Policy Economic Sanctions

Owner: Compliance
Approved by: Management Committee
Date of publication: 28.01.2021
Version: V1.1
Table of content

1 PURPOSE AND SCOPE OF POLICY ........................................................................................ 4

1.1 PURPOSE OF POLICY.................................................................................................................. 4

1.2 SCOPE OF POLICY...................................................................................................................... 4

1.3 SANCTIONS BACKGROUND ......................................................................................................... 4

2 SANCTIONS POLICY ................................................................................................................. 5

2.1 ZERO TOLERANCE ...................................................................................................................... 5

2.2 SANCTIONS APPLICABLE TO IQ-EQ ............................................................................................. 5

2.3 REQUIRED MINIMUM CONTROL STANDARDS ................................................................................ 5

3 SCREENING AND DUE DILIGENCE REQUIREMENTS ........................................................... 6

3.1 GENERAL DUE DILIGENCE REQUIREMENTS ................................................................................. 6

3.1.1 Assessing Sanctions Risk — Business Risk Assessment .................................................. 6

3.1.2 Assessing Sanctions Risk — Client Risk Assessment ........................................................ 6
3.2 SCREENING REQUIREMENTS....................................................................................................... 6

3.2.1 New Business ...................................................................................................................... 6

3.2.2 Existing Business................................................................................................................. 6
3.2.3 Transactions ........................................................................................................................ 7
3.3 ESCALATION AND REVIEW OF POSSIBLE SCREENING MATCHES AND RISK FACTORS ...................... 7

3.3.1 Initial Investigation ............................................................................................................... 7

3.3.2 Escalation to RC .................................................................................................................. 7
3.4 BLOCKING/ASSET FREEZE .......................................................................................................... 8

4 OTHER MATTERS ...................................................................................................................... 9

4.1 EMPLOYEE TRAINING .................................................................................................................. 9

4.2 OWNERSHIP .............................................................................................................................. 9

4.3 SANCTIONS REGISTER ................................................................................................................ 9

APPENDIX I GLOSSARY OF TERMS ................................................................................................. 10

APPENDIX 2 ADDITIONAL INFORMATION & USEFUL LINKS ........................................................ 12

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Revision History

Version Date of Document Summary of main changes

V1.0 02.07.2019 N.A. – First version of Policy

Updated web links
Vocabulary update (RC/RR)
V1.1 28.01.2021 OFAC precision (no contact
possible)
FIU report precision

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1 Purpose and Scope of Policy
1.1 Purpose of Policy
The purpose of this document is to establish the Policy and minimum Control Standards for the
identification and management of risk associated with non-compliance with economic sanctions.

Failure to adhere to the Policy could expose IQ-EQ Luxembourg (“IQ-EQ”), and potentially, the
employees, to significant regulatory enforcement (including possible civil or criminal penalties) and/or
reputational damage.

1.2 Scope of Policy

This policy applies to IQ-EQ as well as their directors, officers and employees, and all persons engaged
to perform work for IQ-EQ. Non-compliance with the Policy is a serious matter, which may result in
disciplinary action.

IQ-EQ is required to maintain and update internal policies, procedure and controls to ensure compliance
with this Policy. Business Unit policies, procedures, and controls include, but not be limited to:

 Customer due diligence and client acceptance procedures;

 Policies & procedures relating to Politically Exposed Persons and other higher risk
relationships;

 Procedures relating to the management and/or exiting of prohibited business; and

 Transaction monitoring procedures.

1.3 Sanctions Background

Economic sanctions are restrictions put in place by national governments such as the US Office of
Foreign Assets Control ("OFAC") or supranational bodies such as the United Nations ("UN") and
the European Union ("EU").

Sanctions are generally intended to limit the provision of certain financial services or restrict access to
financial markets, funds and economic resources in order to achieve a specific foreign policy or national
security objective.

Economic sanctions come in many forms, and these will be adapted and developed to suit a given
situation. The most common types of economic sanctions currently in use or used in recent years are:

 Targeted asset freezes, which are usually applied to named individuals, entities and bodies
("designated," "restricted," or "target" persons), restricting access to funds and
economic resources.

 Restrictions on a wide variety of financial markets and services. These can apply to named
individuals, entities and bodies, to specified groups or to entire sectors. To date these have
taken the form of investment bans; restrictions on access to capital markets; directions to
cease banking relationships and activities; requirements to notify or seek authorization prior
to certain payments being made or received; and restrictions on provision of financial,
insurance, brokering, advisory services or other financial assistance.

 Directions to cease all business of a specified type with a specific person, sector or country.

The consequences of any lack of vigilance in the area of economic sanctions can be severe. Failure to
comply with applicable sanctions requirements may result in criminal prosecution, both against IQ-EQ
itself and in certain circumstances against individual employees, including senior management.

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All applicable employees should therefore clearly understand, and be mindful of, the risks associated
with global economic sanctions as well as the potential adverse impact to IQ-EQ's brand, reputation and
value in the event that we fail to manage the risk effectively.

2 Sanctions Policy
2.1 Zero tolerance

lt is the policy of IQ-EQ, whether acting in a proprietary or fiduciary capacity, not to:

 Permit or facilitate any transaction involving countries or regions subject to comprehensive

sanctions (currently, Iran, Cuba, Syria, North Korea, and the Crimea region of Ukraine) in a
manner that would violate applicable sanctions.

 Deal directly or indirectly with restricted parties targeted by economic sanctions, such as
parties on the OFAC's Control's List of Specially Designated Nationals and Blocked
Persons ("SDN List"), in a manner that would violate applicable sanctions.

2.2 Sanctions applicable to IQ-EQ

As a matter of internal compliance policy, IQ-EQ is required to comply with OFAC, UN, and EU sanctions
as if such sanctions applied to the Business Unit's activities.

Refer to Appendix 2 for additional information. For definitive guidance on the sanctions that apply in
your jurisdiction, please consult your local RC or Managing Director.

2.3 Required Minimum Control Standards

IQ-EQ is required to establish and maintain effective procedures and controls to ensure compliance with
the requirements of this Policy. Minimum control standards shall include:

 A documented business risk assessment, owned by IQ-EQ Board, to assess the overall
risk to the Business Unit of sanctions non-compliance, and to develop policies, procedures
and controls that are commensurate to the assessed level of risk;

 A documented client risk assessment to assess the specific risk of sanctions non-
compliance on individual client engagements;

 Screening controls for both new and existing business to identify, as far as possible,
transactions that involve countries, clients, other associated individuals or entities, or financial
institutions targeted under economic sanctions;

 Procedures to enable the timely investigation of potential target matches in order to

determine whether they are an actual/confirmed target;

 Controls for freezing/blocking accounts and/or transactions in cases where actual target
matches are confirmed; and

 Reporting and escalation processes both internally within and, where necessary to external
agencies and authorities.

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3 Screening and Due Diligence Requirements
3.1 General Due Diligence Requirements
3.1.1 Assessing Sanctions Risk — Business Risk Assessment
IQ-EQ must maintain a good understanding of the applicable economic sanctions regimes, as well as
the risks posed by their particular clients, transactions, services, products and jurisdictions. The key
risks identified should be documented in the form of a specific Business Risk Assessment or as part of
the Unit's Key Risk & Control Register (KRACR), from which risk mitigation activities and controls should
be developed as necessary.

3.1.2 Assessing Sanctions Risk — Client Risk Assessment

All serviced entities must be risk rated as part of the initial onboarding process, and periodically
thereafter in accordance with the Unit's minimum risk rating requirements. As part of the risk
assessment, IQ-EQ must identify and evaluate any potential risks associated with sanctions as part of
the Legal and Regulatory risk considerations. Where specific risk factors are identified, these should be
documented as part of the risk assessment process, together with the proposed mitigating actions or
controls.

Risks from sanctions include, but are not limited to: the country that the client is based in, where it
operates, the type of business the client undertakes, where the client's funds originate and where they
are being sent. The Risk Assessment should include obtaining information about the beneficial
ownership of the Client, particularly as to entities that own a 50% or greater interest in the Client.

Clients who reside and/or operate in a sanctioned jurisdiction, or have a history of dealing with
individuals and entities from such jurisdictions, should be identified as presenting a higher level of
sanctions risk and will require enhanced due diligence and to be monitored more regularly, as described
below. Any proposed matter involving a Client located in a sanctioned country or region (Iran. Cuba,
Syria, North Korea, or the Crimea region of Ukraine) should be escalated as described in Section 3.3.

Risks are present even where services are limited (e.g., registered offices). When undertaking the risk
assessment for such restricted services engagements we should therefore take into account factors
such as the identity and profile of the controllers, beneficial owners and associated parties, the nature
and geographical sphere of the entity's activities etc., in order to determine, and where necessary
mitigate, potential sanctions risks for IQ-EQ.

3.2 Screening Requirements

3.2.1 New Business
In accordance with the Client Due Diligence IQ-EQ must screen potential new Clients and Serviced
Entities against applicable lists of restricted parties using an appropriate screening system (Screening
Deployed, World-Check, Finscan, or similar) as part of the new business acceptance process and in all
cases prior to the commencement of services. This screening should encompass available information
about the Client or Serviced Entity's ownership structure or controlling parties. Refer to Section 3.3
below in the event of a possible match to a screening list and suspend further engagement on the matter
until the possible match is resolved.

3.2.2 Existing Business

IQ-EQ is required to screen existing Clients and Serviced Entities on a regular basis.

IQ-EQ will engage daily screening of Clients and Serviced Entities and weekly screening for investors
with TA Department.

IQ-EQ will also engage in "change of circumstance" screening upon:

 Updates to applicable lists of restricted parties, or

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  Occurrence of a material change or development relating to the Client or Serviced Entity, such
as a change in director/controller, expansion of geographical activities, change in ownership
structure, changing in banking relationships, etc.

IQ-EQ will engage in screening of higher-risk Clients and Serviced Entities — such as those who are
Politically Exposed Persons (PEPs) and/or known to have a connection to a country or regime subject
to applicable economic sanctions — with greater frequency.

Refer to Section 3.3 below in the event of a possible match to a screening list and suspend further
activity involving the Client/Serviced Entity until the possible match is resolved.

3.2.3 Transactions
IQ-EQ must implement risk-based transaction monitoring procedures designed to detect transactions
undertaken by Clients or Serviced Entities that may be subject to economic sanctions. The procedures
should include screening all parties to a transaction, including any known intermediaries such as
suppliers, agents, financial institutions, shipping companies, forwarders, and vessels, as well as the
countries involved the transaction (including any countries involved in transhipments).

Examples of transactions that may be caught by economic sanctions include, but are not limited to:

 Payments or transfers of other assets to financial or other institutions located in a country

subject to applicable economic sanctions;

 Payments or transfers of other assets to or from individuals or entities resident in or national

of a country subject to applicable economic sanctions;

 Transactions involving individuals or entities whose business activities and/or primary source
of wealth originate from a country that is subject to applicable economic sanctions;

 Transactions carried out on behalf of or for the benefit of individuals or entities who may
themselves be designated under applicable economic sanctions, or who are members or
officials of a government that is subject to applicable economic sanctions.

3.3 Escalation and Review of Possible Screening Matches and Risk Factors
3.3.1 Initial Investigation
Where a possible match to a sanctioned country or restricted party is identified, IQ-EQ must document
an initial investigation of the possible match according to procedures established by the Business Unit,
subject to a "four eyes" review/approval process.

This procedure must include:

 Requests for additional information from the Client, intermediary, or other third party to enable
the IQ-EQ to rule out or confirm a possible match;

 Documentation and recordkeeping of all information, determinations made, and actions taken
in connection with a possible match (Refer to Section 4.1 below); and

 An escalation procedure to RC where the outcome of the investigation is inconclusive or raises

further questions.

Where the outcome of the investigation confirms that a potential target match is a "false positive", the
business may proceed without further escalation under this Policy although a clear audit trail of the
investigation and its conclusion should be maintained. (Refer to Section 4.1 below)

3.3.2 Escalation to RC
An investigation must be escalated to RC.

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  Where the outcome of the initial investigation is inconclusive or raises further questions; or

 Where the outcome of the initial investigation confirms an actual match to a restricted party or
sanctioned country.

The escalation should include provision of a clear explanation of the rationale/purpose of the transaction
along with screening results for all parties to the transaction and any available supporting documentation
or information. Further transactions or activity in connection with the matter should be suspended until
clearance is provided by the Managing Director or RC, as appropriate.

RC will be responsible for reviewing the materials and making a determination regarding whether to
proceed, or whether further escalation is warranted (including to outside counsel, as needed).

 Where RC confirms the potential screening match is a "false positive" or the activity is
permitted (as informed by outside counsel, if necessary), the activity may proceed subject to
Managing Director approval, with the supporting advice retained on file. (Refer to Section 4.1
below)

 Where RC confirms a match to a sanctioned country or restricted party that is not otherwise
exempt or authorized under applicable law (as informed by outside counsel, if necessary):

 All activity involving the sanctioned country or restricted party must stop.

 If the party is subject to blocking or asset freeze requirements, appropriate action should be
taken as detailed in Section 3.4.

 Any reporting obligations required under applicable law are carried out (refer to Section 4.3)

 The Managing Director (or appointed representative) must escalate the matter with details of
the particular issue and proposed course of action to:

- The Group Reputation Risk Committee;

- Group Risk and Compliance (GRC) as a Client Risk Event; and
- The Head of the Service Line.

RR with the assistance of RC prepares a Suspicious Transaction Report regarding suspicion reasonable
grounds for suspicion, unusual or suspicious activities/transactions of Money Laundering, associated
predicate offence or terrorist financing if any.

Group Risk and Compliance (GRC) is responsible for determining whether to pursue a license
application for matters that are captured by sanctions prohibitions. For the avoidance of doubt, the
proposed activity or transaction should not proceed without the prior written agreement of the Reputation
Risk Committee, which must be obtained in addition and prior to any external governmental
licenses/permits etc. that may also be required. Details of the Group Reputation Risk Committee
escalation process can be obtained from GRC and the Group Risk Event Policy can be found on the
Group Intranet.

The local Managing Director will agree upon the management of any matter involving a sanctioned
country or restricted party and will notify GRC. Business that violates applicable sanctions may require
termination. GRC will track the matter on the Group's Risk Event Register and will monitor progress,
post-event analysis, and remediation as necessary.

3.4 Blocking/Asset Freeze

Where an investigation identifies a match to a party subject to blocking or asset freeze restrictions, all
property and interests in property of the party must be immediately blocked or frozen and cannot be
dealt with or made available to any party. IQ-EQ is required to ensure the blocking/asset freeze is
appropriately carried out.

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In case blocking or freezing of assets is legally required please contact immediately the Managing
Director and RC and follow the procedure to apply as indicated under the website of Luxembourg
Ministry of Finance https://mfin.gouvernement.lu/fr/dossiers/2018/sanctions-financiaires-
internationales.html where you find the necessary guidelines or consult the IQ-EQ’s Intranet.

4 Other matters
4.1 Employee training

Relevant employees are required to undergo periodic sanctions compliance training to help ensure
understanding of the sanctions requirements and compliance with the policy.

4.2 Ownership
This policy is owned by local RC. Any requests for changes or questions concerning the policy should
be addressed to RC.

This policy is in line with the minimum Group control standards for Economic Sanctions.

4.3 Sanctions register

A sanctions register shall be maintained by IQ-EQ.

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Appendix I Glossary of terms
For the purposes of this Policy, the following key terms and definitions apply:

Term Definition

Applicable economic For the purposes of this Policy, applicable economic sanctions comprise
sanctions any sanctions enacted and in force from time to time under any of the
following regimes:

 United States Office of Foreign Assets Control ("US OFAC");

 United Nations Security Council; and/or
 European Union Common Foreign & Security Policy

Associated party Any third party that may be directly or indirectly associated with our
clients(as defined below). Whilst we may not be acting on their behalf, or
have
any service agreement in place with these individuals or entities, they may
nonetheless benefit from our services indirectly, for example a third party
payee.

Client For the purposes of this policy, “Client” should be interpreted in its
broadest sense, to include Serviced Entities and their associated parties
including, but not limited to, those who are:

 The beneficial owner(s) of the serviced entity i.e.the natural

person(s) who ultimately owns or controls the entity or on whose
behalf the legal arrangement has been established;
 Persons on whose instructions we must or are authorized to act;
 Persons who could make a request to trustees e.g. beneficiaries;
 Individuals with the power to bind the serviced entity e.g. directors
where not provided by IQ-EQ, persons to whom powers of
attorney have been granted, bank account signatories or persons
in equivalent roles, co-trustees, external trustees, protectors,
enforcers etc.; and
 Providers of initial and on-going wealth into the serviced entity
where different from those above e.g. Settlor or dedicator.

Economic sanctions Restrictions put in place by national governments or multilateral

organizations that limit the provision of certain financial services or restrict
access to financial markets, funds and economic resources in order to
achieve a specific foreign policy or national security objective. Economic
sanctions — which may also be referred to as Financial Sanctions, Trade
Sanctions and/or Restrictive Measures - may apply to individuals, entities,
governments or countries and in some cases will prohibit the provision of
any services to named individuals ("Specially Designated Nationals" or
SDNs). An individual or entity who is on a sanctions list may have their
assets frozen, preventing any action being conducted without first
requesting permission from the body who ordered the sanction.

Economic resources Generally means assets of every kind, — tangible or intangible, movable or
immovable — which are not funds, but may be used to obtain funds, goods
or services.

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Term Definition

Funds  Financial assets and benefits of every kind including but not limited
to:

 Cash, cheques, claims on money, drafts, money orders and other

payment instruments.

 Publically or privately traded securities and debt instruments,

including stocks and shares.

 Interest, dividends or other income on or value accruing from or

generated by assets.
Dealing in funds Moving, transferring, altering, using, accessing, or otherwise dealing with
them in any way which would result in any change to their volume, amount,
location, ownership, possession, character, destination or other change that
would engage the funds to be used.
Specially Designated As part of its enforcement efforts, US OFAC publishes a list of individuals
National ("SDN") and companies owned or controlled by, or acting for or on behalf of,
targeted countries. lt also lists individuals, groups, and entities, such as
terrorists and narcotics traffickers designated under programs that are not
country-specific. Collectively, such individuals and companies are called
"Specially Designated Nationals" or "SDNs."

lt is generally prohibited to:

' Deal with the funds or economic resources, belonging to or owned,

held or controlled by a designated individual or entity.

Target person, An
Makeindividual
funds ororeconomic
entity whoresources
is specifically named
available, on anor
directly applicable
indirectly,economic
Restricted Party, sanctions list or owned or controlled by parties named on applicable
Designated Person economic sanctions
to, or for the list a(as
benefit of, determined
designated under applicable
individual law).
or entity; or

Engage in actions that, directly or indirectly, circumvent

the

financial sanctions prohibition.

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Appendix 2 Additional Information & useful links

UN Sanctions

The United Nations (the UN) may impose financial sanctions and require member states to implement
them, by way of a Resolution of the UN Security Council. Further information regarding the work of the
UN in relation to financial sanctions is available at:

https://www.un.orq/sc/suborq/en/sanctions/information

European Union

The EU implements financial sanctions imposed by the UN and may also implement EU autonomous
financial sanctions. All of these sanctions are implemented through EU regulations, which mean they
have direct legal effect in all EU Member States. Additional information available at:

https://www.sanctionsmap.eu/#/main
Luxembourg

CSSF: information available at https://www.cssf.lu/fr/sanctions-financieres-internationales/

Ministry of Finance: information available at https://mfin.gouvernement.lu/fr/dossiers/2018/sanctions-

financiaires-internationales.html .

 Guidelines relating to the implementation of financial restrictive measures (sanctions) against

third countries, entities or individuals.
 Guidelines relating to the implementation of financial sanctions against certain persons,
entities, bodies and group within the framework of combating terrorism financing.
 These guidelines are also available on Intranet.

United States

The United States Government maintains a list of designated individuals and entities through the Office
of Foreign Assets Control ("OFAC"). United States financial sanctions generally have far-reaching extra-
territorial effect. This means that even if an institution is not operating, incorporated or constituted in the
United States, OFAC sanctions may still be applicable. Institutions should be particularly mindful of
OFAC sanctions if they:

 Employ United States citizens or permanent aliens;

 Transact in US dollars;
 Enter into transactions involving United States operations or accounts; or
 Have United States offices, subsidiaries, branches or agencies or a relationship with a United
States firm.

Failure to comply with OFAC sanctions could expose the firm to criminal or civil liability in the United
Additional information available at:

https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx
https://ofac.finra.org/#/

It is reminded that IQ-EQ is not allowed to contact directly OFAC.

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