Anti Money Laundering and Terrorist Financing Manual

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Cyprus, 2025

Contents

Contents

1. Introduction

   1. Application

   2. Legal Framework

   3. Definition of Money Laundering

   4. Stages for Money Laundering

   5. General Examples of Money Laundering Situations

   6. Definition of Terrorism Financing

   7. Money Laundering Offences

   8. Responsibilities

2. The Sole Director

3. Anti Money Laundering Compliance Officer

Anti Money Laundering Compliance Officer Appointment

Anti Money Laundering Compliance Officer’s Duties

Anti Money Laundering Compliance Officer’s Annual Report

4. Application of Appropriate Measures and Procedures on a Risk Based Approach

Application of measures and procedures on a risk-based approach

6. Customer Acceptance Policy

Non-Acceptable Customers

Identification Procedures for Customers

Constant Monitoring and Updating of Customer Identification Records

It should be noted that due to the type of business of the Company (training), the Company's clients receiving services in the form of training/training will no longer be the Company's clients, due to the fact that they have already received the service. Accordingly, these are one-time actions. Accordingly, the Review procedure will not apply to the Company's clients. However, if there are such clients who will use the service repeatedly, then this procedure will apply to them.

Enhanced Customer Identification and Due Diligence Procedures

It has to be noted, that in addition to the below categories, the Company will apply enhanced Customer due diligence measures and in other cases which by their nature, present a high risk of money laundering or terrorist financing.

Screening system

7. Record Keeping Requirements

8. Employees’ Obligations, Education and Training

Employees’ Education and Training Program

9. Monitoring and Review of this Policy

1. Introduction

The Prevention and Suppression of Money Laundering Activities Law of 2007, Ν.188(I)/2007-2024, as amended (the “AML Act” or “AML Law”) recognizes the important role of effective prevention of money laundering and terrorist financing activities and places administrative requirements on all companies to compliance with it.

Finance Sugarfree Ltd as a company registered under the Cyprus Laws under the Registration Number [REGISTRATION NUMBER] (the Company) will comply with the laws of Cyprus, in particular the AML Law.

The Company will provide educational and training services and is not directly related to the investment sphere, and accordingly will not deal with client money, and does not directly have to follow AML regulation, as an unregulated company. However, the Company expresses strict commitment to European requirements for combating moneylending, fraud and counter-terrorism activities. For these purposes, the Company has developed and implemented minimum AML requirements and introduced the Anti money Laundering and Terrorist Financing Manual (hereinafter the “Manual” or “AML Manual”).

The AML Manual is to equip the Company with the necessary internal practices, measures, procedures and controls that will assist the Company in the detection and prevention of Money Laundering and Terrorist Financing in accordance with the Law and the CySEC Directive regarding the prevention and suppression of money laundering and terrorist financing issued amended on 05 August 2024 or any other Directive or Circular amending, substituting or supplementing the aforesaid Directive (hereinafter the “Directive”) of the Cyprus Securities and Exchange Commission (hereinafter the “CySEC”), the guidelines laid by the manual should be followed throughout the Company and all its personnel shall perform their duties as per the guidelines set out in this Manual

1. Application

The Manual applies to all services provided to the Company's clients. In this case, the client will be considered the person who will receive the training/education service for which he will pay.

The AML Manual is developed and periodically updated by the Anti-Money Laundering Compliance Officer (hereinafter the “AMLCO”) of the Company based on the general principles set up by the AML legislation.

All amendments and / or changes of the AML Manual must be approved by the Sole Director.

The Manual shall be communicated by the AMLCO to all the employees of the Company that manage, monitor or control in any way the Clients and its transactions and have the responsibility for the application of the practices, measures, procedures and controls that have been determined herein.

Strict compliance with the provisions of this Manual is obligatory for each officer, employee, Director and other relevant people in the Company.

Failure to comply with the provisions of this Manual may result in civil, disciplinary or criminal sanctions against the Company and/or its Employees, as well as damage to the Company’s reputation.

Due to the small size of the Company and its business, the duties of the AMLCO are assumed by the Sole Director of the Company.

2. Legal Framework

The following legislation and directives (including but not limited to) set out the regulatory and legal framework for the Company’s obligations with respect to the prevention of money laundering and terrorist financing:

1) Law 188(I) on the prevention of money laundering and terrorist financing as this may be amended from time to time (the “Law”)

2) Directive 157/2019 regarding the prevention and suppression of money laundering and terrorist financing on the prevention of money laundering as this may be amended from time to time (the “Directive” or “AML Directive”)

3) Directive 2015/849 of the European Parliament and of the Council of 20 of May 2015 (the Fourth AML Directive)

4) Directive 2018/843 of the European Parliament and of the Council of 30 May 2018 (the “Fifth AML Directive”)

Pursuant to Article 58 of the AML Law, the Company is obliged to apply appropriate policies, controls and procedures that are proportionate to its nature and size to mitigate and effectively manage the risks of money laundering and terrorist financing. Those procedures, which are implemented by the Company, as these are requested by the Law, are the following:

a. Identification and due diligence procedures of the Customers of the Company.

b. Record keeping procedures in relation to Customers' identity and their transactions.

c. Internal reporting procedures to a competent person (e.g. Anti-Money Laundering Compliance Officer) appointed to receive and consider information that give rise to knowledge or suspicion that a Customer is engaged in money laundering activities.

d. Appropriate procedures of internal control, risk management, with the purpose of preventing money laundering activities.

e. The detailed examination of every transaction that due to its nature is considered vulnerable to money laundering, and especially for complicated or unusually large transactions and transactions that are taken place without an obvious financial or legal purpose.

f. Measures for making employees aware of the above mentioned procedures to prevent money laundering and of the legislation relating to money laundering.

g. Provision of regular training to their employees in the recognition and handling of transactions suspected to be associated with money laundering.

Pursuant to Article 58A of the Law, the Company shall take appropriate measures to identify and assess the risks of money laundering and terrorist financing, taking into account risk factors, including those relating to the Customers, countries or geographical areas, products, services, transactions or channels. These measures should be in proportion to the nature and size of the Company. These risk assessments shall be documented, updated and made available to the CySEC.

Furthermore, in accordance with Article 58B of the Law, where appropriate, due to the size and nature of the activities of the Company, an independent internal audit service can be established to verify the internal policies, controls and procedures referred to in Article 58. At the moment, the Company is outsourcing the function of the Internal Audit, which includes also a review of the internal policies, controls and procedures in regard to Money Laundering and Terrorist Financing.

The main purpose of the AML legislation is to define and criminalize the laundering of proceeds generated from all serious criminal offences aiming at depriving criminals from the profits of their crimes.

Pursuant to AML legislation, the Company is obliged to apply appropriate policies, controls and procedures that are proportionate to its nature and size to mitigate and effectively manage the risks of money laundering and terrorist financing. Those procedures, which are implemented by the Company, as these are requested by the Law, are the following:

a. Identification and due diligence procedures of the Customers of the Company.

b. Record keeping procedures in relation to Customers' identity.

c. Internal reporting procedures to a competent person (e.g. Anti-Money Laundering Compliance Officer) appointed to receive and consider information that give rise to knowledge or suspicion that a Customer is engaged in money laundering activities.

d. Appropriate procedures of internal control, risk management, with the purpose of preventing money laundering activities.

e. Measures for making employees aware of the above-mentioned procedures to prevent money laundering and of the legislation relating to money laundering.

f. Provision of regular training to their employees in the recognition and handling of transactions suspected to be associated with money laundering.

The Company shall take appropriate measures to identify and assess the risks of money laundering and terrorist financing, taking into account risk factors, including those relating to the Customers, countries or geographical areas, products, services or channels. These measures should be in proportion to the nature and size of the Company. These risk assessments shall be documented, updated.

3. Definition of Money Laundering

Money laundering is defined broadly and includes all forms of handling or possessing criminal property, including possessing the proceeds of one’s own crime, and facilitating any handling or possession of criminal property. Criminal property may take any form, including money, securities, tangible property and intangible property.

Illegal profits can be generated for example through drug trafficking, illegal arms sales, smuggling, insider trading, embezzlement, corruption & bribery, prostitution, and internet fraud schemes and any other criminal offence punishable in the Republic by a term imprisonment exceeding one year.

Businesses and individuals need to be alert of the risk of clients, their counterparties and others laundering money in any of its possible forms. The business or its client does not have to be a party to money laundering for a reporting obligation to arise.

Money laundering is not only about cash transactions. Money laundering can be achieved through virtually every medium and financial institution or business.

For the purpose of this Manual, money laundering is also taken to encompass activities related to terrorist financing, including handling or possessing funds to be used for terrorist purposes as well as proceeds from terrorism.

4. Stages for Money Laundering

There is no single method of laundering money. Despite the variety of methods employed, the laundering process is accomplished in three basic stages which may comprise transactions by the launderers that could alert a financial institution to criminal activity:

1. Placement – The process of placing, through deposits or other means, unlawful cash proceeds into traditional financial institutions.

2. Layering – The process of separating the proceeds of criminal activity from their origin through the use of layers of complex financial transactions, such as converting cash into traveler’s cheques, money orders, wire transfers, letters of credit, stocks, bonds, or purchasing valuable assets, such as art or jewellery. All these transactions are designed to disguise the audit trail and provide anonymity.

3. Integration – The process of using an apparently legitimate transaction to disguise the illicit proceeds, allowing the laundered funds to be disbursed back to the criminal. Different types of financial transactions, such as sham loans or false import/export invoices, can be used. If the layering process is successful, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds.

The three basic steps may occur as separate and distinct phases or may occur simultaneously or, more commonly, they may overlap. How the basic steps are used depends on the available laundering mechanisms and requirements of criminal organizations.

5. General Examples of Money Laundering Situations

Significant cash transactions: If a person is making thousands of dollars/euros is small change a week from a business (something which is not unusual for a store owner) and wishes to deposit that money in a bank, it cannot be done without possibly drawing suspicion. In Cyprus, for example, cash transactions and deposits of more than 10 000 EUR amount are required to be reported as “significant cash transactions” to the CySEC, along with any other suspicious financial activity which is identified as “suspicious activity reports”. In other jurisdictions suspicion- based requirements are placed on financial services employees and firms to report suspicious activity to the authorities.

Irregular funding: One method of keeping this small change private would be for an individual to give money to an intermediary who is already legitimately taking in large amounts of cash. The intermediary would then deposit that money into an account, take a premium, and write a check to the individual. Thus, the individual draws no attention to himself, and can deposits his check into a bank account without drawing suspicion. This works well for one- off transactions, but if it occurs on a regular basis then the check deposits themselves will form a paper train and could raise suspicion.

Captive business: Another method involves establishing a business whose cash inflow cannot be monitored and passing the small change into this business and paying taxes on it. All bank employees however are trained to be constantly on the lookout for any transactions which appear to be an attempt to get around the currency reporting requirements. Such shell companies should deal directly with the public, perform some service- related activity as opposed to providing physical goods, and reasonably accept cash as a matter of business. Dealing directly with the public ensures plausible anonymity of source. An example of a legitimate business displaying plausible anonymity of source would be a hairstylist. Since it would be unreasonable for them to keep track of the identity of their clients, a record of their transaction amounts must be accepted as primary evidence of actual financial activity. Service- related business have the advantage of anonymity of resources. A business that sells computers has to account for where it actually got the computers, whereas a plumbing company merely has to account for labor, which can be falsified.

Corrupt politicians and lobbyists also launder money by setting up personal accounts to move money between trusted organizations, so that donations from inappropriate sources may be illegally used for personal gain.

Structuring (“smurfing”): Smurfing is possibly the most commonly used money laundering method. It involves many individuals who deposit cash into bank accounts to avoid the reporting threshold.

Bank Complicity: Bank complicity occurs when a bank employee is involved in facilitating part of the money laundering process.

Money Services and Currency Exchanges: Money services and currency exchanges provide a service that enables individuals to exchange foreign currency that can then be transported out of the company. Money can also be wired to accounts in other countries. Other services offered by these businesses include the sale of money orders, cashiers’ cheques, and traveler’s cheques.

Asset Purchases with Bulk Cash: Money launderers may purchase high value item such as cars, boats or luxury items such as jewelry and electronics. Money launderers will use these items but will distance themselves by having them registered or purchased in an associate’s name.

Electronic Funds Transfer: Also referred to as a telegraphic transfer or wire transfer, this money laundering method consists of sending funds electronically from one city or country to another to avoid the need to physically transport the currency.

Postal Money Orders: The purchase of money orders for cash allows money launderers to send these financial instruments out of the country for deposit into a foreign or offshore account.

Credit Cards: Overpaying credit cards and keeping a high credit balance gives money launderers access to these funds to purchases high value items or to convert the credit balance into cheques.

Casinos: Cash may be taken to a casino to purchase chips which can then be redeemed for a casino cheque.

Refining: This money laundering method involves the exchange of small denomination bills for larger ones and can be carried out by an individual who converts the bills at a number of different banks in order not to raise suspicion. This serves to decrease the bulk of large quantities of cash.

Legitimate Business/ Co- mingling of funds: Criminal groups or individual may take over or invest in business that customarily handles a high cash transaction volume in order to mix the illicit proceeds with those of the legitimate business. Criminals may also purchase business that commonly receive cash payments, including restaurants, bars, night clubs, hotels, currency exchange shops, and vending machine companies. They will then insert criminal funds as false revenue mixed with income that would not otherwise be sufficient to sustain a legitimate business.

Value Tempering: Money launderers may look for property owners who agree to sell their property, on paper, at a price below its actual value and then accept the difference of the purchase price “under the table". In this way, the launderer can, for example, purchase a €2 million, while secretly passing the balance to the seller. After holding the property for a period of time, the launderer then sells it for its value of €2 million.

Loan Back: Using this method, a criminal provides an associate with a sum of illegitimate money and the associate creates the paperwork for a loan or mortgage back to the criminal for the same amount, including all of the necessary documentation. This creates an illusion that the criminal’s funds are legitimate.

The scheme’s legitimacy is further reinforced through regularly scheduled loan payments made by the criminal and providing another means to transfer money.                                            

6. Definition of Terrorism Financing

Terrorism is defined as the use or threat of action designed to influence government, or to intimidate any section of the public, or to advance a political, religious or ideological cause where the action would involve violence, threats to health and safety, damage to property or disruption of electronic systems.

Terrorism financing is an offence by any means, directly or indirectly, unlawfully and willfully, which provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in whole or in part, in order to carry out an act intended to cause death or serious bodily injury to a civilian, or to any other person not taking an active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing any act.

7. Money Laundering Offences

Every person who knows or ought to have known that any kind of property constitutes proceeds from criminal activities is guilty of an offence if he/she carries out any of the following:

1. Converts or transfers or removes such property for the purpose of concealing its illicit origin or of assisting any person who is involved in the commission of a predicate offence to evade the legal consequences of his actions

2. Conceals or disguises the true nature, the source, location, disposition, movement, rights with respect to property or ownership of this property;

3. Acquires, possesses or uses such property

4. Participates in, associates or conspires to commit or attempts to commit and aids and abets and provides counselling or advice for the commission of any of the above-mentioned offences

5. Provides information with respect to investigations that are being performed for laundering offences for the purpose of enabling the person who acquired a benefit from the commission of a predicate offence to retain the relevant proceeds.

8. Responsibilities

This Manual will be subject to an ongoing review and update by the AMLCO so as to ensure full compliance with current AML legislation.

This Manual and related policies, rules, operations and controls bind the Director, the staff members, and any other person involved in the operations of the services offered.

The procedures and recommendations contained in this Manual must be followed strictly by the Company’s personnel. Staff should be made aware of the seriousness of Money Laundering and Terrorist Financing activities, their own statutory obligations and be encouraged to co-operate and report suspicious transactions promptly. This can be done through the completion of the Internal Suspicion Report for Money Laundering and Terrorist Financing, and should be submitted, to the AMLCO.

It is the responsibility of all Company employees to read and understand the Company’s Anti-Money Laundering and Terrorist Financing Manual. Each employee receives a copy of the Manual and has to sign that he/she has read and understood its contents and understands the responsibilities.

The AMLCO ensures that the employees and divisions operate within the scope of the policies and rules outlined in this Manual.

2. The Sole Director

The Director of the Company has the following duties:

1. Determines, records and approves the general policy principles of the Company in relation to the prevention of money laundering and terrorist financing and communicates them to the compliance officer.

2. Appoints an AMLCO that possesses the skills, knowledge and expertise and, where is necessary and, where is necessary, assistant AMLCOs and determines their duties and responsibilities, which are recorded in this AML Manual.

3. Approves the AML Manual, the policies, procedures, which is communicated to all employees of the Company, that manage, monitor or control in any way the customers’ transactions and have the responsibility for the application of the practices, measures, procedures and controls that have been determined.

4. Ensures that all requirements of the AML Act, are applied, and assures that appropriate, effective and sufficient systems and controls are introduced for achieving the abovementioned requirement.

5. Assures that the AMLCO and his assistants and any other person who has been assigned with the duty of implementing the procedures for the prevention of money laundering and terrorist financing, have complete and timely access to all data and information concerning customers’ identity, transactions’ documents and other relevant files and information maintained by the Company so as to be fully facilitated in the effective execution of their duties.

6. Ensures that all employees are aware of the person who has been assigned the duties of the AMLCO, as well as his assistants, to whom they report any information concerning transactions and activities for which they have knowledge or suspicion that might be related to money laundering and terrorist financing. Such Information is provided to the AMLCO.

7. Establishes a clear and quick reporting chain based on which information regarding suspicious transactions is passed without delay to the AMLCO, either directly or through his assistants and notifies accordingly the AMLCO for its explicit prescription in this   AML Manual.

8. Ensures that the AMLCO and the Alternate AMLCO (if applicable) have sufficient resources, including competent staff and technological equipment, for the effective discharge of their duties.

9. to assess and approves the Annual Report of the AMLCO and the Director takes all action as deemed appropriate under the circumstances to remedy any weaknesses and/or deficiencies identified in the aforesaid Annual Report.

10. To put in place appropriate procedures for its employees, or persons in a comparable position, to report breaches internally through a specific, independent and anonymous channel, proportionate to the nature and size of the Company.

3. Anti Money Laundering Compliance Officer

Anti Money Laundering Compliance Officer Appointment

An Officer is appointed by the Director of the Company as Money Laundering Compliance Officer («AMLCO») of the Company in order to command the necessary authority. Such person should have sufficient qualification and given necessary authority to coordinate all AML activities on the Company’s level and communicate directly with the Director.

This function could be inhouse or outsourced.

The level of remuneration of the AMLCO shall not compromise his objectivity.

In performing his/her role, the AMLCO takes into account the nature, scale and complexity of the Company’s business, and the nature and range of services and activities undertaken in the course of the business.

Due to the size of the Company’s business the Director made a decision to combined this function with management functions.

Anti Money Laundering Compliance Officer’s Duties

As a minimum, the Anti Money Laundering Compliance Officer’s duties include the following:

1. Designs, based on the general policy principles of the Company the internal practice, measures, procedures and controls relevant to the prevention of money laundering and terrorist financing, and describes and explicitly allocates the appropriateness and the limits of responsibility of each department that is involved in the abovementioned.

2. Develops and establishes the customers’ acceptance policy and submits it to the board of directors for consideration and approval.

3. Prepares a risk management and procedures manual regarding money laundering and terrorist financing.

4. Monitors and assesses the correct and effective implementation of the policy principles of the Company in relation to the prevention of money laundering and terrorist financing, the practices, measures, procedures and controls and in general the implementation of the risk management and procedures manual for the same matters. In this regard, the AMLCO applies appropriate monitoring mechanisms (e.g. on-site inspections to different departments of the Company) which will provide him with all the necessary information for assessing the level of compliance of the departments and employees of the Company with the procedures and controls which are in force. In the event that he identifies shortcomings and/or weaknesses in the application of the required practices, measures, procedures and controls, gives appropriate guidance for corrective measures and where deems necessary informs the Director.

5. Receives   information   from   the   Company’s employees which is considered to be knowledge or suspicion of money laundering or terrorist financing activities or might be related with such activities.

6. Detects, records, and evaluates, at least on an annual basis, all risks arising from existing and new customers, new financial instruments and services and updates and amends the systems and procedures applied by the Company for the effective management of the aforesaid risks

7. Evaluates the systems and procedures applied by a third person on whom the Company relies for customer identification and due diligence purposes.

8. Ensures that the branches and subsidiaries of the Company that operate in countries outside the European Economic Area, have taken all necessary measures for achieving full compliance with the provisions of the present Directive, in relation to customer identification, due diligence and record keeping procedures.

9. Provides advice and guidance to the employees of the Company on subjects related to money laundering and terrorist financing.

10. Acquires the required knowledge and skills for the improvement of the appropriate procedures for recognizing, preventing and obstructing any transactions and activities that are suspected to be associated with money laundering or terrorist financing.

11. Prepares the annual report that assesses the Company’s level of compliance with its obligations laid down in the AML Law.

During the execution of his duties and the control of the compliance of the Company with the AML Law, the compliance officer obtains and utilizes data, information and reports issued by international organizations referred later in this manual.

Anti Money Laundering Compliance Officer’s Annual Report

The Annual Report prepared by the AMLCO is submitted for the approval of the Director. It is provided that during the approval of this Report, the Director identifies and implements the measures decided for the correction of any weaknesses and/ or deficiencies identified in the Report and establish implementation timeframe.

1. The Annual Report, prepared by the AMLCO is a significant tool for assessing the Company’s level of compliance with its obligations laid down in the AML Law.

2. The Annual Report is prepared and submitted for approval to the Director.

3. The Annual Report deals with money laundering and terrorist financing preventive issues pertaining to the year under review.

Due to the fact that the Company is an unregulated Company, it is not obliged to provide such a report to the Regulatory Authorities. Due to these circumstances, the Director, as AMLCO, may prepare this report in free form for its internal purposes, as well as for statistical purposes. In the event that serious AML risks are identified, the Director, as AMLCO, will prepare a corresponding report for the regulatory authorities and implement all necessary actions to minimize the potential AML risks.

4. Application of Appropriate Measures and Procedures on a Risk Based Approach

The Company shall be, at all times, in a position to demonstrate that the extent of measures and control procedures that applies are proportionate to the risk it faces for the use of services provided, for the purpose of money laundering and terrorist financing.

A risk-based approach involves identification, recording and evaluation of the risks that have to be managed. The level of due diligence required when considering anti-money laundering procedures within the Company should take a risk-based approach. This means the number of resources spent in conducting due diligence in any one relationship that is subject of risk should be in proportion to the magnitude of the risk that is posed by that relationship.

Application of measures and procedures on a risk-based approach

The Company applies appropriate measures and procedures, on a risk-based approach, so as to focus its effort in those areas where the risk of money laundering and terrorist financing appears to be higher.

A risk-based approach:

1. recognizes that the money laundering or terrorist financing threat varies across customers, countries, services.

2. allows the Director to differentiate between customers of the Company in a way that matches the risk of their particular business;

3. allows the Director to apply its own approach in the formulation of policies, procedures and controls in response to the Company’s particular circumstances and characteristics;

4. helps to produce a more cost effective system; and

5. promotes the prioritisation of effort and actions of the Company in response to the likelihood of money laundering or terrorist financing occurring through the use of services provided by the Company

A risk-based approach involves specific measures and procedures in assessing the most cost effective and proportionate way to manage the money laundering and terrorist financing risks faced by the Company. Such measures and procedures are:

1. identifying and assessing the money laundering and terrorist financing risks emanating from particular customers, services, countries and geographical areas of operation;

2. documenting in the risk management and procedures manual, the policies, measures, procedures and controls to ensure their uniform application across the Company by persons specifically appointed for that purpose by the Director;

3. managing and mitigating the assessed risks by the application of appropriate and effective measures, procedures and controls;

4. continuous monitoring and improvements in the effective operation of the policies, procedures and controls.

The application of appropriate measures and the nature and extent of the procedures on a risk-based approach depends on different indicators.

Such indicators include the following:

● the scale and complexity of the services

● geographical spread of the services and Customers

● the nature of Customers

● the distribution channels and practices of providing services

● the degree of risk associated with each area of services

● the country of origin and destination of Customers’ funds

The AMLCO shall be responsible for the adequate implementation of the policies, procedures and controls on a risk-based approach.

Risk Assessment

It has to be noted that the Company has established a Risk Assessment whose purpose is to assist the Company to classify its Customers on a risk basis in the three risk categories of Low/Normal/High risk. This exercise will be used as a tool by the Company and the AMLCO, but the AMLCO is not bound to adopt the classification resulted from this assessment if the AMLCO is of the opinion that this should not be followed for any reason. The structure of this exercise will be updated as frequently as this is needed so as to incorporate new risk factors and regulatory updates.

5. SANCTIONS POLICY

The Company shall always remain vigilant towards all the applicable sanctions applied by US and United Nations Sanctions due to United Nations Sanctions (Counter-Proliferation Financing) Act.

Further to the above, the Company has implemented all the relevant procedures in respect to cross-checking the prospective clients through the sanctioned lists created and updated by the Company.

What are Sanctions?

Sanctions are restrictions on activity with targeted countries, governments, entities, individuals and industries ('targets') that are imposed by bodies such as the United Nations (UN), individual countries or groups of countries. The Company shall always remain vigilant towards all the applicable sanctions applied by UN and/or other jurisdictions to either nationals and/or Countries.

Sanctions can be classified as:

• Specific,

• General,

• Sectoral,

• Focused.

Specific sanctions relate to specific lists of named individuals, legal entities, organizations, vessels etc. (the US Department of Treasury refers to some of these entities as Specially Designated Nationals)

General sanctions cover all transactions with certain countries or jurisdictions; certain transactions with countries or jurisdictions such as exports, imports or new investment, or all transactions within a certain area of activity/products (e.g. arms sales to a particular country).

Sectoral sanctions cover certain parties in specific sectors (OFAC designates parties on a Sectoral Sanctions Identification List or “SSI List”) but only restrict certain transactions of these designated parties.

Focused sanctions prohibit the export of commercial and dual-use goods, software and technology subject to U.S. jurisdiction under the Export Administration Regulations.

Sanctions can be also classified as the comprehensive sanctions, the arms sanctions; and the financial sanctions.

The comprehensive sanctions are usually imposed against the countries, where the efforts are made to direct sanctions against specific organization, groups, entities or natural persons or to restrict measures to defined areas

The arms sanctions are focused on all goods that can be used for military purposes and related goods/services.

The Financial sanctions are focused on prohibition placing assets of any kind at the disposal of designated or providing them with financial services of any kind and play a special role in economic relations.

Sanctions do affect the business operations of financial institutions and their clients/counterparties by placing restrictions and controls on the movement of goods, services and funds. Such restrictions may include:

• Prohibitions to transfer of funds to and from a sanctioned country;

• Restrictions on provision of financing to the sanctioned persons/entities

• Freezing of the funds/assets of a targeted designated sanctioned persons/entities;

• Prohibition on a particular type of transactions;

• Travel bans;

• Restrictions on particular terms of the transactions;

• Prohibition on transactions with the sanctioned securities.

The following types of sanctions, depending on the agency of their adoption:

• UN Resolutions:

The UN Security Council regularly passes resolutions with sanctions character. In accordance with the UN Charter, these resolutions are not binding law in the member states of the UN. They must be implemented by the individual member states via local law or regulations. In the European Union that is usually done via EU regulations and decisions.

• EU regulations and Decisions:

The Council and the Commission of the EU issue sanctions based on their own discretion or to implement UN resolutions. EU regulations and decisions are immediately binding law;

• Within the territory of the member states of the EU, including its airspace and maritime space;

• On board any aircraft, sea craft or any vessel under the jurisdiction of a member state.

• US Sanctions:

• The Office of Foreign Assets Control (OFAC) of the Department of the Treasury administers and enforces economic sanctions and trade embargoes based on the US foreign policy and national security goals.

• Local Sanctions: There are several jurisdictions where local sanctions regulations are in place (US, Japan, Switzerland, Singapore and Malaysia). These regulations apply in addition to any EU regulation/decision in the issuing country.

In general sanctions regime is applicable only within the territory of the countries which have enacted those sanctions into law.

However, certain of those countries enforce their law in a way that it covers also activity outside of their territory, especially if such activity causes relevant effects within those countries (i.e. Payment processing in one of those countries). Whenever such jurisdictional link or nexus is created, several sanctions regime might become applicable.

Additionally, the US have enacted sanctions regime with extra-territorial application. These sanctions might become relevant to transactions that involve parties or goods originating from or forwarded to or transiting to the countries which have no jurisdictional link of nexus to the USA whatsoever.

Sanctions remain the key weapon of economic pressure that the European Union applies to achieve its foreign policy and national security goals in these regions. The sanctions against Russia, for example, continue to evolve and may be the most complex that businesses ever have faced. It is extremely important for a Company engaged in international business to pay attention to sanctions’ developments as new issues continue to emerge within the fluid political landscape.

It must be noted that, as per the current situation, as of the date of preparing this Manual, the above sanctions are in place and possibly, new sanctions can be imposed.

The Company established the following procedures in order to ensure compliance with the sanctions:

i. Provide all departments involved in client acceptance, with a summary of applicable restrictions.

ii. Ask them to refer to compliance/legal adviser in case they have questions with regards to the transaction in restricted instruments or with sanctioned persons.

iii. Provide the clients with formalized answer (developed in cooperation with compliance and a legal specialist) that the transaction in question cannot be executed, if needed.

Risk Assessment due to sanctions

The Company aims to ensure our Sanctions Policy and procedures are proportionate to the risks we face. The Company has performed a company-wide assessment of the risk of being exposed to persons subject to sanctions.

This Sanctions Policy and the procedures contained here have been developed in response to the results of that risk assessment. Where necessary the Company will review our risk assessment and make appropriate changes to this policy.

When identifying any possible risks associated with a business relationship, the

Company should consider relevant risk factors including who the customers are, the countries or geographical areas, the particular products, services and transactions the individual customers requires and the channels of use to deliver these products, services and transactions.

The following, inter alia, are sources of risks which the Company faces with respect to Sanctions.

Procedure actions:

A) Before the Company enters into a business relationship with a potential Client or enters into an agreement with a counterparty or service provider, it performs due diligence of that Client/counterparty/service provider, including a World-Check search.

This way, the Company will detect any relevant finding for that the potential Client/counterparty/service provider.

B) The AMLCO will examine the findings, if necessary liaise with external consultants and/or lawyers and inform accordingly the senior management of these findings.

C) If despite any such finding, the Company intends to proceed with any transaction or relationship that falls within the scope of the Sanctions and/or Restrictive Measures that may be adopted, the Company will, through the AMLCO, submit a request to  the competent authority of the Republic of Cyprus.

The AMLCO will maintain a file of all the actions followed in such cases. That file will include all written and electronic communication in respect to the act in question, including any communication with the relevant authorities, decisions taken, and any other important information on the matter.

If a member of staff is suspicious that financial sanctions are being contravened, or that a Client, counterparty or any other third party is a designated person or entity on an official sanctions list, this must be escalated to the AMLCO immediately. Following escalation, after assessing all available information, if AMLCO is unable to determine whether a customer or third party is indeed one and the same as a listed person/entity they should seek guidance from the supervisory authority.

Sanction Match

Any potential match identified through our screening process must be properly investigated before the Company can take any further steps.

Any employee is responsible for reporting any potential matches immediately to the AMLCO. The AMLCO will investigate whether there is an actual match.

The opening or the maintenance of accounts or the execution of transactions related to close family members or close associates or related entities (irrespective of % age of ownership (directly or indirectly) of parties subject to specific EU, U.S., UK and U.N sanctions, is strictly prohibited.

The execution of transactions with any of parties subject to specific EU, U.S., UK and U.N sanctions and related entities with ownership (directly or indirectly) equal or over 50%, is strictly prohibited.

Enhanced due diligence must be applied on all customers who are connected with countries that have sanctions imposed on them. Their activities must be comprehended fully to enable the correct assessment and treatment of their transactions.

For entities that are subject to sectorial sanctions, the following should apply: No transactions involving these affected entities in the specific sectors are allowed. In case of acceptance such a client, the approval from AMLCO and Director is required, the close monitoring should be in place, the client should be categorized as High Risk. Under OFAC’s ‘50 percent rule’, any entity that is owned 50 percent or more by one or more parties under Sectoral Sanctions, must be treated as though it itself is under Sectoral Sanctions.

6. Customer Acceptance Policy

The purpose of the Company’s Client Acceptance Policy (hereinafter the “CAP”) is to lay down the procedures and the control systems based on which the Company operates during the process of accepting new customers.

The CAP defines the criteria for:

a. acceptance of new Customers

b. non-acceptable Customers

c. categorisation of the Customers into various risk categories.

The CAP shall be followed by the Company and especially by the employees which shall be involved in the establishment and termination of the Business Relationship.

The AMLCO shall be responsible for applying all the provisions of the CAP.

General Principles of the client acceptance procedure

The Company shall classify Customers into various risk categories and, based on the risk perception, decide on the acceptance criteria and ongoing monitoring for each category of Customer.

The following information shall be collected at the time of the establishment of the Business Relationship:

● Establishment of the Customer’s identity (identification procedure)

i. For physical person – a collection of personal details, including first / last name, date of birth, telephone number, e-mail, country of residence;

ii. For physical person – verification of identity through an acceptable national passport/ID document

Customer Risk Categorization

The Company has adopted all requirements in relation to Customer identification and due diligence procedures. The Customer categorization, identification and due diligence are as follows:

1. low risk,

2. normal risk,

3. high risk

Non-Acceptable Customers

The Company has decided that the risk associated with certain groups of customers is unacceptably high and has therefore decided to preclude such customers from establishing a business relationship with the Company Apart from the requirements of the Cyprus legislation, the Company , as part of its Risk Appetite Assessment, has included in this category other types of customers based on their Money Laundering / Terrorism Financing risk.

The following list predetermines the types of Customers who are not acceptable for establishing a Business Relationship with the Company:

• Customers who fail or refuse to submit within a reasonable timeframe depending on the occasion, the requisite data and information for the verification of their identity, without adequate justification

• Entities/persons who appear on the OFAC SDN list

• Entities/persons from UN sanctioned countries

• Persons from high risk third countries in accordance to Companies countries risk assessment or persons from third countries assessed as high risk third countries by the Company from time to time who are not approved by the AMLCO and a Director.

• U.S. residents, U.S. citizens.

In connection with the provision of a service related to training, the Company has come to the conclusion that only individuals can be clients of the Company, and accordingly legal entities fall outside the Company's area of ​​activity.

It has to be noted that the Company does not enter into any Occasional Transactions with any physical or legal person. Also, the Company will not open or maintain anonymous or numbered accounts or accounts in names other than those stated in official identity documents.

The Company has a list of countries with which it will not work and will not accept clients from these countries. This list is attached to this Manual. This list may be updated from time to time by decision of the Director.

Due to the small volume of the Company's business and the small number of clients, the AMLCO will manually check clients by screening them using publicly available information on the Internet. As the Company's business grows, as well as the number of clients increases, the Company will implement and will use the commercial screening database for screening - KYC service provider, for example Sumsub, KYCAID, LSEG.

Termination of Business Relationship

If the AMLCO has reasonable grounds to believe a Customer engaged in a fraudulent activity or presents a high money-laundering risk due to a material negative change in information about the Customer, the AMLCO may recommend to terminate the Business Relationship with such a Customer to the Board.

Identification Procedures for Customers

The Company ascertain the true identity of natural persons by obtaining the following information:

1. true name and/or names used as these are sated on the official identity card or passport,

2. telephone (home and mobile) number,

3. e-mail address, if any,

4. date and place of birth,

5. citizenship,

Politically exposed persons’ accounts (PEP)

The establishment of a business relationship with politically exposed persons as defined in this Manual, may expose a Company to enhanced risks, especially, if the potential customer seeking to establish a business relationship is a politically exposed person.

The Company should pay more attention when the said persons originate from a country which is widely known to face problems of bribery, corruption and financial irregularity and whose anti-money laundering laws and regulations are not equivalent with international standards.

“Politically Exposed Persons” or “PEPs” means natural persons who are or have been entrusted with prominent public functions’ in the Republic of Cyprus or in an another country, their immediate family members and persons known to be their close associates.

1. (a)Prominent Public Function shall mean any of the following public functions:

1. heads of State, heads of government, ministers and deputy or assistant ministers,

2. members of parliaments or of similar legislative bodies

3. members of the governing bodies of political parties;

4. members of supreme courts, of constitutional courts or of other high-level judicial bodies whose decisions are not subject to further appeal, except in exceptional circumstances,

5. members of courts of auditors or of the boards of central banks,

6. ambassadors, chargιs d'affaires and high-ranking officers in the armed forces,

7. members of the administrative, management or supervisory bodies of State-owned enterprises.

8. directors, deputy directors and members of the board or equivalent function of an international organization.

9. Mayors

No public function referred to in points (i) to (ix) shall be understood as covering middle-ranking or more junior officials.

‘Immediate family members’ includes the following:

1. the spouse, or a person considered to be equivalent to a spouse, of a politically exposed person

2. the children and their spouses, or persons considered to be equivalent to a spouse, of a politically exposed person

3. the parents of a politically exposed person

2. (b)Persons known to be close associates includes the following:

1. any natural person who is known to have joint beneficial ownership of legal entities or legal arrangements, or any other close business relations, with a politically exposed person .

2. any natural person who has sole beneficial ownership of a legal entity or legal arrangement which is known to have been set up for the de facto benefit of a politically exposed person.

Without prejudice to the application, on a risk-sensitive basis, of the enhanced customer due diligence measures, where a politically exposed person is no longer entrusted with a prominent public function by Cyprus or a third country, or with a prominent public function by an international organisation within the meaning of this Section, the Company shall, for at least 12 months, be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk specific to politically exposed person .

Constant Monitoring and Updating of Customer Identification Records

The Company ensures that the customer identification records remain completely updated with all relevant identification data and information throughout the business relationship. The Company examines and checks, on a regular basis, the validity and adequacy of the customer identification data and information it maintains, especially those concerning high risk customers. The procedures and controls of also determine the timeframe during which the regular review, examination and update of the customer identification is conducted. The outcome of the said review is recorded in a separate note/form which should be kept in the respective customer file.

Specifically, the Company set the following timeframe for the said checks based on the client categorization:

• For High-Risk Clients every one (1) year

• For Normal Risk Clients every three (3) years

• For Low-Risk Clients every five (5) years.

It should be noted that due to the type of business of the Company (training), the Company's clients receiving services in the form of training/training will no longer be the Company's clients, due to the fact that they have already received the service. Accordingly, these are one-time actions. Accordingly, the Review procedure will not apply to the Company's clients. However, if there are such clients who will use the service repeatedly, then this procedure will apply to them.

Enhanced Customer Identification and Due Diligence Procedures

According to the requirements of AML Law, the Company has to apply Enhanced Due Diligence to the High-Risk Customers.

The below are specific categories of High-Risk Customers or potentially Higher Risk Customers that are not included in the Non-Acceptable Customers and the measures of enhanced due diligence to be followed:

- PEP Customers

- Customers from High-Risk Countries.

It has to be noted, that in addition to the below categories, the Company will apply enhanced Customer due diligence measures and in other cases which by their nature, present a high risk of money laundering or terrorist financing.

Additional verification measures in this case may include:

- additional screening,

- request for additional information

- request to provide a copy of a passport or ID document

Screening system

Due to the small volume of the Company's business and the small number of clients, the AMLCO will manually check clients by screening them using publicly available information on the Internet. As the Company's business grows, as well as the number of clients increases, the Company will implement and will use the commercial screening database for screening - KYC service provider, for example Sumsub, KYCAID, LSEG.

The Company shall consider the following parameters in the selection process and when and how to be used:

1. The screening system shall be appropriate to the nature, size and ML/TF risks of the Company. This should include well-documented policies and procedures.

2. Screening should be performed before:

• the establishment of a business relationship;

• the provision of any services.

The Company must ensure that the automated screening system is up to date and correct. Also ensure that there is a full understanding of the capabilities and limits of the screening system in order to apply extra measures whenever deemed necessary.

The automated management information system should be tailored in line with Company’s risk appetite and perform regular reviews of the calibration and rules to ensure its effective operation.

The Company should establish procedures for the treatment of potential ‘target matches’. For example:

• investigating whether a potential match is an actual target match or a false positive,

• notifying senior management,

• freezing accounts where appropriate and where an actual target match is identified,

• keep a clear, documented audit trail of the investigation of potential target matches and the decisions and actions taken, such as the rationale for deciding that a potential target match is a false positive.

The screening results would divide the Customers into the following categories:

1. Unmatched – Customers who were screened against the negative database but have not triggered any probable match

2. Unprocessed – have triggered a highly probable match by name, country and date of birth (where available). These Customers are reviewed by the AMLCO and moved to one of the following categories:

a. Positive match – the person on the list is the Customer and the relevant measures are taken depending on the results.

b. Possible match – the person may or may not be the Customer under examination. The AMLCO use the information they have to determine.

c. False – the person on the list is different from the Customer. Customer is accepted. A note may be recorded of why the match is false if this is so needed for clarification purposes.

d. Unspecified – there’s not enough info to decide with respect such the Customer. In these cases, more information may be requested from the Customer which will be reviewed for decision.

7. Record Keeping Requirements

The Company keeps record of the documents/data that are specified in the present manual electronically.

The documents/data are kept for a period of at least five (5) years, which is calculated after the termination of the business relationship.

At the end of that period, the Company deletes the personal data, unless it is otherwise requested by a different legislative provision.

8. Employees’ Obligations, Education and Training

The Company’s employees can be personally liable for failure to report information or suspicion, regarding money laundering or terrorist financing.

The employees cooperate and report to the AMLCO, without delay, anything that comes to their attention in relation to transactions for which there is a slight suspicion that are related to money laundering or terrorist financing.

The Company’s employees fulfil their legal obligation to report their suspicions regarding money laundering and terrorist financing if they follow the reporting procedure for such disclosures pursuant to this manual, and these disclosures shall have the same effect as disclosures or intended disclosures the Unit.

Employees’ Education and Training Program

The Company ensures that its employees are fully aware of their legal obligations according to this AML Manual, the AML Law and other Cyprus AML legislation, by introducing a complete employee’s education and training program.

The AMLCO of the Company is responsible for the designing of the Training Program.

The ongoing training programs aims to help employees to recognise operations which may be related to money laundering or terrorist financing and to instruct them as to how to proceed in such cases.

The Senior Management of the Company shall be responsible for the AMLCO of the Company to receive proper AML training.

9. Monitoring and Review of this Policy

The Company will periodically review this Policy and change it if necessary.

The Company will revise this Policy in case of changes and updates to legislative and regulatory requirements and in the presence of other circumstances that make it necessary to revise this Policy.

Appendix I

List of countries/jurisdictions with which the Company does not work

(this includes both restricted countries and those countries with which the Company does not work due to their high risk):

Afghanistan

Algeria

Angola

Barbados

Burkina Faso

Burundi

Cameroon

Cape Verde

Cook Islands,

Comoros

Democratic Republic of the Congo

Djibouti

Equatorial Guinea

Eritrea

Gabon

Gambia

Gibraltar

Guinea-Bissau

Haiti

Ivory Coast

Iran

Iraq

Jamaica

Kenya

Kiribati

Kyrgyzstan

Laos

Lebanon

Lesotho

Liberia

Malawi

Mali

Mauritania

Monaco

Mozambique

Myanmar

Namibia

Nepal

North Korea

Papua New Guinea

Panama

Sierra Leone

Senegal

Solomon Islands

Somalia

South Sudan

Sudan

Suriname

Syria

Tanzania

Tajikistan

Timor-Leste

Tokelau

Tonga

Trinidad and Tobago

Turkmenistan

Tuvalu

Uganda

United Arab Emirates

USA

Vanuatu

Venezuela

Yemen

Western Sahara