSES

This circular determines certain preventive measures proportional to the nature of money laundering and terrorist financing risks.

1. Duty of Vigilance and Customer Identification

Money transfer houses must attach particular importance to customer due diligence standards to preserve their reputation and the integrity of the financial system. To this end, money transfer houses must develop and implement policies and procedures, and take measures to establish the identity of permanent or occasional clients, beneficial owners, ordering parties, and beneficiaries.

Money transfer houses are therefore required to identify clients, ordering parties, and beneficiaries, and to verify their identity using documents, data sources, or independent and reliable information. When they have sub-agents, money transfer houses must also ensure that their agents implement similar preventive measures, in accordance with Section 6 of this circular.

Customer identification takes place during:

1. the establishment of the business relationship;
2. occasional transactions exceeding the regulatory threshold or in the case of repeated distinct operations for an individual amount below the regulatory threshold, or when the lawful origin of funds is not certain, or if it involves a fund transfer at the national or international level;
3. transactions, in gourdes or foreign currencies, carried out in a single operation or in several operations between which there appears to be a link and whose total is equal to or greater than the threshold established by law and regulations;
4. the existence of suspicion of money laundering or terrorist financing, regardless of any exemption or threshold provided for in laws and regulations;
5. the existence of doubt regarding the accuracy or relevance of previously obtained customer identification data.

The identification of a natural person under Article 36 of the Decree of April 30, 2023, sanctioning money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction, involves "obtaining full first and last names, date and place of birth, and address of their principal residence."

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Regarding the verification of information, Article 36 of the aforementioned decree specifies that: "the verification of the identity of a natural person requires the presentation of an original official document currently valid and bearing a photograph, of which a copy is taken. The verification of their address is carried out by presenting a document capable of proving it or by any other means."

When the client is a legal person or a legal structure, the identification and verification of identity concerns "the corporate name, the registered office address, the identity and powers of the directors and senior management or their legal equivalents abroad, proof of its legal constitution," according to Article 38 of the Decree of April 30, 2023.

During customer identification, a copy of all documents must be made, classified, and centralized by the money transfer house. Formal checks must be performed regarding the signature, any anomalies in the photograph, and the physical appearance of the potential client.

Money transfer houses must take reasonable measures to obtain information on the true identity of the persons in whose interest a transaction is carried out, if there is the slightest doubt that these clients may not be acting for their own account.

Money transfer houses must ensure that transfers contain all required information on the ordering party and the beneficiary and take appropriate measures in the contrary case, in accordance with Articles 47 to 54 of the Decree of April 30, 2023. The ordering party and the beneficiary may be the same person. The transfer may be cross-border or national.

The documents and information used for customer identification must be requested during fund remittances and transmissions for a total sum equal to or greater than the established regulatory threshold or the equivalent in foreign currency, for a high-amount occasional operation, for any transaction carried out under conditions of unusual or unjustified complexity.

Money transfer houses must exercise constant vigilance and conduct a careful review of operations, ensuring they are consistent with their updated knowledge of their clients. They must demonstrate extensive and updated knowledge of the client to be able to detect potential inconsistencies or anomalies in their operations.

If money transfer houses cannot comply with the provisions set out above, they may neither establish nor maintain a business relationship, nor carry out an operation for the client. They will determine, in this case, whether it is appropriate to file a suspicious transaction report with the Central Unit for Financial Intelligence (UCREF) or to establish an internal confidential report in accordance with Article 46 of the Decree of April 30, 2023.

When clients do not act for their own account, money transfer houses are required to obtain necessary information on the identity of the persons in whose interest a transaction is carried out. Furthermore, a lawyer, notary, accountant, or securities broker acting as a financial intermediary cannot invoke professional secrecy to refuse to disclose the identity of the beneficial owner, in accordance with the provisions of Article 49 of the Decree of April 30, 2023.

2. Beneficial Owners

Money transfer houses are required to identify beneficial owners in accordance with the provisions of Articles 40 to 42 of the Decree of April 30, 2023.

If money transfer houses cannot obtain the information mentioned in this section or their clients fail to communicate it or provide irrelevant or implausible information, they may neither establish nor maintain a business relationship, nor carry out an operation for the client. They will determine, in this case, whether it is appropriate to inform the UCREF.

3. Politically Exposed Persons

Enhanced due diligence must be exercised regarding politically exposed persons (PEPs), who are defined by Article 6 of the Decree of April 30, 2023, as persons who hold or have held prominent public functions in a foreign country or in Haiti or within or for the account of an international organization, as well as the family members of this person, or any other persons closely linked or associated with them.

Money transfer houses must have appropriate risk management systems in place to determine if the client or beneficial owner is a politically exposed person. As soon as the client is identified as a politically exposed person, it is necessary to:

a) obtain authorization from senior management before establishing or continuing a business relationship with the client; b) take any appropriate measures to establish the origin of wealth and the origin of funds of clients identified as PEPs; c) ensure enhanced continuous monitoring of the business relationship.

4. Enhanced Due Diligence Measures

Money transfer houses must apply, based on their risk assessment, enhanced due diligence measures in situations that, by their nature, may present a high risk of money laundering or terrorist financing and, at the very least, in the following cases (non-exhaustive list):

a) the beneficial owner is a politically exposed person residing abroad; b) operations carried out with natural or legal persons from countries that do not apply or insufficiently apply international standards in the fight against money laundering and terrorist financing.

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Furthermore, as prescribed by Article 28 of the Decree of April 30, 2023, particular attention must be paid to operations originating from countries that do not apply or insufficiently apply international standards in the fight against money laundering and terrorist financing. Money transfer houses must apply enhanced due diligence measures to them, proportional to the risks.

5. New Technologies

Money transfer houses must identify and assess money laundering risks that may result from: (a) the development of new products and new business practices, including new distribution mechanisms; (b) the use of new or developing technologies in connection with new products or existing products. This risk assessment should take place before the launch of new products or new business practices or before the use of new or developing technologies. Money transfer houses must take appropriate measures to manage these risks.

6. Document Retention

Money transfer houses are required to retain for a period of at least five (5) years, after the cessation of relations with the client, all documentation related to customer identity, information collected on ordering parties and beneficiaries during international and national transfers, account books, and business correspondence. Similarly, documents and records related to operations carried out by clients must be kept in the institution's archives for at least five (5) years after the execution of the transaction.

To this end, a document archiving form for operations must be used for document retention.

This retention of documents, relating to national and/or international transactions carried out, will allow for a rapid response to information requests from competent authorities and to reconstruct individual transactions (including amounts and types of cash involved, if applicable) in order to provide, if necessary, evidence in case of criminal prosecution.

Similarly, a copy of transaction reports and suspicious transaction reports must be kept and archived by the money transfer house.

7. Use of Sub-agents

Money transfer houses are required to ensure that their sub-agents comply with laws and regulations relating to the fight against money laundering and terrorist financing.

They must ensure that sub-agents are able to provide, upon request and without delay, copies of identification data and other documents related to the due diligence obligation.

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8. Prevention Program

Money transfer houses must implement a prevention program that includes the following elements:

1. policies, procedures, and internal controls, including compliance control mechanisms, and appropriate procedures during employee hiring, to ensure that hiring is carried out according to stringent criteria;
2. the centralization of information on customer identity, ordering parties, beneficiaries, beneficial owners, and on suspicious transactions;
3. the designation of a compliance officer and the designation of compliance officers at each branch or agency, if applicable;
4. an assessment of money laundering and terrorist financing risks and a classification of risks based on activities and customer profile;
5. the development of a continuous training program for employees and sub-agents;
6. an internal control mechanism to verify compliance, observance, and the effectiveness of adopted measures;
7. the implementation of an independent compliance control testing mechanism; and
8. the handling of suspicious transactions.

The prevention program must be approved by the board of directors of the money transfer house or by the foreign correspondent if it is an agent representative.

a. Policies, Procedures, and Methods

Money transfer houses are required to develop a prevention program comprising written policies, procedures, and methods that allow for the identification of risk factors and the assessment of money laundering and terrorist financing risks presented by their activities.

Policies, procedures, and methods must be approved by the board of directors and kept up to date. They must be clearly communicated to all executives involved in dealing with clients.

Policies and procedures must cover all reporting obligations, document keeping, document retention, customer identification, control, risk assessment, and mitigation that apply to the money transfer house.

Policies, procedures, and methods must apply to all branches or agencies. Furthermore, money transfer houses acting as agents must ensure that their sub-agents implement their money laundering and terrorist financing prevention program.

Money transfer houses are also required to develop appropriate selection procedures guaranteeing the recruitment of employees according to stringent criteria.

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b. Centralization of Information

Money transfer houses must equip themselves with an information system allowing for the centralization of data.

c. Designation of a Compliance Officer

Any money transfer house must proceed with the nomination of a compliance officer. This officer must be a senior executive of the institution, selected based on their competence, experience, integrity, and professional ethics. They must know the functions and structure of the institution, and be aware of the risks and vulnerabilities related to money laundering and terrorist financing in the sector as well as the trends and typologies that characterize these threats. They must report directly to senior management for all matters related to money laundering and terrorist financing.

The compliance officer is notably responsible for:

a) ensuring the application of legislation and regulations; b) enforcing internal procedures and methods for fighting money laundering and terrorist financing; c) identifying deficiencies and making appropriate recommendations; d) proposing training programs on a periodic basis; e) ensuring liaison with sub-agents; f) ensuring liaison with the UCREF; g) preparing and transmitting suspicious transaction reports to the UCREF; h) ensuring that transaction reports are completed and transmitted to the UCREF within the required deadlines; i) receiving and responding to information requests from the UCREF and any authority acting in the framework of the fight against money laundering and terrorist financing.

Money transfer houses must designate, in each branch or agency, an executive responsible for enforcing anti-money laundering laws and regulations and ensuring coordination with the compliance officer. In no case does the designation of this executive relieve the compliance officer of their responsibilities under the law.

d. Risk Assessment

The prevention and compliance program must include an assessment of money laundering and terrorist financing risks.

Risk assessment is an analysis of threats and weaknesses in money laundering or terrorist financing presented by the money transfer house's activities, taking into account risk factors such as clients, countries or geographical zones, services, distribution channels, etc. This assessment varies notably according to the size of the

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money transfer house, its geographical location, and the activities carried out. A risk classification must be performed based on the services offered, the distribution channels used, the characteristics of clients, the country or territory of origin or destination of funds.

Risk assessment implies that employees are well-versed in the institution's activities and exercise judgment to assess money laundering and terrorist financing risks. This assessment must not be static and must be modified at least every twelve (12) months.

e. Continuous Training

The prevention program must include a training component. All employees who are in contact with clients, who have knowledge of operations carried out by clients, or who handle cash or funds in any way, or who are responsible for implementing or monitoring the compliance regime, must understand reporting obligations, customer identification, and document keeping.

All sub-agents belonging to a money transfer house's network must also understand reporting obligations, customer identification, and document keeping.

The training program must be documented in writing and kept up to date. The modalities regarding the frequency and method of training should be established. It must indicate, among other things, the categories of participants, the subjects to be covered, and the frequency of training sessions. Each new employee of the money transfer house and new sub-agent must be trained before starting to work with clients. Updates to the program should take place periodically to keep all interested parties informed of legislative and regulatory changes.

f. Internal Control Mechanism

Money transfer houses must exercise constant vigilance and establish an organization and internal procedures designed to ensure compliance with provisions provided by law and allowing operations managers to prevent and identify any attempt at money laundering or terrorist financing. One of the roles of this control is to avoid the use of the financial system for money laundering or terrorist financing purposes and to minimize the risks faced by institutions.

This internal control system must contain, among other things:

a) a control mechanism for internal policies, procedures, and methods for fighting money laundering and terrorist financing; b) a structure guaranteeing the confidentiality of information processing; c) measures for identifying elements at risk related to money laundering and terrorist financing and systems for assessing these risks;

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d) a monitoring system that can guarantee control over risks related to money laundering and terrorist financing; e) a centralized documentation and information system; f) a system of information on initiatives taken in terms of compliance, deficiencies in this area, and corrective measures taken.

g. Independent Testing Mechanism

Periodic independent tests regarding compliance with internal procedures or good risk monitoring, specific verification on the money laundering and terrorist financing aspect, must be carried out by the internal audit of the money transfer house.

Audits can notably apply to the following points:

a) the assessment of the quality of risk management and control for all operations and in all branches; b) interviews with employees in charge of operations and their supervisors to assess their degree of knowledge and respect for the money laundering and terrorist financing procedures adopted by the institution; c) the examination of a sample of document archiving forms and forms for information on doubtful financial transactions; d) a verification of the document keeping system; e) the existence of supporting documents attached or referenced to accounting records; f) periodic reviews of all correspondent banking relationships established with foreign banks to detect high-risk partners; g) the knowledge by collaborators of internal anti-money laundering rules.

The results of any audit must be reported to the board of directors.

h. Handling of Suspicious Transactions

Money transfer houses must develop and implement policies regarding the identification and follow-up of unusual or suspicious transactions. These policies must define what is considered suspicious or unusual, and provide examples in this regard.

The identification of unusual or suspicious transactions can be done by monitoring transactions, information from third parties (newspapers, internet, etc.), and the money transfer house's knowledge of the client's environment.

9. Sanctions

As a result of a deficiency found in the organization of internal procedures for the prevention of money laundering and terrorist financing, in accordance with Article 116 of the Decree of April 30, 2023, and Article 109 of the Law of May 14, 2012, the BRH reserves the right to take all administrative sanctions ranging from a warning to the withdrawal of approval in the most serious cases, without prejudice to those provided for by law.