Resolution No. JPRF-V-2023-068: Reforming the Standard to Prevent Money Laundering and Terrorist Financing in Securities Market Participants

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador | THE FINANCIAL POLICY AND REGULATION BOARD

CONSIDERING:

That Article 82 of the Constitution of the Republic of Ecuador establishes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities;

That Article 226 of the Fundamental Law determines that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law;

That Article 13 of the Organic Monetary and Financial Code, Book I, creates the Financial Policy and Regulation Board, part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation;

That numbers 2 and 3 of Article 14 of the Organic Monetary and Financial Code, Book I, state that the Financial Policy and Regulation Board will issue regulations for the national financial system, securities, insurance, and prepaid comprehensive health care services;

That Organic Monetary and Financial Code, Book I, Article 14.1, number 15, letter a), determines as functions of the Financial Policy and Regulation Board, to establish within the framework of its competencies any measure that contributes to preventing and seeking to eradicate fraudulent practices, including money laundering, the financing of crimes such as terrorism, considering current and applicable international standards;

That the article numbered incorporated below Article 6 of the Organic Monetary and Financial Code regarding regulatory, normative, or control capacity, shall seek to adopt as a reference framework the international technical standards related to the scope of their competence for the issuance of regulations and the exercise of their functions, strictly adhering to the normative hierarchy established in the Constitution of the Republic of Ecuador;

That the Seventh General Provision of the aforementioned norm in the current legislation where mention is made of the "Monetary and Financial Policy and Regulation Board," replace it with "Financial Policy and Regulation Board."

That the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes establishes in Article 5 the following:

financial and insurance, will be obligated subjects to report to the Financial and Economic Analysis Unit (UAFE) through the delivery of the reports provided for in this law, according to the regulation issued in each case, among others: foreign subsidiaries under the control of institutions of the Ecuadorian financial system; stock exchanges and securities houses; fund administrators and trusts; cooperatives, foundations, and non-governmental organizations; natural and legal persons who habitually engage in the commercialization of vehicles, boats, ships, and aircraft; companies dedicated to national or international money or value transfer services, national and international transport of money, parcels, or postal packages, mail, and parallel mail, including their operators, agents, and agencies; travel agencies and tour operators; natural and legal persons who habitually engage in real estate investment and intermediation and construction; racetracks; pawnshops and pledge houses; negotiators of jewelry, metals, and precious stones; dealers in antiques and works of art; notaries; artistic promoters and raffle organizers; property registrars

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

That, on April 3, 2023, Supplement No. 282 of the Official Register published the Organic Reformatory Law to the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes, which replaces Article 5 of the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes, adding new obligated subjects to report to the Financial and Economic Analysis Unit (UAFE), and incorporates in the article numbered below Article 5, actors who must report operations to the aforementioned body;

That the Republic of Ecuador is a member of the Financial Action Task Force (FATF), being a commitment of the Ecuadorian State to have a system to prevent money laundering and terrorist financing that meets international standards, particularly those established in the forty (40) Recommendations made by the FATF, among which stands out the presence of an adequate legal and institutional framework, and the issuance of supervisory regulations that establish preventive due diligence controls by economic sectors;

That the penultimate paragraph of Article 14.1 of the Organic Monetary and Financial Code, Book I, establishes that the Superintendent of Companies, Securities, and Insurance may propose regulation projects for consideration by the Financial Policy and Regulation Board, with the backing of the respective technical reports;

That the Superintendent of Companies, Securities, and Insurance through Office No. SCVS-INMV-2023-00004172-O dated January 20, 2023, sent to the Financial Policy and Regulation Board Report No. SCVS.INMV.DNFCDN.2022.22.134 of December 30, 2022 and its annex, that Title Financial, Securities, and Insurance;

That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0043-M of June 6, 2023, sends to the President of the Board the following reports, which conclude:

a) Technical Report No. JPRF-CTVS-2023-001
Once the reform proposals presented by the Stock Exchanges, Securities Houses, Fund Administrators, and the Superintendent of Companies, Securities, and Insurance have been analyzed, as well as considering international best practices, the operational impact of the application of the standard indicated by the participants in the securities sector, the review of comparative international regulation, and the criterion of the control body, it is determined necessary Assets and the Financing of Monetary, Financial, Securities, and Insurance Resolutions, in order to adapt them to the development and operation of the securities sector, and seek improvements in their implementation. The proposed reforms are as follows:
which the obligated subjects lose that condition.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

Adjust the composition of the Compliance Committee, based on the organizational structure of the obligated subjects.
Fix the domicile of the Compliance Officer.
Incorporate new grounds for suspension or cancellation of the Registration for Compliance Officers.
Establish the confidentiality of reports prepared by the Comisario, internal and external audit.
Establish independence in the functions of the Compliance Officer, in order to avoid conflict of interest.
Homologate with the insurance sector in the areas: - Profile of the Substitute Compliance Officer, - Signing of information forms, - Periodicity of reports by the Comisario or internal auditor and external auditor. b) Legal Report No. JPRF-CJF-2023-0016

1. The Financial Policy and Regulation Board is competent to issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the securities system, in accordance with what is provided in number 2 of Article 14 of the Organic Monetary and Financial Code, Book I.
2. The Financial Policy and Regulation Board, according to Article 14.1, number 15, letter a) of the aforementioned norm, is empowered to establish any measure that contributes to preventing and seeking to eradicate fraudulent and prohibited practices, including money laundering and the financing of crimes such as terrorism, considering current and applicable international standards.
3. The Financial Policy and Regulation Board is the governing body in matters of money laundering prevention and crime financing, and will issue policies, regulations, and supervision in the securities sector, as determined by Article 9 of the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes.
4. The Financial Policy and Regulation Board, in accordance with the article numbered below Article 6 of the Organic Monetary and Financial Code, Book 1, will seek to integrate as a reference framework international standards for the issuance of regulations and exercise of its functions. In this regard, it is important to indicate that the Republic of Ecuador has been a member of the Financial Action Task Force of Latin America (GAFILAT) since December 8, 2000, and must seek to adhere to the 40 Recommendations of the Financial Action Task Force in matters of prevention, detection, and eradication of the crime of money laundering.
5. The Superintendent of Companies, Securities, and Insurance is empowered to send regulation projects to the Financial Policy and Regulation Board, according to the penultimate paragraph of Article 14.1 of the Organic Monetary and Financial Code, Book I, for which reason, it corresponds to this Board to know and resolve on the proposal of
   Terrorism and Other Crimes in ;

That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on June 14, 2023, and carried out via video conference on June 16, 2023, reviewed the Memorandum No. JPRF-ST-2023-0043-M of June 6, 2023, issued by the Technical Secretary of the Board, as well as Technical Report No. JPRF-CTVS-2023-001 of June 5, 2023, and Legal Report No. JPRF-CJF-2023-0016 of June 6, 2023, issued

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

by the Technical Coordination of Policy and Regulation of the Securities and Insurance System, and the Legal Coordination of Financial Policy and Standards of the aforementioned Board, respectively, and the corresponding resolution project;

That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on June 14, 2023, and carried out via video conference on June 16, 2023, reviewed and approved the following Resolution; and,

In exercise of its functions,

RESOLVES:

ARTICLE FIRST.- THE FINANCING OF TERRORISM AND OTHER CRIMES IN THE PARTICIPANTS OF THE
the following:
When legal persons have finalized the merger, spin-off, or concluded the dissolution and liquidation process with the respective registration in the Commercial Registry and annotation

ARTICLE SECOND.- OBLIGATED SUBJECT TO
REPORT: Natural persons, legal persons, and other legal figures, who engage in the activities established in Article 5 of the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes, and especially, stock exchanges, securities houses, fund administrators and trusts, issuers, and depositories MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER CRIMES IN THE PARTICIPANTS OF THE of Companies, Securities, and Insurance, by the following:
the activities established in Article 5 of the Organic Law for the Prevention, Detection, and Eradication of the Crime of Money Laundering and the Financing of Crimes; especially, stock exchanges; securities houses; fund administrators and trusts; depositories centralized compensation and settlement of securities; and, the other institutions of the Securities Market that are incorporated by the Financial Analysis Unit

ARTICLE THIRD.- Substitute the text of letters d) and e) and incorporate a letter f) in the
SYSTEM FOR THE PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, TO PREVENT MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND Monetary, Financial, Securities, and Insurance Resolutions, according to the following text:

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

A commercial area official designated by the legal representative; e) An official from the legal area, if it has one; and, f)

ARTICLE FOURTH.- Substitute the text of letter f) and incorporate a letter g) in number 5.
OF PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, FINANCING OF TO PREVENT MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND Monetary, Financial, Securities, and Insurance Resolutions, according to the following:
No legal impediment to exercise the position; and, g) The compliance officer must be domiciled and reside in the city where the

ARTICLE FIFTH.- The compliance officer, without prejudice to their obligation to maintain secrecy and reserve regarding reserved or privileged information to which they have access due to their functions, must sign a confidentiality agreement with the obligated subject regarding such information.
PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, FINANCING THE MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER CRIMES IN Monetary, Financial, Securities, and Insurance Resolutions, with the following text:
l for the substitute compliance officer must be equal to the profile required for the holder, except that their experience must be at least two (2) years; and, may simultaneously develop another function in the obligated subjects, provided that it does not correspond to the areas of subscription of stock and over-the-counter orders; stock operators, stock settlements, structuring of fiduciary business contracts, account officer or fiduciary business officer, internal audit, compensation and settlement of securities, or others in which it can be determined that there would be incompatibility of functions in relation to the obligations related to the role of compliance officer; they will also not review activities carried out by their spouse, or their relatives

ARTICLE SIXTH.- The compliance officer must be independent of the other areas of the obligated subject and must depend laborally on the company; they will be endowed with sufficient powers and resources to adequately fulfill their functions.
of the Se
MONEY LAUNDERING RISKS, FINANCING OF TERRORISM AND OTHER CRIMES FINANCING OF TERRORISM AND OTHER CRIMES IN THE PARTICIPANTS OF THE the following text:

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

will not perform review activities in institutions where they had previously rendered their services within the last year in areas of subscription of stock and over-the-counter orders; stock operators, stock settlements, structuring of fiduciary business contracts, account officer or fiduciary business officer, internal audit, compensation and settlement of securities, or others in which it can be determined that there is incompatibility of functions in relation to the obligations related to the role of compliance officer; nor will they review activities carried out by their spouse, by their relatives included within the fourth degree of consanguinity or second of affinity, nor when there is

ARTICLE SEVENTH.- Add a paragraph following that which says:
may not contract with third parties the execution of the functions assigned to the compliance officer, who cannot delegate the exercise of their position nor occupy another position in the OF ASSETS, FINANCING OF TERRORISM AND OTHER CRIMES (SPARLAF Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following text:

ARTICLE EIGHTH.- Substitute the text of the paragraph that says:
in physical form or through electronic signature. The documents that certify the information in number 14. on the PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, FINANCING THE MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER CRIMES IN Monetary, Financial, Securities, and Insurance Resolutions, by the following:
medium recognized by law. The documents that certify the collected information must be archived in physical or

ARTICLE NINTH.- semi-annual directed to the Board of Directors or the competent statutory administrative body, in which it will detail
the conclusions obtained in the compliance evaluation process of the SPARLAFTD; however, in case there are detected extraordinary situations that warrant reporting, must info PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, FINANCING THE MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER CRIMES IN Monetary, Financial, Securities, and Insurance Resolutions, by the following:

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

which will detail the conclusions obtained in the compliance evaluation process of the SPARLAFTD; however, in case there are detected extraordinary situations that

ARTICLE TENTH.- The Comisario or the
internal auditor and the external auditor are obligated to keep reserve and confidentiality of the information that comes to their knowledge in the exercise of their functions and expressly are of the number PREVENTION AND MANAGEMENT OF MONEY LAUNDERING RISKS, FINANCING THE MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER CRIMES IN Monetary, Financial, Securities, and Insurance Resolutions, the following paragraph:
this standard and that are sent to the Superintendence, as well as those issued by the external auditor are of a reserved and confidential nature, so they cannot reveal information to

ARTICLE ELEVENTH.- Add below letter f) of number 1. on the
TO PREVENT MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND OTHER tions Monetary, Financial, Securities, and Insurance Resolutions, the following text:
When irregularities or non-compliance with the implementation of this standard are proven, or if they are immersed in any of the prohibitions or do not meet the profile for the exercise of their functions. h) Reveal or share information about their clients or the company or third parties. If the obligated subject evidences what is exposed in letters g) and/or h), it may notify the control body with the case justifications; and, if within the controls the institution determines it, will proceed to apply the corresponding sanction and notify the company so that it proceeds

GENERAL PROVISIONS
FIRST.- Within a term of two (2) days from the issuance of this Resolution, the Superintendent of Companies, Securities, and Insurance will publish on its website and inform the controlled entities about its content.

SECOND.- The obligated subjects will send to the Superintendent of Companies, Securities, and Insurance the schedule for the implementation and application of the provisions contained in the present Standard, within a term of thirty (30) days after its promulgation in the Official Register. Once this term has expired, the obligated subjects will implement the provisions of this Standard within a period of three (3) months.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Government Financial Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |

FINAL PROVISION.- This Resolution will enter into force from its publication in the Official Register; without prejudice to this, it will be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.

NOTIFY.- Given in the Metropolitan District of Quito, on June 16, 2023.
THE PRESIDENT,
Mgs. María Paulina Vela Zambrano

The aforementioned Resolution was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on June 16 2023.- I CERTIFY.
TECHNICAL SECRETARY
Dr. Nelly Arias Zavala