AML Policy

These Internal AML Procedures (these “Procedures”) have been prepared for Kassio ApS (“Kassio”) and approved by the MLRO and the management of Kassio (the “Management”).

These Procedures set out Kassio’s internal AML policies, rules, procedures and guidelines in order to ensure that Kassio and its employees, at all times, limits the risk of being exploited fraudulently for the purpose of money-laundering or financing of terrorism. Pursuant to these Procedures Kassio shall identify and monitor its customers and report to the State Prosecutor for Serious Economic and International Crime (in Danish: Statsadvokaten for Særlig Økonomisk Kriminalitet) ("SØIK") if it is known, suspected or there are reasonable grounds to assume that a transaction is or has been related to money laundering or financing of terrorism.

These Procedures shall apply to all of Kassio’s activities. In addition, these Procedures shall, at all times, be observed and complied with by all employees of Kassio.

The purpose of these Procedures is to ensure that all employees understand the obligations and the responsibility, which follows with the anti-money regulation, and to understand Kassio’s guidelines and procedures in these matters.

Further, the purpose is to reduce Kassio’s risks of being exploited for ML/TF.

1. Business description

Kassio operates out of Copenhagen, Denmark and provides a will provide a value-generating platform for cryptocurrency users by offering a unified solution for their customers. The customers will be able to:

• fund their multicurrency fiat account,
• buy and sell cryptocurrency,
• store their cryptocurrency in a wallet,
• obtain cryptocurrency-backed micro loans,
• get a fixed deposits and savings rate and
• receive a payment card.

Kassio will provide such services and activities through an application to a global customer base.

2. 2.2 Obligations and scope of the rules

Kassio is located in Denmark and is considered to be subject to Danish law. As per the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism (the "Danish AML Act") Kassio must register with the Danish FSA (in Danish: Finanstilsynet), and ensure proper policies and procedures are placed to reduce the risk of being exploited for ML/TF.

Kassio has taken a proactive stance and implemented procedures in its current operations, which give certainty to all stakeholders that Kassio strives to prevent its services being used for money laundering, terrorist financing and other illicit activities.

Kassio does so by having know-your-customer (“KYC”) processes and risk-based procedures to conduct business in full compliance with the Danish AML Act. These processes are described further below.

As a legal entity subject to the AML Act, Kassio must know their customers’ identity and the purposes of the business relationships. To ensure that Kassio knows its customers, Kassio must perform certain customer due diligence measures. Such measures include requesting their customers to produce various kinds of proof of identity and pay attention to their customers' activities. If Kassio has a suspicion of being misused for money laundering or terrorist financing by a customer, Kassio must immediately scrutinise the matter more closely. If Kassio is unable to disprove its suspicion, the State Prosecutor for Serious Economic and International Crime (SØIK) must be notified immediately for the matter to be scrutinised more closely. It is a requirement under the Danish AML Act that Kassio registers with the Danish FSA and have adequate written policies, procedures and controls covering (i) an overall risk assessment in respect of the company itself, based on the company's business model; (ii) customer due diligence measures; (iii) investigation; (iv) recording and notification obligations; (v) training programs for both employees and management with respect to anti-money laundering; and (vi) internal monitoring measures.

3. Money Laundering Process

"Money Laundering" as defined in Article 3 (1) in the Danish AML Act (in Danish: “Hvidvaskloven”):

• Unauthorized to receive or obtain other parts of financial dividends or funds obtained by a criminal offense.
• Unauthorized to conceal, store, transport, assist in disposal or otherwise subsequently act to secure the financial gain of a criminal offense.
• Attempts or complicity in such dispositions.

The process of money laundering typically involves 3 steps named 1) placement, 2) layering and 3) integration.

Placement is the process of putting the illegitimate money into the financial system. Layering hides the source of the illegitimate money through a series of transactions and/or bookkeeping tricks. Finally, Integration is where the laundered money is withdrawn from an account and is used further as a legitimate funds.

1. Placement

The initial stage of the process involves placement of illegally derived funds into the financial system, usually through a financial institution. This can be accomplished by depositing cash into a bank account. Large amounts of cash are broken into smaller, less conspicuous amounts and deposited over time in different offices of a single financial institution or in multiple financial institutions. The exchange of one currency into another, as well as the conversion of smaller notes into larger denominations, may occur at this stage.

Furthermore, illegal funds may be converted into financial instruments, such as money orders or checks, and commingled with legitimate funds to divert suspicion. Furthermore, placement may be accomplished by the cash purchase of a security or a form of an insurance contract.

2. Layering

After placement comes the layering stage (sometimes referred to as structuring). The layering stage is the most complex and often entails the international movement of the funds. The primary purpose of this stage is to separate the illicit money from its source. This is done by the sophisticated layering of financial transactions that obscure the audit trail and sever the link with the original crime.

During this stage, for example, the money launderers may begin by moving funds electronically from one country to another, then divide them into investments placed in advanced financial options or overseas markets; constantly moving them to elude detection; each time, exploiting loopholes or discrepancies in legislation and taking advantage of delays in judicial or police cooperation.

In the case of virtual currencies, there are different ways in which layering can occur, and which we take into consideration under the performance of our KYC/KYB procedure. For instance, this could be the case when one is transferring virtual currencies to wallets that have been recognized as wallets connected to criminal and illicit activities or when one is transferring virtual currencies to countries that are recognized as high-risk countries.

3. Integration

The third stage involves the integration of funds into the legitimate economy. This is accomplished through the purchase of assets, such as real estate, securities or other financial assets, or luxury goods. The three stages are also seen in terrorist financing schemes, except that stage three integration involves the distribution of funds to terrorists and their supporting organizations, while money laundering, as discussed previously, goes in the opposite direction—integrating criminal funds into the legitimate economy.

There are many different ways in which the laundered money can be integrated back with the criminal; however, the major objective at this stage is to reunite the money with the criminal in a manner that does not draw attention and appears to result from a legitimate source. For example, purchases of property, artwork, jewellery, or high-end automobiles are common ways for the launderer to enjoy their illegal profits without necessarily drawing attention to themselves.

4. Terrorist Financing

Terrorist financing is defined in art. 4 of the AML Act according to art. 114 in the Danish Criminal Act (in Danish: “Straffeloven”). The Danish Criminal Act defines terrorist financing as:

1. Directly or indirectly provides financial support to,
2. Directly or indirectly procure or collect funds to or
3. Directly or indirectly provide funds, other assets or financial or similar services to a person, a group or an association, who commits or intends to commit action covered by art. 114 or art.114 a.

Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.

In order to facilitate activities, terrorist financiers could try to take advantage of the freedom of capital movements and the freedom to supply financial services which the integrated financial area entails, if certain coordinating measures are not adopted at an international, European Union, and national level. Also, every financial institution, and every company which is somehow involved in the financial sector must adopt and follow strict internal and external anti-money laundering guidelines.

Kassio must appoint a Money Laundering Reporting Officer who is authorised to make decisions on behalf of Kassio in accordance with policies, controls and procedures, enhanced customer due diligence procedures, verifying source of funds and assets of potential high-risk customers and UBOs and gathering sufficient information about cross-border activities.

Kassio employee Nikolai Søndergaard will be the MLRO moving forward. He has been responsible for creating the AML/CTF program and is thus well suited to take on the role.

1. 3.1 Core obligations of MLRO
• Responsible for developing and updating the AML/CTF policies to match existing regulations
• Ensures that there are mechanisms to facilitate the reporting of any suspicious activities that may indicate money laundering or terrorist financing may be taking place.
• Investigates the reports and if necessary, takes the communication with SØIK and Hvidvasksekretariatet (FIU Danmark)
• Deals with SØIK and Hvidvasksekretariatet (FIU Danmark) directly on any money laundering and terrorist financing issues.
• Reports to the senior management on the effectiveness of the AML Program and significant AML/CTF matters.
• Has regular communication with senior management and has access to the necessary resources to execute upon the role.
2. Standing of the MLRO
• An employee with the power of attorney to take decision on behalf of the company for approving the following:
1. Policies, procedures and controls.
2. Establishing a business relationship with a customer from a high-risk country.
3. Establishing a relationship with a customer who is connected to a PEP.
• An employee with significant knowledge and insights into Kassio’s risk regarding ML/TF, thus being able to make decision benefitting Kassio’s when combating ML/TF and affecting Kassio’s risk exposure.
• The MLRO has the authority to act independently in carrying out responsibilities

KYC procedures have to be implemented, whenever a customer signs up with Kassio. All processes are based on a know-your-customer principle (“KYC”), which means that it must be certain that the customer is who they state they are.

Generally, there is a medium risk of ML/TF, but in cases where the risk is assessed higher the information and documentation required must be stricter to ensure proper identification of the customer. The risk assessment of a customer is completed on a case-by-case principle. The process can be summarized by the following illustration: