♦ Detect and prevent Money Laundering.

♦ Maintain identities of its individual and corporate clients, following KYC policy.

♦ Identify suspicious activity.

♦ To maintain and identify the restricted names, as per the instructions of the Central Bank similar to The Office of Foreign Assets Control.

♦ Comply with the rules and regulations provided by the Central Bank of UAE.

♦ Additionally to follow the guidelines provided by the Senior Management of the Company.

Definition of Money Laundering:

Money laundering refers to any transaction aimed at concealing and/or changing the identity

of illegally obtained money, so that it appears to have originated from legitimate sources,where in fact it has not.

Clause (1) Where a person intentionally commits or assists in commission of any of the following acts in respect of the property from any of the offences stated in Clause (2) of this Article, such person shall be considered a perpetrator of the Money Laundering offence:

a. The conversion, transfer or deposit of proceeds, with intent to conceal or disguise the illicit origin of such proceeds.

b. The concealment or disguise of the true nature, source, location,

disposition, movement, rights with respect to, or ownership of proceeds.

c. The acquisition, possession or use of such proceeds.

Clause (2) For the purpose of this law, Property shall mean those derived from the following offences:

a. Narcotics and psychotropic substance.

b. Kidnapping, piracy and terrorism.

c. Offences committed in violation of the environmental laws.

d. Illicit dealing in fire-arms and ammunition.

e. Bribery, embezzlement, and damage to the public property.

f. Fraud, breach of trust and related offences.

g. Any other related offences referred to in international conventions to which the state is a party.

The above Definition and Article on Money Laundering are obtained from the Central Bank of the U.A.E. It is extremely imperative for the employees to understand the guidelines. They should keep themselves updated with the regulations. The key element of KYC should be properly followed. The suspicious transactions should be properly noted and advised to the supervisor and the manager. The most important is the internal filtering system, which should be properly seen and applied.

The compliance procedure which has to be followed by Zareen staff for their operations are as follows:

Out going Transfer

Walk-in clients: With regard to the walk-in customer at the counter, who wish to pay cash for transfer/drafts, operations staff who handle client must carefully verify the identity of any

such customer in all case where the value of a transaction exceeds AED (2000) Two Thousand or equivalent in other currencies.

The identification normally includes customer details such as the name and full address of the beneficiary, the physical checking of the customer’s actual identification which includes:

a) Passport Copy

b) UAE Identity Card

c) UAE Labour Card

d) Driving License

e) ID Cards Issued By The Corporate (WELL KNOWN)

All details should be entered into the form no: CB9/2001/1 to be signed by the customer and officer-in-charge of handling the transaction.

Exchange Houses & Corporate Clients:

In case of Corporate Clients or other Exchange houses who wish to do regular business with us, following are the required documents we need for Compliance:

a) Central Bank license (in case of Exchange house)

b) Trade License

c) Passport Copy of the Authorized Signatory

d) Company Profile (in case of Corporate)

The details of the above documents should be maintained separately, such as their renewal date’s etc. after the expiry of the validity of the said documents the renewed one to be taken

from the Exchange house or Corporate Clients. All other subsequent changes in the information provided by the Exchange houses or Corporate should be updated regularly.

If it appears that the transaction is carried-out on behalf of another person, vigilance is required, i.e. the actual remitter details also should be taken along with the details of the person who came to do transaction at the counter:

Inward Remittance

In case of receiving a transfer/draft to be paid in case or in the form of travelers Cheques to Walk-in client or in case the transfer/draft is received though a Money Exchange where its amount is AED (40) thousand or equivalent in other currencies or more, the Central Bank

form No.(CB9/2000/2) should be filled-in and placed in a special file.

In case of suspected money laundering transaction, the identity of the customer must be verified at any point of time and in same way as described above, regardless of the fact whether the concerned amount is (40) thousand or less.

Exchange of Foreign currencies

Customer who seeks to exchange large quantities of low denomination bank notes for those of high denominations bank notes with no obvious reasons. In such case, if amount exchanged is AED (40) thousand or equivalent in other currencies or more, the Central Bank form No.CB9/2000/3 should be filled-in and placed in a file.

Blocked list of Individuals/Organizations

The Central Bank of U.A.E, updates on the blocked and black listed names of Organization / Individuals, have to be followed strictly by the operation staff of Zareen before they execute any transaction. All the blocked names have to be updated in our Software which has option to alert the user by the system administrator or the Software provider THE MANAGEMENT OF ZAREEN EXCHANGE CENTER HAS DECIDED TO STRICTLY IMPLEMENT THE PROCEDURE WHICH REFLECTS THE RULES DEFINED BY THE CENTRAL BANK OF UAE AND THE INTRENAL GUIDELINES. THE STAFF ARE REQUIRED TO STRICTLY UNDERSTAND AND FOLLOW THOSE TO CONTROL AND MONITOR THE POSSIBLE MONEY LAUNDERING EFFORTS. THE PROPER IMPLEMENTATION OF THESE RULES WILL HELP IMPROVE THE IMAGE OF THE

COMPANY AND WILL BOOST OUR RELATIONSHIP WITH THE REGULATORS AND THE CORRESPONDENT BANKS. THIS IS FURTHER RE AFFIRMED :

ANTI MONEY LAUNDERING – REGULATIONS

Following is the key principle to avoid any Money Laundering transaction/attempt or incident. The payment officer should follow this very closely.

♦ Know your customers and confirm the identity of the customers through a reliable source.

♦ The institution should appoint a Money Laundering Monitoring and reporting officer. In

our institution, a senior officer is dedicated for this sensitive job.

♦ The institution will continue to train the junior officers to understand and practice to

prevent any such activity. It would be the responsibility of the

Money Laundering Monitor to train the officers. In our case, the person would be responsible further for compliance and due diligence.

♦ The institution will continue to follow the rules of the Central Bank by filling the required form. Moreover, as the corporate profiles are must to be maintained, we would control our business from any such suspicious activity.

♦ As it is mandatory, we would continue to hold the record for the next five years.

♦ The information of any remittance must be readily available so that it can be supplied to the correspondent bank for further information / investigation.

THE DETAILS OF THESE IMPORTANT POINTS SHOULD BE NOTED BY ALL CONCERN EMPLOYEES:

KNOW YOUR CUSTOMER

KYC is a much broader definition to know our customers. Our walk in customers should be properly checked and the required form for both the products as per the rules should be filled. In case of our corporate and institutional customers (a large portion of our business would come from this source) should be properly known and the key customers profile should be maintained by all the BRANCHES.

It is of utmost importance to understand that the people those who would like to launder the money normally would avoid their true identities. It is highly suspicious if the customer does not want to give his identification as per the rules provided by the Central bank and the management. The payment services officer would bring such a situation in the knowledge of Branch Manager. Moreover, such a transaction should not be processed at all. However, if the customer does provide an identity which is not in line with the required identification mark, the decision can be taken by the Manager. In an extreme case a disclosure report can be considered to be given to the Central Bank.

TRANSACTION DETAILS

A. The customers’ full name should be entered into the forms. However, at least two names of the identification document should be recorded. No nick name and single name would be acceptable. The payment service officer should take care of this business transaction initiation.

B. The Central Bank forms should be properly filled in with required details. For example, name of sender, address, telephone number and purpose of remittance.

C. The forms should be properly signed by the customer. In case the payment is being made

on behalf of institutional customer, the proper procedure needs to be followed, as given by the management. In this case the known institutional customer would provide all the

information. The relevant document from the institutional customer should have been obtained earlier.

D. The required forms as given by the Central Bank should be obtained according to the

amount of transaction/transfer. In the case that transaction is over DHS 40K inward or outward, proper identification is must.

The customer should further be investigated on the following occasions:

♦ If the transaction is DHS 40K or above, and the necessary information is not being provided.

♦ If the transaction is apparently linked to another transaction conducted together, and the money is being transferred to the same beneficiary with the same details. The genuineness of the transaction needs to be ascertained.

♦ Apparently the transaction has been split into couple of transactions. A large sum apparently has been broken into smaller amounts. This needs to be clarified from the customer. In case the customer does not provide satisfactory answer the transaction can be refused at an early stage.

♦ In case the officer becomes suspicious on the transaction, it needs to be further investigated irrespective of the amount. The payment officer must involve the immediate supervisor or the manager to ascertain the correctness of the business.

DOCUMENTS TO BE USED FOR IDENTIFICATION:

♦ PASSPORT COPY.

♦ UAE IDENTITY CARD

♦ UAE LABOUR CARD

♦ DRIVING LICENSE

♦ ID CARDS ISSUED BY THE CORPORATES (WELL KNOWN)

♦ In case the transaction is of commercial nature, the COMPANY’S TRADE LICENSE, COPY OF INVOICE should be obtained. However, in the case of corporate known customers, a file can be maintained to obtain such regular documents for one time. It is also important to check the expiry date of such trade / commercial license.

♦ Corporate Files: regular customers profile should be maintained. In the case of institutional customers, (exchange houses) the Central Bank License, Profile made by Manager, Account Opening form (overseas customers) and other relevant document should be obtained)

CREDENTIALS OF THE IDENTITY DOCUMENT

The Officer executing the transaction should note the following while assessing thecustomers. In case if there is any ambiguity the Branch Manager or Supervisor should be involved.

♦ Check the photograph for the likeness.

♦ Assess the age of the customer with the date of birth given in the document. Name should be properly checked. As mentioned two names should be entered in the remittance form.

♦ Customer signature should be verified.

♦ Again, if the customer is well known, the job should be done in a very professional manner to avoid any dispute. The job should still be done amicably.

♦ In case the institutional customer is involved in the transaction, proper documents (as

mentioned earlier) would be sufficient to support the transaction.

♦ In the case if the payment is made on behalf of an institutional customer (local exchange house), the person’s document should be obtained.

EXAMINING THE CUSTOMER

In case the customer is new, the profile of the customer should be determined. Itwould include:

♦ The business venture.
♦ The transaction amount should match with the business activity.
♦ Any particular reason of transacting or establishing business with us without provoking the customer.
♦ It is important to determine the level of activity which can take place. In the case of huge remittances which are expected to be made, the nature of business, the project undertaken and amount involved must be checked. In this case a senior officer should be involved.
♦ It would be realistic to genuinely determine the origin and the destination of the funds,particularly if the remittances are going to be regular, irrespective of the amounts size.
♦ The customer introduction from another source should be made. In the case of a wellknown entity already doing business, the relationship officer/marketing officer should get involved.
♦ As mentioned, in the case of Limited / Partnership concerns the meeting with the top people must be made. The person who would bring the documents should also be known.
♦ Details of the running business should be known including registered address and principal trading address, if different. All other relevant information should be covered, as mentioned earlier. It would be the responsibility of the branch managers to maintain such records at one place. Referred as CUSTOMER INFORMATION / PROFILES.

INDUCTION OF A SENIOR OFFICER AS COMPLIANCE AND MONEY LAUNDERINGREPORTING OFFICER.

Company is required towards appointing a senior officer for compliance and Money

Laundering reporting purpose. The person in our organization would report directly to the CEO, and will also perform the duties as internal reporter. A senior seasoned person, who would also be involved in the training of the youngsters/payment officers. The Branch managers should stay in touch with the compliance and Money Laundering reporting officer for day to day operation.

The major responsibilities would include:

♦ The person should receive the suspicious transactions report from the branches. The

supervisor/branch manager should inform him of any such transaction. Moreover, he would have a direct access to the system to further analyze and judge the branch activities.

♦ The reporting officer will make his opinion in case the transaction needs to be reported to the Central Bank. This is a crucial decision and the officer should be satisfied from all angles.To make such a decision concrete and substantial, he may involve the senior management.

♦ The officer would keep training the various functional officers. He would be writing

guidelines and procedures and will keep updating the records in this regard.

TRAINING

The company would train the senior officers and direct officers involved in the payment

services activities. Such training would include.

a) Law related to such activities, as described by the Central Bank.

b) Policies and Procedures defined by the Senior Management.

c) Procedure and Emphasis on the KYC and its related aspects.

d)Understanding of the suspicious transactions.

e) Develop coordination among the staff to understand the basics of this complex issue.

f) Reporting procedures.

g) Recording of such transactions.

h) Handling any awkward situation. Customers to remain calm and at the same time wrong doings should be properly monitored.

i) The sensitivity of the business linked with the correspondent banks. Officers should

understand the gravity attached with the Paying Banks.

j) Training should be conducted once in Six Months. This would remain the responsibility of the Senior Compliance/Reporting officer to conduct this program together with the other senior officials.

IDENTIFYING A SUSPICIOUS TRANSACTION

An Analytical Approach

It is of utmost importance that the staff should be in a position to detect a suspicioustransaction. This is a critical aspect since extra ordinary probing may lead to frustration of the customer. This situation can even lead of disturbing the business position. Therefore, the Branch Managers should see it very vigilantly that only true cases should be handled strongly.

In order to achieve the above objective, the Branch Managers should ensure the following:

♦ All the policies and procedures related to ML and Compliance should be readily available. The Staff should aware to refer to them whenever there is any need.

♦ In case if there is any suspicious transaction, it should be investigated properly and timely, and the STR should be prepared.

♦ The staff should remain in touch with the Reporting Officer, and in case of help, he should be immediately available.

IT IS ALSO VERY CRUCIAL TO DETERMINE THE SUSPICIOUS TRANSACTION. AS

MENTIONED EARLIER, A SUSPICIOUS TRANSACTION SHOULD BE MORE THAN A

GUESS, AS THE EXTRA ORDINARY INVESTIGATION CAN LEAD TO

MISUNDERSTANDING AND DIFFICULTIES.

A suspicious transaction / activity are when the circumstances confirm that the individual is involved in the laundering. This would normally evident from the fact that the activity is

deviating from the normal business activity. Thus it becomes even more imperative for us to understand the normal business of our regular customers.

In the case of walk in customers, the large amount transactions have to be handled with

different approach. The staffs are regularly being advised on this.

Another important hint to determine the suspicion is the background information of the

person engaged in the transaction. In case of walk in customers or slightly known customers, their suspicious background would lead to further clarification and investigation. However, it would not lead to straight conclusion that the gentleman would be involved in the activity, and therefore careful observation is the key. However, people having any suspected background would require to be thoroughly examined.

The KEY INDICATIONS to such activity may be as follows.

♦ Lack of information about the business.

♦ Proper identification is not available.

♦ Walk in customers would like to do large amounts transactions.

♦ Customers would like to split the transactions into smaller numbers.

♦ Many transactions are going to the same beneficiary, particularly of a larger amount split into smaller numbers.

♦ A very important ELEMENT is the transaction size which does not match with the

PROFILE, BACKGROUND and FINANCIAL STRENGHT of the customer. This is extremely important and also leads to the fact that we should know our customers well.

♦ Although not essential, but frequent transactions being done by the customer in a short span, where the beneficiary is the same, or other such factors which are unclear.

♦ In the case of COMMERCIAL REMITTANCE, some of the evidences are incomplete, forexample INVOICE is not being provided, or the Commercial License is not available. In the case of commercial remittances, the remittance officer should become more vigilant.

♦ The exchange business is slightly delicate, and the customers have relationship for Payment services. Therefore, it is important to understand the business trend and pattern. It is also important to see if the business pattern has not been changed frequently. Once again from the business strategy point of view, it could be OK, but we need to remain satisfied. An example could be of COLLECTION OF CHECKS, which should not be the part of our direct business.

ACTION PLAN

♦ In case the officer concern is doubtful about the transaction and the customer, and feels that the transactions could be out of normal business, the following points should be taken into consideration.

♦ The immediate supervisor should be involved into the dealing with the customer, and the transaction should be avoided.

♦ The business handling should remain normal so that the customer should not feel of any change in the attitude.

♦ The details of the transactions should be noted and the STR should be prepared.

♦ Once the STR is completed it should be sent to the Compliance and ML reporting officer. However, it should be checked and noted that this is not a guess job, and the supervisor and officer know the transaction clearly. It is further suggested that BRANCH MANAGER should also be involved once the matter is fully determined as suspicious.

♦ THIS IS FOR THE INFORMATION OF ALL CONCERNED OFFICERS /SUPERVISOR/MANAGERS, THAT IN CASE THE FINANCIAL INSTITUTION FAILS TO REPORT AGENIUNLY SUPICIOUS TRANSACTION, WHICH IS BEING SURFACED LATER, THATINSTITUTION IS SUBJECT TO PENALIZATION, AS PER THE RULES ANDREGULATIONS OF THE CENTRAL BANK.

Therefore, it is not only our professional responsibility to highlight such a transaction, but it becomes regulatory issue to bring such an activity into limelight.

UAE LAW REGARDING MONEY LAUNDERING The UAE Government takes this activity as highly criminal and therefore it is not only risky for the institution but it carries high risk for the individuals if they do not follow the proper rules, and remain vigilant in performing their duties.
Out of the major articles, ARTICLE 13 says ; Up to 7 years imprisonment and a fine of

maximum DHS 300,000 and not less than 30,000, where the following actions are confirmed to be undertaken by an individual intentionally.

♦ The conversion, transfer or depositing the proceeds with the intention to deliberatelychange the status of the original funds.

♦ The deliberate concealment of the true nature, source and ownership of the proceeds.

♦ The control, acquisition and the use of such funds, in any activity and more so in anyunlawful activity.

ARTICLE 14 SAYS

♦ Fine not less than DHS 300,000 and not more than DHS 1 Million, additional to Confiscate the property or the proceeds of the transaction or equivalent value.

♦ In case any FINANCIAL INSTITUTION is engaged in any such activity and it used itsname and account intentionally to launder the money.

ARTICLE 15 SAYS

♦ In case of any employee of the institution is being involved in a deliberate attempt to do the activity directly related with the ML act, the said employee would be fined up to DHS 100,000 and not less than DHS 10,000. The employee can also be charged for imprisonment or both, depending on the intensity of the incident.

ARTICLE 16 SAYS

♦ The employee who is involved in tipping off (avoiding and advising the suspicious person of the potential incident) can be fined up to DHS 50,000 and not less than DHS 5,000. The person can be punished through imprisonment up to one year and / or with fine.

IMPORTANCE OF RECORD KEEPING

As per the rules of the Central Bank of UAE, we need to keep the record of all our

transactions for the next five years. It is understandable that all our transactions will be above board, and there should not be any necessity to go back to our record, but we need to comply with the rules.

We need to do the following

♦ Keep the vouchers and the support document for five years.

♦ The branch (s) can keep the record off site, but ensure that the copies are available when required.

♦ The company should also keep the record of the Account Opening forms, even if theaccounts are closed.

♦ The other important correspondence should also be maintained so that in case of urgency the details can be obtained.

♦ The Central Bank correspondence, Reports and other related information are of paramount importance and should be kept separate at a place accessible to authorized officers.

RESPONSIBILITY OF ZAREEN EXCHANGE CENTER TOWARDS T HE FINANCIAL SYSTEM.

Zareen Exchange Center has been granted license to conduct the business of Currency Exchange and Remittances. It needs to follow the given rules of the Central Bank of the UAE.

It is our utmost responsibility that we should ensure that all proper guidelines, procedures and systems are well in place. We should act in a manner which should reflect the high professional standard.

KINDLY STRICTLY NOTE THE ABOVE GUIDLEINES WHICH ARE MEANT TO AVOID
ANY UNDUE ACT OF MONEY LAUNDERING AND TO PROPERLY ENFORCE THESE RULES. MANAGEMENT ZAREEN EXCHANGE