Anti-Money Laundering

Rules of Arev Securities hf. on anti-money laundering and counter-terrorist financing, and the proliferation and financing of weapons of mass destruction.

Introduction

These rules are made on the basis of Act No. 140/2018, on measures to combat money laundering and terrorist financing, as well as the Act on the freezing of funds and the listing of persons on a list of restrictive measures in connection with the financing of terrorism and the proliferation of weapons of mass destruction no. 64/2019.

General

Aims and scope

The purpose of these rules is to seek to prevent the business and operations of Arev Securities hf. (hereinafter referred to as "Arev") or its subsidiaries are used to launder money or to finance terrorist activities and the proliferation and financing of weapons of mass destruction.

By the enactment of these regulations, Arev intends to meet in every respect the most stringent requirements placed on financial institutions at national and international level concerning the prevention of money laundering and the financing of terrorism, and the proliferation and financing of weapons of mass destruction.

These rules apply to Arev. If the laws of any state in which Arev may have operations outside the European Economic Area impose less stringent requirements than these rules, the provisions of these rules shall apply. If the requirements go further than Arev's rules, Arev shall comply with them in all respects.

Risk assessment

These rules shall be applied on the basis of a risk assessment, whereby the extent of information gathering and other measures under this Act in respect of each client shall be based on an assessment of the risk of money laundering and the financing of terrorism, and the proliferation and financing of weapons of mass destruction, at any given time.

Arev has established risk assessment rules based on Article 4. Art. 4 of Act No. 140/2018 on measures against money laundering and terrorist financing, which allows financial undertakings to determine the scope of customer due diligence based on an assessment of the risk of money laundering and terrorist financing. These anti-money laundering and counter-terrorist financing rules are issued in connection with Arev's Know Your Client (KYC) data collection rules and the company's anti-money laundering and counter-terrorist financing risk assessment policy.

Definitions

In these rules, the following terms shall have the meanings set out below:

Money laundering:

When an individual or legal entity receives, uses, or acquires an advantage, or obtains an advantage for themselves or others, through an offence punishable under the general criminal code or other laws. It is also considered money laundering when a person or legal entity converts such proceeds, transfers them, sends, stores, assists in their delivery, conceals them or information about their origin, nature, location, disposes of or transfers the proceeds, or otherwise facilitates the obtaining of a benefit from such criminal offences.

Financing of terrorism:

The acquisition of funds, whether directly or indirectly, for the purpose, or with the knowledge, that they are to be used, in whole or in part, to commit an offence punishable under sections 100a to 100c of the Penal Code, as those provisions may be amended from time to time.

Benefits:

Any profit and assets, by whatever name called, including documents intended to secure the rightful holder's access to property or other rights that can be valued in money.

Real owner:

A person, one or more, who in fact owns the business or controls the client, legal entity or individual in whose name the business or activity is conducted or carried out. A beneficial owner is considered to be, for example:

a) a person or persons who, in fact, own or control a legal entity through direct or indirect ownership of more than 25% of the legal entity's shares, control more than 25% of the voting rights, or are otherwise considered to have control over the legal entity. This provision, however, does not apply to a legal entity that is listed on a regulated market as defined in the law on stock exchanges.

b) if it is not possible to identify the beneficial owner in accordance with point 1. e.g. due to ownership being so widely dispersed that no individuals own or control the client within the meaning of these laws, or if there is doubt as to the ownership, the individual or individuals who control the activities of the legal entity shall be considered the beneficial owner.

In cases other than those mentioned above, it must be assessed on a case-by-case basis when a person is considered to control a legal entity or another individual in such a way that they are deemed to be the beneficial owner, in accordance with paragraph b of the second sub-paragraph of Article 13(3) of Law No. 140/2018.

Shell Bank:

A financial undertaking or a similar entity without substantial activity or a registered office in the country where it is authorised to operate, which is also unrelated to a supervised group subject to effective supervision by the relevant supervisory authority.

Individuals at risk due to political affiliations:

Individuals, both domestic and foreign, who are or have been high-ranking in public service, along with their immediate family and close associates.

Freezing of economic wealth: To prevent any form of utilisation of economic assets for the purpose of obtaining funds, goods or services, including through sale, lease or pledging.
Freezing of funds: to prevent any transfer, transfer between accounts, alteration, use, access to, or dealing in funds in any way that would result in a change to their amount, amount, location, ownership, possession, nature, destination or other changes that enable the use of funds, including asset management.
Weapons of mass destruction: Nuclear, chemical, biological or toxic weapons or delivery systems for such weapons, cf. the Act on the Implementation of the Convention on the Prohibition of the Development, Production and Stockpiling of Chemical Weapons and on their Destruction and the Act on the Implementation of the Treaty on the Comprehensive Nuclear-Test-Ban.
Registered party: A person who has been placed on an enforcement list in accordance with Articles 9 to 11.
The proliferation and financing of weapons of mass destruction: Development, production, acquisition, assembly, use, provision, possession, transfer, dissemination, trade in or storage of weapons of mass destruction, as referred to in Article 2 of the Regulation on International Security Measures concerning Weapons of Mass Destruction, No. 123/2009.
Legal Entity: A party who falls under Article 2 of the Act on Measures against Money Laundering and the Financing of Terrorism, No. 140/2018.

About anonymous accounts

Arev is prohibited from opening or maintaining anonymous securities portfolios or other accounts for clients whose identity has not been verified in accordance with Arev's Know Your Client (KYC) policies.

Arev's transaction on behalf of a client

Arev is authorised to hold accounts in its own name for its clients, provided that appropriate measures have been taken to verify the identity of the relevant client as stipulated in Arev's Know Your Client (KYC) policy. If ownership of such accounts cannot be confirmed in the manner described above, additional due diligence shall be applied and a specific check shall be carried out to see if the client is on any sanctions lists.

Article 4 of these rules shall in no way limit the right of the firm to enter into forward contracts with known clients or to accumulate shares for known clients in a omnibus account in the name of the firm, or otherwise as is a normal part of its business.

About the shell bank's business

Arev is prohibited from establishing or continuing business relationships with shell banks, or any financial institution known for allowing shell banks to use its accounts for the purpose of conducting business.

About the preservation of information

Arev shall:

I. Retain copies of identity documents and public records, as well as other information about the client, for at least five years from the end of the business relationship or the completion of a particular transaction. The data must be in a form that is accessible to the authorities upon request.

II. Ensure that the retained data are sufficient for the authorities to ascertain how individual transactions were conducted, bearing in mind that they may potentially need to be used as evidence in a criminal case.

The data that must be preserved are, at a minimum:

a) The name and address of the client, as well as the names of any proxies and agents involved in the transaction, if the client is a legal entity.

b) Tax identification number and other personally identifiable information.

c) Information on the type and nature of the transaction.

d) Information on the amounts of the transaction and the currency in which the transaction was conducted.

e) Information on which accounts were used in the transaction.

f) Timestamp of the transaction.

g) Name of the recipient of funds, if applicable.

On the obligation to report suspicious client conduct and related measures

Suspension of trade

Gruni Arev, or that its employees have reasonable grounds to believe, that funds which a client intends to pass through the company are proceeds of unlawful activity or are related to the financing of terrorism and the proliferation and financing of weapons of mass destruction, shall ensure that:

The requested transactions shall not be carried out, except in cases where the transactions are of such a nature that they cannot wait, the company is obliged to carry out the transactions, or the suspension of transactions may hinder or impede an investigation by the authorities. In such a case, however, careful records of all information about them must be kept, and they must be reported immediately to the authorities in accordance with the provisions of this chapter.
Taking into account the outcome of the measures in accordance with point 8.1.a, the responsible authority for anti-money laundering measures shall assess whether the alleged incident requires a specific review in light of the Act No. 64/2019 on the freezing of assets and the registration on a list of coercive measures. The responsible person shall make an assessment and take appropriate action where warranted. Further details are set out in Articles 8.2, 8.3 and 8.4.
The client shall not be refused the execution of the transaction or otherwise warned, cf. article 9.

Regarding notification to the responsible person for anti-money laundering measures

All suspicious and unusual transactions, attempts at such transactions, or suspicious client behaviour, in accordance with Article 10 of Arev's Customer Due Diligence (KYC) policy, shall be immediately reported to Arev's Anti-Money Laundering Officer.

Examples of suspicious client behaviour include:

a) When a client fails to prove their identity satisfactorily.

b) When a client does not provide information about the purpose of the intended transaction.

c) When a client provides unreliable information.

d) If it can be assumed that a transaction is carried out for the benefit of a third party and the client refuses

to provide information about a third person.

e) Transactions which do not appear to have a financial or legitimate purpose.

f) If, during the vetting of business partners, links are found to parties on international lists of

Coercive measures.

A notification to the money laundering reporting officer shall, at a minimum:

a) Be in writing.

b) Contain information about the client's name and tax identification number.

c) Contain a description of the suspicious conduct and the reasons for the suspicion.

d) Contain the necessary data relating to the transaction.

Review by the person responsible for anti-money laundering measures of suspicious and unusual transactions

The Money Laundering Reporting Officer shall immediately assess whether there are grounds to report the suspicious transaction or attempted transaction to the relevant authorities. The money laundering reporting officer is responsible for ensuring that all circumstances of such transactions are thoroughly investigated and that the findings of that investigation are submitted to the authorities alongside the transaction report. However, if there is no reason to make such a report, the findings of the anti-money laundering officer's investigation shall be retained in accordance with the provisions of Article 7.

The money laundering reporting officer's review of suspicious or unusual transactions shall consist of the following actions:

a) Obtain the necessary data for information about a client or a proposed transaction.

b) The reliability of the available data shall be verified.

c) An independent assessment shall be made of the available data and information.

d) Information on the notification to the money laundering reporting officer and the actions taken in its follow-up, shall be recorded in the company's data retention system.

Data obtained by the money laundering reporting officer in connection with their independent investigation of suspicious transactions must be sufficiently detailed to allow for an understanding of the nature of the transactions and to be used as evidence in criminal proceedings.

If the outcome of the check is positive, the person responsible for anti-money laundering measures shall notify staff of their findings at the same time as the competent authority.

Notification to the competent authorities

The money laundering reporting officer, having conducted a thorough investigation into the circumstances of a transaction or suspicious client conduct, that there are grounds for suspicion or reasonable cause to believe that such a transaction is related to an offence of the kind defined in Article 2.3, he shall immediately report this to the competent authority.

Such a notification shall at a minimum:

a) Be in writing.

b) Contain information about the client, including a copy of the client's identity document.

c) Contain a detailed description of the client's suspicious conduct.

d) Contain copies of all documents and information relating to the assessor's assessment of the actions taken against money laundering, and whether the transaction is related to money laundering or the financing of terrorism.

e) Specify the deadline that Arev has to complete the transaction.

f) Contain any other information that may be necessary.

Such notification shall generally be provided before the suspicious transaction is carried out, but otherwise, in the cases referred to in sub-paragraph 7.1(a), after the transaction has been completed. It is emphasised that Arev shall send a notification to the competent authority in accordance with the above, even if no transaction has taken place and/or no transfer has occurred, or if it was only an attempted transaction.

Upon the dispatch of such a notification, a decision on the execution of the client's transaction shall be taken in consultation with the competent authority handling the notification. It shall always be ensured that the competent authority receiving the notification confirms its receipt.

Obligation of confidentiality

Managers, employees and others working on behalf of Arev are obliged to ensure that a client or any other external party does not become aware that information has been sent to a competent authority or that an investigation into suspected money laundering may be initiated.

Furthermore, the same parties are prohibited from informing the client or otherwise indicating to them that their business is under investigation following a report from another party, should they become aware of such an investigation.

Regarding Arev's duties towards employees in relation to the duties under clause 8.1 as a whole.

Arev shall ensure that information about which employee reported a client's suspicious transaction is kept confidential, and their name shall be withheld, for example, in notifications to the Director of National Police or other competent authorities, unless there is an overriding necessity.

Where applicable, the company shall also take the necessary measures to protect those employees involved in the notification of client transactions from threats or hostile actions by clients following such notification.

The person responsible for anti-money laundering measures shall ensure that these rules are complied with.

On monitoring the implementation of Arev's monetary policy.

Arev shall ensure that the provisions of these rules are at all times consistent with the applicable international rules and standards which provide the best guidance on measures to prevent money laundering and the financing of terrorism.

Arev shall at all times ensure that the procedures and working practices in the various departments of the company reflect the provisions of these rules, so as to guarantee that the criteria and principles set out herein are implemented in all respects.

On the duties of related technological development

Arev shall endeavour to:

a) To analyse at all times what impact new technology or business practices may have on clients' ability to carry out money laundering or the financing of terrorism.

b) Take appropriate measures to prevent such technology or business practices from being used in dealings with Arev or its subsidiaries for the purpose of laundering funds or financing terrorist activities.

c) Maintain specific policies and procedures that address the risk factors associated with non-face-to-face transactions.

The company shall endeavour to ensure that its obligations under this article are fulfilled, as appropriate in consultation and cooperation with the competent authorities in each state where the company or its subsidiaries operate.

On the responsible person for anti-money laundering and counter-terrorist financing measures

The overall management of Arev's anti-money laundering and counter-terrorist financing is in the hands of the Managing Director, acting on behalf of the Arev Board, However, the implementation of the board's policy, as well as the supervision of its and relevant legal provisions' compliance, is the responsibility of a dedicated Officer for Anti-Money Laundering and Counter-Terrorist Financing.

The money laundering reporting officer shall have direct access to the company's board and management regarding the matters which fall within the scope of these rules. The money laundering reporting officer shall also have unconditional access to customer due diligence, transactions or requests for transactions, along with all data that may be relevant for a report to the Director of National Police.

The person responsible for anti-money laundering measures shall at all times familiarise themselves with, and use, the guidance and instructions of the Financial Supervisory Authority and other government authorities and international organisations. They shall also take appropriate measures to maintain their knowledge.

The annual report of the Anti-Money Laundering Officer to the Arev Board shall detail how the company's written internal rules and internal controls comply with guidelines, recommendations and information from the Financial Supervisory Authority and other government authorities, and the recommendations of the FATF. The report shall also address how notifications and information from the Financial Supervisory Authority and other government authorities have been handled. The report shall provide information on the number of notifications received by the Anti-Money Laundering Officer and how many were forwarded to the police. Information shall also be provided on how staff training and education have been conducted. Finally, the report from the money laundering reporting officer shall state what can be improved in the company's working methods and make recommendations for improvements.

The person responsible for anti-money laundering measures is Jón Sch. Thorsteinsson.

Staff training

The Money Laundering Officer shall ensure that all Arev employees are made aware of these policies and the duties they owe under them, and shall ensure that they are provided with adequate training in the measures to prevent money laundering and the financing of terrorism which prethe company has in place at any given time.

Furthermore, it shall be ensured that such knowledge and training are maintained, and they shall be based on the technology and methods known to be used in money laundering at any given time.

The heads of the individual departments of the company shall ensure that employees attend the training courses and presentations on the prevention of money laundering and the financing of terrorism offered for this purpose, as appropriate.

Training for front-line staff who are in direct contact with clients

Specific training for front-line staff shall be organised at least once a year. These training sessions shall cover the relevant laws and regulations on the prevention of money laundering and the financing of terrorism, the documentation to be obtained at the outset of a business relationship, and the ongoing monitoring of client transactions, where to report suspicions of money laundering, how to handle communications with clients in relation to such a report, and what duties rest with staff under these rules and the money laundering legislation. These staff members shall receive special training to enable them to identify which transactions might be related to money laundering.

Training for other staff

Other Arev staff shall regularly attend courses where the company's rules in this regard, as well as the applicable legislation on the prevention of money laundering and the financing of terrorism, are reviewed.

Training for new employees

At the start of employment, the new employee shall be given the company's policies on anti-money laundering and counter-terrorism financing. Every effort shall be made to ensure that new employees attend the first money laundering induction session held after they start work.

On the supervision of the effectiveness of anti-money laundering measures

The Money Laundering Officer shall be responsible for the regular monitoring of the effectiveness of Arev's anti-money laundering defences and the company's defences against the financing of terrorism and the proliferation and financing of weapons of mass destruction. The company's procedures related to its anti-money laundering and counter-terrorist and proliferation financing defences, together with the Money Laundering Officer's testing plans and their findings, shall be subject to regular review by the company's internal audit.

In addition, internal audit carries out independent reviews in this area.

On safety when hiring staff

Arev shall, when recruiting staff, ensure that they meet the most stringent eligibility requirements. The recruitment procedure shall, among other things, provide for the authority to investigate an applicant's educational and professional background, their financial situation, criminal record and other factors relevant to assessing whether they are in a position that increases the risk of them becoming a tool for individuals engaged in money laundering, the financing of terrorism, and the proliferation and financing of weapons of mass destruction.

Consequences of not following these rules

Arev neglects in its operations, intentionally or through gross negligence, to verify the reliability of information about clients, in accordance with Arev's rules on client due diligence, the duty to report, in accordance with the provisions of these rules, or other obligations pursuant to fails to provide information or to furnish assistance, reports or documents as provided for in these rules and the law, Arev may be subject to fines.

If a director or employee of Arev has committed an offence under this Act, Arev may also be fined if the offence was committed in the interests of Arev.

Coming into force

These rules shall come into force upon the signature of the board. Furthermore, the previous rules on anti-money laundering measures shall be repealed from 2025.

Approved by the board on 27 March 2026