Systems To Establish The Identity Of Subscribers, Anti-money Laundering And Security Systems

8. Systems To Establish The Identity Of Subscribers, Anti-money Laundering And Security Systems

8.1. MECHANISMS FOR ESTABLISHING THE IDENTITY OF THE SUBSCRIBERS AND ANTI- MONEY LAUNDERING MECHANISMS

The objective of verifying the identity of the Subscriber and their Ultimate Beneficial Owners ("UBO") (see Section 2.3 "Subscribers for whom the offering is intended and any restrictions") and applying the associated vigilance measures is to mitigate the risks of money laundering and terrorist financing prior to any possible subscription. Thus, BlockchainValley collects and analyzes the information necessary to understand the purpose and nature of the business relationship between it and the Subscriber.

This information makes it possible to ensure that the operations carried out are consistent with the professional activities of the potential covered Subscriber, the risk profile presented by the business relationship, and, the origin of the funds concerned by the operations.

8.1.1. KYC/AML PROCEDURE

BlockchainValley has set up AML-CTF internal functions and procedures, considering the risk assessment carried out for each potential Subscriber. Taking into account the volume and nature of the Offer as well as the risks presented by the business relationships BlockchainValley establishes, it has concluded that due diligence will be applicable to all Subscribers to comply with French KYC/AML regulation.

8.1.3. RISK CLASSIFICATION

Before entering into a business relationship or carrying out any transaction in relation to the Offer, BlockchainValley identifies the covered Subscribers by means of the following appropriate methods (the "Covered Subscribers"). It verifies the identification data collected by BlockchainValley relating to the customer, operation, geography, UBO, shareholders and any other relevant information element.

BlockchainValley has adopted and understands that market practice is to use a Risk-Based Approach and applies KYC measures and monitoring methods depending on the risk level applied.

The Applicable Regulations include:

European Directives:

• Directive 2015/849/EU “4th AMLD”;Directive 2018/843/EU “5th AMLD”;

• Directive 2018/1673/EU “6th AMLD”.

The 4th and 5th AML Directives are already transposed to the French law (cf. Implementing regulation below).

The 6th AMLD entered into force in June 2021 and had for a principal objective to harmonies the definition of money laundering by introducing a list of 22 offenses considered as criminal activity.

The 6th AMLD also defined initiators, facilitators and inciters of crimes as accomplices. In the event of a flagrant offence or lack of control, they will then be considered as individuals taking direct advantage of the crime and will therefore be subject to the same criminal penalties. The criminal liability is also extended to legal entities under the 6th AMLD.

Moreover, any offence found in connection with a money laundering activity is now punished by a minimum sentence of 4 years in prison (1 year before).

The French Parliament did not have to transpose the changes set out in the 6th AMLD into national law, as the provisions of national criminal law (Article 324-1 of the French criminal code in particular) were already deemed to be sufficiently compliant with the requirements of the directive.

Legal basis:

▪ Articles L.561-1 to L.561-50 of the MFC.

Implementing regulation:

• articles R.561-1 to R.561-63 of the MFC;

• order (arrêté) of the French Ministry of Finance dated 2 September 2009 implementing the provisions of Article R.561-12 of the MFC;

• order (arrêté) of the French Ministry of Finance dated 27 July 2011 regarding the list of equivalent third countries in the fight against money laundering and terrorist financing mentioned in Article L.561-9, II, 2° of the MFC; and

• order (arrêté) of the French Ministry of Finance dated 6 June 2013 regarding the modalities of transmission of the declarations to TRACFIN.

• AMF Position 2019-14 – Guidelines on risk factors

• AMF Position-Recommendation 2019-15 – Guidelines on the risk-based approach to combating money laundering and terrorist financing

• AMF Position-Recommendation 2019-16 – Guidelines regarding obligations of vigilance with respect to clients and their beneficial owners

• AMF Position 2019-17 – Guidelines on the concept of politically exposed persons

• AMF Position 2019-18: Guidelines on the obligation to report suspicions to TRACFIN

  Finally, it should be noted that transactions including unusual high amounts based on the subscriber's income (salary, inheritance, etc..) constitute a red flag in terms of Money Laundering risks, hence, senior management's approval is required to finalize the subscription process for such cases.

8.1.3. CONTROLS AND SECURITY MEASURES APPLIED

All controls and security measures will be implemented after the Subscriber is allowed to subscribe tokens. The Subscriber will be warned not to purchase any token if not ready to go through a process of Whitelisting. The Subscriber will have to carry out the verification process on the Subscription Platform.

During the Whitelisting or KYC process, the Subscribers will be asked to share the minimum information and official documentation to verify their identity, depending on the amount they are going to invest.

The Whitelisting or KYC consists in filling up a questionnaire, which will indicate the next step. For those considered low risk and under USD1000 the questionnaire will be sufficient. In case of further monitoring or when the subscriber wishes to invest USD1000 and beyond, further Whitelisting identification could be needed.

For a customer in the form of a natural person, this identification is carried out by collecting its full name, full address including a phone number date and place of birth, nationality, country of residence and ewallet address used for subscription. For a customer in the form of a legal person, this identification is carried out by collecting its legal form, its name, registration number, as well as its head office address plus the basic data from above for the person acting as representant of the legal person, including ewallet address used for subscription.

When the Subscriber is a legal person, its identity is verified through the communication of the original version or copy of any deed or extract from an official register dating from less than three months or extract from the Official Journal, establishing the name, legal form, head office address and the identity of the shareholders and corporate officers, of the legal representatives or their equivalents under foreign law.

When the Subscriber is a natural person their identity is verified upon presentation of an official documents containing his photograph, either by taking a copy of the document or by collecting the following information: full name, date and place of birth, date, and place of issue of the document and the name of the authority which issued the document or authenticated it.

Subscribers from these countries are NOT allowed to invest and if any person invest being a citizen or a resident in one of these countries the funds will be returned as they won't meet the requirements: North Korea, Iran, Mnyamar, USA, American Samoa, Anguilla, Bahamas, British and US Virgina Islands, Costa Rica, Fiji, Guam, Marshall Islands, Palau, Panama, Russia, Samoa, Trinidad Tobago, Turk and Caicos Islands, Vanuatu, Belarus, Democratic Republic of Congo, Haiti, Somali, Siria, Yemen, Libya.

8.1.4. TECHNICAL ASPECT OF THE AML AND CTF PROCEDURE

Blockchain Valley SAS has implemented an AML-CTF infrastructure which is adapted to its size, nature, complexity and volume of its activities and the risks identified by the risk classification. All verification steps will be carried out on the Subscription Platform.