Glossary Anti-Money Laundering Guide Flech pay
1. OBJECTIVE
2. SCOPE
3. CONCEPTS
3.1-Placement
3.2-Concealment
3.3-Integration
3.4-Financing of terrorism
3.5-Corruption
3.6- Politically exposed person (PEP)
3.7-Final beneficiary
4. SIGNS OF MONEY LAUNDERING AND TERRORISM FINANCING
5. RISK-BASED APPROACH
5.1- “Know Your Customer” Process
5.2- “Know Your Employee” Process
5.3- “Know your Supplier/Outsourced Service Provider” Process
5.4- “Meet Your Partner” Process
5.5- Assessment of New Products and Services
5.6- Transaction Monitoring
5.7- Reporting Suspicious Transactions to Regulatory Bodies
5.8- Maintenance of Information and Records
6. GENERAL RHETORY
7. COMPLIANCE
7.1- Legal Rhetoric, Risks and Regulatory
7.2- Internal Audit
7.3- Registration Area
7.4- Human Resources
7.5- Information Security
7.6- Training
8. REFERENCES

1.This Policy for the Prevention of Money Laundering and Combating the Financing of Terrorism aims to define the guidelines for Flech Pay to consolidate payments, through the Compliance area and all its administrators, principles and rules that aim to prevent the institution of money laundering and terrorist financing practices, in line with current legislation and regulations and combined with best market practices.

2. ScopeThe Policy must be respected, followed and disseminated in all sectors of the company, not limited, in the exercise of its activities, to its partners, directors, administrators, advisors, managers, employees, interns, agents, suppliers, representatives, commercial partners and business, apprentices, outsourced service providers or anyone, whether legal or natural person, those who are acting on behalf of or in conjunction with Flech pay.

3.Concepts
MONEY LAUNDERING It is broadly interpreted as the insertion of an illicitly obtained financial asset into the products or services of payment arrangements in order to give it the appearance of an asset arising from a legal activity, as well as enabling the financing of illicit activities, including terrorism, through financial systems. Generally the money laundering process consists of three steps:

3.1-PLACEMENT, Introduction of money or other physical values from illicit activities into financial and non-financial institutions. Flech pay Money Laundering Prevention Guide.

3.2-HIDEDSeparate the financial asset resulting from illicit activities from its origin, masking the origin of the resources. This is done to make it difficult to track audits, analyses, monitoring and provide anonymity.

3.3-IntegrationPut the “laundered” resources back into the economy in such a way that they re-enter the financial system as resources of apparently lawful origin. Flech pays strictly to prevent its products from being used to practice money laundering.

3.4-TERRORISM FINANCINGIt consists of gathering funds and/or capital to carry out terrorist activities. These funds may come from donations or gains from various illicit activities, such as drug trafficking, prostitution, organized crime, smuggling, extortion, kidnapping, fraud, etc.

3.5-CORRUPTIONIt consists of suggesting, offering, submitting, requesting, accepting or receiving undue advantages, directly or indirectly, from people in the public or private sector or third sector organizations. Flech pay Money Laundering Prevention Guide.

3.6-POLITICALLY EXPOSED PERSON(PEP) Politically exposed people are considered to be public agents who perform or have performed in the last 5 (five) years, in Brazil or in foreign countries, territories and dependencies, positions, jobs or relevant public functions, as well as their representatives, family members and other people in your close relationship. A natural person who has a joint shareholding in a legal entity governed by private law with a politically exposed person is also considered a PEP, as they have a close relationship, for example.

3.7-END BENEFICIARYIt is the natural person who, ultimately, directly or indirectly, owns, controls or significantly influences the business structure. The representative, including the attorney and agent, who exercises de facto command over the activities of the legal entity is also considered the final beneficiary. Legal entities constituted in the form of a publicly-held company or non-profit entity and cooperatives are excluded from the provisions, for which the information collected must include information from natural persons authorized to represent them, as well as controllers, administrators and directors, if there is. Flech pay Money Laundering Prevention Guide.

4. Indications of Money Laundering and Terrorist FinancingIn accordance with what is stipulated in the regulatory framework present in local laws and regulations in references in this policy, it is of utmost importance that partners, directors, administrators, advisors, managers, employees, interns, agents, suppliers, representatives, commercial and business partners , apprentices and outsourced service providers are aware of operations that constitute signs of money laundering and terrorist financing.

The list of signs of Money Laundering and Terrorist Financing is exemplary and below we highlight some: Values, proposals and/or operations incompatible with the socioeconomic profile, financial capacity or professional occupation of the client, beneficiary, third parties, holder and other related parties;

Movement of amounts incompatible with the monthly revenue of legal entities; Significant fluctuation in relation to the volume and/or frequency of business of any of the parties involved;

Developments that include characteristics that could constitute a device to circumvent the identification of the employees involved and/or their respective beneficiaries, as well as identification of the origin, destination, those responsible or the final recipients of the resources;

Movement of high-value resources, in a persistent manner, on behalf of third parties; Sudden and objectively unjustified change in relation to the operational modalities usually used by the person(s) involved;

Operations carried out with the purpose of generating loss or gain for which there is, objectively, no economic basis; Flech pay Money Laundering Prevention Guide Participation of natural persons residing or entities incorporated in countries that do not apply or insufficiently apply the recommendations of the Financial Action Group against Money Laundering and Terrorist Financing – FATF; Private transfers of resources without apparent motivation; Transfers in which it is not possible to identify the final beneficiary;

Operations whose degree of complexity and risk appear to be incompatible with the technical qualifications of the client or their representative; Resistance in providing the necessary information at the beginning of a relationship or updating registration; Providing false information; Representation of different legal entities or organizations by the same attorneys or legal representatives, without reasonable justification for this occurrence; Existence of a payment account of non-profit organizations whose balances or financial movements do not present an economic or legal basis or in which there appears to be no link between the organization’s declared activity and the other parties involved in the transactions; Unusual movement of financial resources to/from any type of PEP and/or related PEP;

Request for non-compliance or action to induce employees of the institution not to follow regulatory or formal procedures for carrying out an operation; Declare several bank accounts and/or change them regularly; Authorize an attorney who has no apparent relationship; Flech pay Money Laundering Prevention Guide.

Fragmentation of cash withdrawals, with the aim of circumventing regulatory reporting limits; Atypical resource operations by natural or legal entities related to bidding; Atypical resource operations by natural or legal entities related to sponsorship, advertising, marketing, consultancy, advice and training arising from contracts with the public sector;

Operations involving political parties, electoral campaigns and/or other unfounded/unjustified parties involved; Operations involving people or entities related to terrorist activities listed by the United Nations Security Council (UNSC), US Office of Foreign Assets Control (OFAC) and the European Union; Operations with signs of terrorist financing;

Atypical, incompatible and/or apparently unfounded operations in municipalities located in border regions. Once identified, cases of suspected Money Laundering and Terrorist Financing must be reported to the Compliance Department, which will be responsible for respecting the confidentiality of the report and providing due investigation of the facts, communicating to the competent authorities, when relevant. Flech pay Money Laundering Prevention Guide.

5.Risk-Based ApproachIn order to identify and measure the risk of using our products and services in the practice of money laundering and terrorist financing, we use the ABR methodology (risk-based approach) in order to identify, prevent and mitigate the risks identified in the process acceptance, relationship maintenance and monitoring.

For this classification we consider the variables: Customer, location, business model, role played (customers, suppliers, employees and partners), product and transaction. This methodology allows us to categorize risk so that we can manage and apply greater efforts in higher risk situations and create more simplified controls and/or monitoring in lower risk situations. The risk assessment is reviewed periodically and/or when there are changes to the risk profiles.

5.1. “Know Your Customer” ProcessThis is a set of actions carried out by the Registration areas of the Business Units that establish mechanisms to ensure customer identification and qualification, including the capture, verification, updating and storage of registration information, also including specific procedures for identifying final beneficiaries and Politically Exposed Persons, as well as verifying the status of representatives, family members or close collaborators of these people. Flech pay Money Laundering Prevention Guide.

In addition, the use of a database to validate the information received by customers. It is prohibited to initiate or maintain relationships with individuals or entities mentioned on the international sanctions lists of the United Nations (UN), US Office of Foreign Assets Control (OFAC) and the European Union, as well as shell companies.

After the registration procedure, all corporate and private clients and their final beneficiaries, legal representatives and/or management (if or when applicable) are subject to verification against internal and external restrictive lists, in order to identify involvement in illicit activities. Depending on the client’s risk classification, more in-depth due diligence is carried out, and if relevant deficiencies are found, the case is submitted for analysis by a higher authority.

5.2. “Know Your Employee” ProcessThis is a set of rules, procedures and controls that must be adopted to select and monitor employees in relation to their economic-financial situation and suitability, aiming to avoid links with people involved in illegal acts. Flech pay Money Laundering Prevention Guide.
5.3. “Know your Supplier/Outsourced Service Provider” ProcessThis is a set of rules and procedures that must be adopted to identify and accept suppliers and outsourced service providers, preventing the hiring of unreputable companies and/or people or those suspected of involvement in illicit activities.

5.4. “Know Your Partner” ProcessThis is a set of rules, procedures and controls that must be adopted to identify and accept business unit partners, aiming to prevent business from being carried out with unreputable counterparties or those suspected of involvement in illicit activities, as well as ensuring that they have appropriate PLD/CFT procedures, when applicable.

5.5. The Compliance Departmentparticipates in the analysis of new products and services to evaluate in advance, from an AML/CFT perspective, new products, services and/or means of new technologies that are presented with the aim of mitigating regulatory risks and the risks of these products involving and/ or be used to commit money laundering or terrorist financing crimes. Assessment of New Products and Services Anti-Money Laundering Guide Flech pay.

5.6. Transaction MonitoringThe Compliance Department is responsible for routine monitoring of operations to identify signs of Money Laundering and Terrorist Financing. Monitoring is carried out through a system that has an interface with internal systems that collect registration, operational and financial information from customers, through parameterization of rules. Once the incident has been generated, it is up to Compliance to analyze the client and its operations to confirm or not the signs of Money Laundering and Terrorist Financing. Any identification of signs of Money Laundering, Corruption or Terrorist Financing will be taken to the company’s Management for decision-making on the report, as well as blocking the customer’s account and/or ending the relationship.

5.7. Reporting Suspicious Transactions to Regulatory BodiesOperations, situations or proposals with signs of money laundering or terrorist financing must be communicated to the competent regulatory bodies, when applicable, in compliance with legal and regulatory determinations in a timely manner. Flech pay Money Laundering Prevention Guide.

Communications in good faith made in accordance with applicable legislation and regulations do not entail civil or administrative liability for Flech pay, nor for the responsible administrators. Information about communications is restricted, confidential and is not disclosed to customers or third parties.

5.8. Information and Record MaintenanceRegistration documents, analyzes carried out in the “know” your client procedures, suppliers, outsourced service providers, partners, employees and/or dossiers relating to selected operations and/or proposals, whether communicated to COAF or not, must be archived for the minimum period of 10 (ten) years from the first day of the year following the end of the relationship with the customer, or termination of the contractual relationship and/or from the first day of the year following the completion of the transaction.

Flech pay training. through the Compliance Department, it periodically provides training to its employees, partners and outsourced service providers to disseminate the prevention of money laundering and terrorist financing. Flech pay Money Laundering Prevention Guide.

Exceptions Exceptions must be substantiated by their respective areas of interest, and must always be approved by the Compliance Department. If there is no consensus among the members of the Compliance Department, the case will be submitted for analysis for consideration and deliberation by the Board.

Responsibilities All Flech pay employees are responsible for conducting business in accordance with applicable legislation and this Anti-Money Laundering and Terrorism Financing Policy. Below are the specific responsibilities of the areas, according to their nature of activity and in relation to the content of this Policy.

6. GENERAL RHETORYEvaluate the results of analyzes aimed at preventing illegal acts in your Business Unit; Encourage employees in your Business Unit to undertake Money Laundering and Terrorism Financing Prevention training; Ensure compliance with the determinations of regulatory bodies to act in PLD/FT; Decide on the beginning of relationships with Politically Exposed Persons (PEPs) and their relatives, when flagged by Compliance;

Approve the Money Laundering Prevention Policy and value its effectiveness, as well as guarantee the continuous improvement of the policy, procedures and internal controls related to the prevention of money laundering and terrorist financing.

7.COMPLIANCEFlech pay’s Compliance area has a structure dedicated to the Prevention of Illicit Acts process, where it is responsible for carrying out the following activities: Analysis of customers, employees, suppliers, outsourced service providers and partners prior to the beginning of the relationship, mitigating exposures reputational and/or illicit risks, as well as identification of PEP and its related entities; Flech pay Money Laundering Prevention Guide.

Ensure the promotion of an organizational culture for the Prevention of Money Laundering and Terrorism Financing, working to disseminate culture and carrying out training on the topic, covering its staff, partners and outsourced service providers; Implement tools to support strategies for the Money Laundering and Terrorist Financing Prevention program;

Carry out prior analysis of new products, services or the improvement of existing processes, as well as the use of new technologies; Monitoring the transactional behavior of all customers, as well as data that could pose a risk to Flech pay’s image;

Review and update rules applicable to the business versus requirements in regulatory bodies’ regulations; Assessment and investigation of signs of money laundering found through transaction monitoring; Present suspicious operations with signs of money laundering and terrorist financing, as well as providing information on the results of signs found in the assessment and investigation of money laundering, as well as terrorist financing; Ensure that after due deliberation, customers who suspect illicit transactions are duly notified to COAF, within the regulatory deadline; Keep the institution’s information updated with COAF, providing statements when necessary; Flech pay Money Laundering Prevention Guide.

Review the risk-based assessment criteria whenever applicable; Periodic review and updating of the AML/FT Policy and procedures manual, based on current laws and regulations, as well as best practices, when necessary; Carry out Due Diligence for relevant partners and/or suppliers (when applicable) through a questionnaire available on the Flech pay corporate website; Timely evaluate occurrences of suspicious transactions or operations that contain signs of money laundering practices and deliberate together with the General Management of Flech pay on the communication to COAF.

7.1. LEGAL RHETORIC, RISKS AND REGULATORYDefine Flech pay guidelines for preventing illegal acts, in accordance with current regulations; Ensure the development and implementation of the training and ongoing training program for employees, suppliers and business partners. Ensure the assessment of potential risks of money laundering and terrorist financing practices at the beginning of relationships with customers (PF\PJ), establishments, suppliers and commercial partners, as a necessary measure to prevent them. Support the assessment of risks and necessary measures to deal with occurrences of transactions or operations suspected of money laundering and terrorist financing from a legal perspective; Flech Pay Money Laundering Prevention Guide – Make best efforts to include clauses relating to the prevention of ‘money laundering’ and terrorist financing in standard draft contracts.

7.2.INTERNAL AUDITCarry out, at least once a year, an independent and objective assessment of the quality and effectiveness of the Money Laundering Prevention Policy and the procedures adopted by the Institution regarding the prevention of the use of the financial system to commit “laundering” crimes or concealment of assets, rights and values, and financing of terrorism.

Verify compliance with established rules through adhesion tests;
Note identified deviations and report inconsistencies to those responsible; Define and carry out verification tests on the control procedures adopted to prevent and combat illicit acts.

7.3. REGISTRATION AREACarry out the registration ensuring the integrity of the information, as well as keeping the registration updated in accordance with the previously established rules. Obtain, verify and validate the authenticity of customer identification information; Flech pay Money Laundering Prevention Guide.

Keep customer information updated according to their risk profile and nature of business; Communicate to the Compliance area any resistance from the client in providing mandatory documents and/or information, in accordance with the registration policy/current standards applied to the business;
Prohibit the beginning of relationships with customers whose identification and qualification procedures have not been completed; Identify the final beneficiaries for corporate clients; Collect information relating to PEP and/or those related directly to the client through forms and/or statements;

After confirming and comparing a PEP client and/or those related to the Compliance area, carry out control and management of the registration base so that the PEP and related PEP control of the Compliance area is equalized with the control of the Registration area , and that corrections are made to customer data in any identified discrepancy; Ensure the adequacy of customer registration data. Registration information and documentation must be kept up to date, through verification tests, with a maximum frequency of one year. Identify, evaluate and monitor operational risks and report to Compliance if any atypicality is identified, as well as recommend controls aimed at mitigating the risk of Money Laundering and Terrorist Financing. Flech pay Money Laundering Prevention Guide.

It is up to the Commercial area to follow best practices regarding the “Know Your Customer” process, especially in capturing, intermediating and also communicating the Compliance area about suspicious activities;

Ensure adequate collection of registration information from customers, business partners and suppliers, aiming to get to know customers and assist the registration area; Capture information and documentation, paying attention to relevant issues and carrying out the necessary due diligence to prevent money laundering and terrorist financing crimes;

Assist in the complete identification of final beneficiaries of Legal Entity clients, whenever necessary; Assist the Compliance Department in understanding customers, establishments and final beneficiaries, whenever necessary;

Provide additional information or provide necessary clarifications requested by the Compliance Department;
Carry out visits to customers and establishments, whenever necessary or requested by the Compliance Department;
Maintain confidentiality of investigations carried out by the Compliance Department regarding suspected Money Laundering, Terrorist Financing and other illicit acts. Flech pay Money Laundering Prevention Guide.

7.4. HUMAN RESOURCESEnsure the adequate collection, verification, validation and updating of registration information for new employees, as well as reporting for validation by the Compliance Department;

Ensure that employees undertake Prevention and Combating Money Laundering and Terrorism Financing training and other training as necessary;

Present, whenever necessary, the report extracted from the training platform with the status of PLD/CFT training; Verify personal, professional and socio-economic information provided by employees, expressly informing the Compliance Area of any suspicion detected;

Assist the Compliance Area in monitoring “Know Your Employee – KYE”. INFORMATION TECHNOLOGY Ensure that PLD/CFT systems are functioning properly, guaranteeing the resolution of any failures in the shortest possible response time. Flech pay Money Laundering Prevention Guide.

7.5. INFORMATION SECURITYEnsure compliance with the applicable Circulars regarding the contracting of data processing and storage and computing services (if applicable) in the cloud, used for monitoring and selection of operations and suspicious situations, as well as auxiliary services for the analysis of these operations and situations.

PURCHASING Assist the Compliance Department in understanding suppliers, whenever necessary; Provide additional information or provide necessary clarifications requested by the Compliance Department; Capture information and documentation, paying attention to relevant issues and carrying out the necessary due diligence for the purposes of preventing money laundering and terrorist financing. IOS ABOR It is the responsibility of all Flech pay partners and employees: Report to Compliance any and all proposal, operation or situation considered atypical or suspicious; Keep communications/reports made to the Compliance area confidential, not allowing those involved to become aware of suspicions; Flech pay Money Laundering Prevention Guide.

Act in a timely manner and with diligence and probity in supporting the PLD/CFT Compliance department regarding requests regarding products, services and operations to guarantee the application of the parameters and controls established in this policy;

Prepare responses to audit notes regarding the respective areas and their responsibilities; Provide documentation requested by regulatory bodies; Provide documentation requested by internal and external audits;

Disseminate the culture of preventing and combating Money Laundering and Terrorism Financing crimes; Comply with the administration’s determinations to act in the prevention of Money Laundering and Combating the Financing of Terrorism;

Participate in training and update seminars on the Prevention of Money Laundering and Combating the Financing of Terrorism;

Report to Compliance if any Conflict of Interest is identified. Report to Compliance the hiring of outsourced service providers, preventing the hiring of reputable companies and/or people or those suspected of involvement in illicit activities Flech pay Money Laundering Prevention Guide.

8. REFERENCESLaw 9,613, of March 3, 1998 (“Money Laundering Law”); Law 12,683, of July 9, 2012 (“Money Laundering”); Law 12,865, of October 9, 2013 (“Payment Arrangements Law”); Circular no. 3,865, dated December 7, 2017 (“Compliance”); Resolution 4282/13 of the National Monetary Council; Circulars 3,680/13, 3,681/13 and 3,865/17 of the Central Bank of Brazil; Law 12,846, of August 1, 2013 (“Anti-Corruption Law”); Decree 8,420, of March 18, 2015; Ordinances 909.15 and 910/15 of the General Comptroller of the Union; Normative Instructions 01/15 and 02/15 of the General Comptroller of the Union; Circular No. 3,978/20 of the Central Bank of Brazil; Circular No. 4,001/20 of the Central Bank of Brazil; Law No. 13,260, of March 16, 2016; Circular no. 3,858, dated November 14, 2017; Circular Letter no. 3,409, dated August 12, 2009; Circular Letter no. 3,430, dated February 11, 2010; Circular Letter no. 3,977, dated November 30, 2019; Circular no. 3,942, dated May 21, 2019. Flech pay Money Laundering Prevention Guide.

set of internal regulations, mechanisms and procedures for integrity, auditing, encouraging the reporting of irregularities and application of the Code of Conduct, Corporate Governance Guidelines, Policies and Standards with the aim of detecting and remedying non-conformities. PLD/CFT – Prevention of Money Laundering / Combating the Financing of Terrorism. PEP – Politically Exposed Person. Financial Activities Control Council (COAF) – Body created by Law no. 9,613 of March 3, 1998 for the purpose of disciplining, applying administrative penalties, receiving, examining and identifying suspected occurrences of illicit activities related to money laundering.
Office of Foreign Assets Control (OFAC) – Agency belonging to the United States Department of Treasury, whose main function is to administer and apply sanctions based on national and international security policies against countries and terrorist regimes and traffickers targeted internationally. United Nations Security Council (UNSC) – Body of the United Nations whose mandate is to ensure the maintenance of international peace and security.

It is the only body in the international system capable of adopting binding decisions for all 193 UN member states, and can even authorize military intervention to guarantee the execution of its resolutions. The Council is also known for authorizing the deployment of peacekeeping operations and special political missions. Flech pay Money Laundering Prevention Guide.

European Union – Through the European Council, which is a body that defines, administers and applies financial and/or commercial, political and international security sanctions, as well as the prevention of money laundering and terrorist financing.