1. Compliance & AML
Annual Training
(Bermuda)
Nigel Bell
Compliance Manager
January 2012

2. WHAT IS COMPLIANCE?
“An independent function that identifies, assesses, advises on,
monitors and reports on a company’s compliance risk, that is, the risk of
legal or regulatory sanctions, financial loss, or loss to reputation a
company may suffer as a result of its failure to comply with all
applicable laws, regulations, code of conduct and standards of good
practices”
Basel committee supervision 2008

3. COMPLIANCE
REPORTING
PRESIDENT &
MANAGING DIRECTOR

4. MISSION STATEMENT &
OBJECTIVES
To provide the LOM Group of Companies with compliance solutions that satisfy all
regulatory requirements while promoting successful business practices
To ensure that LOM attains high standards of regulatory Compliance by providing a
practical, efficient and business friendly Compliance solution
Compliance shall;
1. Establish wide Compliance and Anti Money Laundering/ Anti-Terrorism framework in line with
applicable local and international laws and regulations;
2. The framework shall define requirements, set compliance objectives and outline a monitoring
process to ensure effective implementation;
3. Raise awareness within the Company about the different components of AML framework through
development of policies and procedures and periodic staff training/awareness sessions; and
4. Report and take appropriate action, upon detecting suspicious activities involving shades of
money laundering as directed by regulators.

5. LOM
COMPLIANCE GROUP
Team
Nigel Bell
Compliance Manager
Key Responsibilities:
Group Policies & Procedures Credit & Risk Management
Regulatory & Legal Matters Client Complaint
AML Program Marketing & Account Approvals
Broker & Trading Compliance Counterparty Relationships

6. COMPLIANCE
FUNCTION
LOM’s Compliance consist of three primary functions;
 Advisory,
 Monitoring & Surveillance and
 Training

7. ADVISORY
Compliance advises;
Brokers on pre and post trade execution
in the development of new products and services by providing
guidance on relevant laws and regulations
Assist in identifying and addressing conflicts of interest

8. MONITORING &
SURVEILANCE
LOM’s monitoring consist of;
Identifying potential trading or compliance violations with internal
policies and/ or applicable securities laws and regulations,
Managing conflicts of interest, intentional wrongdoing and
violations;

9. TRAINING & AWARENESS
Educating staff on compliance issues, and acting as a contact
point within the Company for compliance queries from staff
members; and
Establishing written guidance to staff on the appropriate
implementation of compliance laws, rules and standards
through policies and procedures and other documents such as
compliance manuals, internal codes of conduct and practice
guidelines

10. POLICIES &
PROCEDURES
As a licensed investment provider in Bermuda and Bahamas, we have a fiduciary obligation to
our advisory clients. The Company has a duty of loyalty to always act in utmost good faith, place
our clients’ interests first and foremost, and to make full and fair disclosure of all material facts
and in particular, information as to any potential and /or actual conflicts of interest.
As an employee of LOM, you are required to follow these principals by adhering to the following
internal policies and procedures:
Compliance Procedures Manual - Reviewed and updated annually or when there is a
regulatory change
LOM Group of Companies Policies & Procedures Compliance Manual - Reviewed and
updated annually
LOM’s Anti- Money Laundering & Anti-Terrorist Financing Policies & Procedures -
Reviewed and updated annually or when there is a regulatory change
LOM’s AML/ATF Training Manual - Reviewed and updated annually
LOM’s Risk, Credit & Operation Manual - Reviewed and updated annually
LOM’s Mobile Device Policy - Reviewed and updated annually

11. POLICIES &
PROCEDURES
LOM Policies & Procedures on the Dashboard

12. POLICIES &
PROCEDURES
New & Updated Policies & Procedures
Policy & Procedure Last Updated Next Review
LOM’s Mobile Device Policy November-10 November-11
LOM’s AML/ATF Training Manual January-11 January-12
LOM Group of Companies Policies &
Procedures Compliance Manual
July-11 July-12
LOM’s Anti- Money Laundering & Anti-
Terrorist Financing Policies & Procedures
October-11 October-12
LOM’s Risk, Credit & Operation Manual October-11 October-12

13. IBA ACT 2003
General Business Conduct and
Practice – Code of Conduct

14. IBA ACT 2003
2 Professional Conduct Standards
COC 2.4 LOM is expected to observe the tenets of any code or set of standards promulgated
by any body, whether in Bermuda or elsewhere, which has responsibility in the public interest
for the supervision or regulation of investment business or other financial services or for the
setting of standards of conduct which govern the business conducted by LOM.
Notwithstanding any inconsistency between such tenets and any applicable provisions within
local code or any other legal requirement, LOM is expected to comply with such codes and
accepted standards as part of its policy of observing good market practice.

15. SECTION I
Maintaining Client Privacy &
Confidentiality

16. PRIVACY POLICY
1.3 Privacy Policy
As a licensed investment provider, LOM must comply with the respective regulations relating
to privacy, which require the Company to adopt policies and procedures to protect client
personal information. Such information may include personal financial and account
information, information relating to services performed for or transactions entered into on
behalf of clients, advice provided by LOM to clients, and any data or analyses derived from
such personal information.
Non-Disclosure of Client Information
LOM does not share any client personal information with any non-affiliated third parties, except
in the following circumstances:
As necessary to provide the service that the client has requested or authorized, or to
maintain and service the client's account;
As required by regulatory authorities or law enforcement officials or as otherwise required by
any applicable law (refer to 1.8 below); and
To the extent reasonably necessary to prevent fraud and unauthorized transactions.

17. PRIVACY POLICY
Safeguarding and Disposal of Client Information
Employees must;
Any document, statement, correspondence, personal notes, computer printouts, or other
written material containing a client name, address, account information, proprietary LOM
information, or any other privileged information that is no longer needed and not required to be
kept, must be shredded rather than placed in the normal trash.
NOT to store client information on any electronic media device
NOT have any documents containing client names or other sensitive information left in view
in reception or other public areas. Client files and logs should be kept in a secure location out
of business hours. All client files must remain in the file room or with Compliance.
1.4 Employee Responsibilities
All employees are prohibited, either during or after the termination of their employment with LOM,
from disclosing confidential client information to any person or entity outside the firm, including family
members.

18. PRIVACY POLICY
“Employees should maintain the confidentiality
of information learned in the course of their
employment”
1.4 Employee Responsibilities – LOM Compliance Manual

19. PRIVACY POLICY
The ‘Need To Know’ Concept and Information Barriers
DO’s
Be mindful of who has access to your drive(s)
Limit/control email distribution of sensitive
information
Consider disabling auto-complete function in
Outlook
Advise Compliance of potential information
barrier violations.
Advise Compliance of any security threats that
you become aware of
DON’Ts
Send emails containing sensitive information
to personal/internet outside email accounts
(hotmail, gmail, yahoo)
Give temp staff access to sensitive
information without proper consideration of
potential impact
Allow individuals leaving department to
continue to have access to folders
Give uncontrolled systems access to your
department
Discuss non-public information in public
areas, or discuss information with other LOM
employees who do not have a valid business
reason to know

20. PRIVACY POLICY
1.5 Maintaining Confidentiality of Private Proprietary Information
Employees are expected to follow the following security measures:
Always obtain consent from Compliance with respect to the removal of any
Documents containing confidential information from the office. Any copies removed
from the Company’s offices must be promptly returned.
Physical access to any non-electronic confidential information must be limited by
either locking or monitoring access to the offices and storage areas where such
information is located.
Visitors to the Firm's office MUST be monitored and accompanied by an
employee.

21. SECTION II
Personal Trading

22. PERSONAL TRADING
2.1 Staff Trading Accounts
LOM employees trading their personal account must ensure that:
The interests of client accounts will at all times be placed first;
All personal securities transactions will be conducted in such manner as to avoid actual or
potential conflicts of interest or any abuse of an individual’s position and responsibility; and
Must not take inappropriate advantage of their positions.
2.6 Annual Holdings Disclosure
Every year employees are required, upon request, to disclose all security accounts held at
LOM and externally, as well as any new brokerage accounts that were opened and not
disclosed throughout the year.

23. PERSONAL TRADING
LOM employees are permitted to trade for their personal accounts provided:
The account and trading does not interfere with a staff member's work
Accounts are kept well within appropriate normal operating and margin guidelines, the same
that apply to clients.
There is NO front running of client orders.
Policy 2.2 Transactions between Staff and Client Accounts
All transactions between a broker and clients must be disclosed and pre-approved
by their Manager or Compliance.
This includes transfers of cash or securities, and crosses of securities.
Employees must inform Compliance of all personal trading accounts including those accounts where:
The account is in the name of a partner and/or spouse of an LOM employee; and
An LOM employee either has direct or indirect authority or control, beneficial interest or serves
as a trustee on the account.

24. SECTION III
Conflicts of Interest &
Outside Business Activities
(“OBA”)

25. CONFLICTS & OBA
3.1 Conflicts of Interest and Outside Business Activities
In accordance with BMA regulations;
“Integrity & Fair Dealing - An investment provider shall observe high standards of integrity
and fair dealing in the conduct of its investment business and shall avoid conflicts of interest”.
(Code of Conduct)”
Executive, Senior Management and all employees are required to avoid any outside activities,
interests or relationships that either directly or indirectly conflict with, or create the appearance of
the existence of a conflict of interest with their ability to act in the best interests of the Company
and its clients.
If a conflict of interest or the appearance of a conflict arises between the interests of the Company
or its clients and the interest of the employee, the interests of the Company and Its clients will
prevail. The determination as to the existence or appearance of a conflict is made by the
Compliance Manager in his sole discretion.

26. CONFLICTS & OBA
The following are some examples of common conflicts of interest:
Employee/LOM Conflicts
personal interest (direct or indirect) in employment related matters such as a contract with
inappropriate use of LOM facilities or property for personal or outside activities;
external employment/not-for-profit work /outside businesses and other activities that conflict
with the employment duties for LOM;
inappropriate external Directorships;
Employee/Client Conflicts
direct/indirect personal interest in client matters;
advice and actions intended to improperly maximize variable compensation;
LOM Client Conflicts
misuse of client information;
misuse of client property or delegated rights:
inappropriate soft dollar arrangements;
market manipulation, inappropriate research or analysis or inappropriate use or disclosure of
same;
relationships with multiple clients with conflicting interests

27. CONFLICTS & OBA
Private Investments, Outside Business
Activities, External Directorships
Must be disclosure to;
 Compliance
Reason
 Potential conflicts and regulatory issues
 Regulators requires compelling evidence of
due diligence
 May be required to disclose to regulators
Example of annual form sent by Compliance

28. CONFLICTS & OBA
OTHER ACTIVITIES that require prior written (or verbal) consent of their
Manager and/or the Compliance Manager:
 Rebating, either directly or indirectly, to any person or entity any part of the
compensation received from the Firm as an employee;
 Accepting, either directly or indirectly, from any person or entity, other than the Firm
compensation of any nature as a bonus, commission, fee gratuity or other consideration
in connection with any transaction on behalf of the Firm or a client account;
 Beneficially owning any security or having, either directly or indirectly, any financial
interest in any other organization engaged in any investment or related business, except
for beneficial ownership of not more that 4.9% of the outstanding securities of any
business that is publicly owned; and
 Executing transactions in securities for which any employee or an immediate family
member holds a position on the board of directors or any other committee of a publicly
traded company.

29. SECTION V
Broker & Trader
Compliance

30. BROKER & TRADER
COMPLIANCE
In accordance with BMA regulations,
“Standards Of Market Conduct - An Investment provider shall meet high standards of
market conduct including Compliance with the relevant statute law and any Code or
standard (applying to the Investment provider), which has been issued or endorsed by
any Investment Exchange on which business is conducted by the Investment provider.”
5.1 Responsibilities of Traders/Brokers
Traders and brokers individually have the authority and the responsibility to reject any
orders received by the trading desk which they believe to be improper.
If an order is rejected by a counterparty because it is believed to be improper or raises
compliance concerns, the order must be rejected by the LOM trader – no further effort is to be
made by the trader to execute the rejected order through another counterparty.
Traders and Brokers are expected to be pro-active in monitoring the authenticity and legality
of all trade orders. Any irregularities are to be brought to the attention of the Compliance
Manager immediately.

31. BROKER & TRADER
COMPLIANCE
5.2 Ought to Have Known Rule
Brokers and Traders are considered to be professionals in the investment field. Therefore, you are
required to be familiar with all rules and regulations of the industry. Regulators use the concept of
“ought to have known”. The concept essentially means that a reasonable person operating under
the same conditions would be reasonably expected to recognize the potential impact on the market
or the client of an order accepted by the broker and/or trader. In complaint situations, “I only took
the order” is often not a valid defense.
5.3 Scope of activity
LOM brokers and traders are prohibited against participating in the following activities;
Offering services to clients that are beyond the scope of their employment with LOM.
Acting in the capacity of trustee, executor or power of attorney on behalf of a client under any
circumstances as it is the firm’s view that a conflict of interest exists or may be perceived to
exist in these situations. This does not include staff acting as a trustee, executor or power of
attorney for immediate family members. Examples; Referral Fee Arrangement etc.

32. BROKER & TRADER
COMPLIANCE
5.3 Brokers & Traders Scope of Activities continued…….
 Signing External Agreements - Brokers are not permitted to sign external agreements on
behalf of LOM.
 Broker Acting as Witness in Litigation Proceedings - Brokers are generally discouraged
From volunteering to act as a witness in litigation proceedings due to potential conflicts of
Interest and reputational risk management.
 Referral Fee Arrangements - Any fee sharing arrangements for referrals or otherwise
should be in writing (sample agreements available), and must be approved in advance by
compliance, finance, and sales manager. LOM is not a party to such agreements however
disclosure and pre-approval are still required. Brokers who refer a client to a person or
entity appearing to conduct investment business which is not licensed in Bermuda must
disclose such information to the client.
 Broker/ Traders involvement in Raising Capital - Raising funds for a company
associated in any way with a particular broker or a client of the broker, from other clients of
LOM is prohibited unless the subject of prior written consent from management.

33. BROKER & TRADER
COMPLIANCE
5.4 Integrity and Fair Dealing
In accordance with meeting our regulatory obligations, brokers and traders (when applicable) are
required to adhere to the following;
 Overcharging - Charges posted to client accounts shall not be unfair in their incidence or
unreasonable in their amount.
 Churning - Brokers must not carry out unnecessary transactions, or in unnecessary
frequency or excessive size, for a client’s account for the purposes of generating
commissions for the broker and/or the firm.
 Prompt and timely execution - Traders and brokers shall act promptly in accordance
with their instructions, Unless they have been given discretion as to timing and use that
discretion in an alert and sensible way.

34. BROKER & TRADER
COMPLIANCE
5.7 Manipulative Trading Practices
In accordance with BMA regulations,
“Market Manipulation - In any activities relating to trading in securities, investment providers must not
engage in any market manipulation or any other conduct directly or indirectly with the aim of
manipulating securities market prices.”
Brokers & Traders are required to notify compliance of any of the following client activities;
 Client creating or attempting to create a false or misleading appearance of active public
trading in a security (that is, fictitious orders for the same security placed with a variety of
securities houses);
 Entering or attempting to enter into any scheme or arrangement to sell and repurchase a
security in an effort to manipulate the market; or Causing the last sale or last bid or offer for
the day in a security to be higher or lower than warranted by the prevailing circumstances
with the intent to manipulate closing price quotations;
 Using or attempting to use any manipulative or deceptive scheme or contrivance to influence
the market price of a security;

35. BROKER & TRADER
COMPLIANCE
5.8 Trading Practices
Brokers and traders must be impartial, deal fairly with all clients, and avoid: making statements
and representations that could be misinterpreted by the client; selling techniques that could be
deemed inappropriate by the regulators.
Any of the following occurrences would be considered violations of the code of conduct of trading.
 making statements that in any way suggest to a client that a security will be resold or
repurchased, or that the purchase price of a security will be refunded;
 giving a client the impression that the future value of a security will be guaranteed;
 overstating the likelihood to a client that a private security will be listed on an exchange;
 promotional or unusual sales activity in connection with transactions in any securities, public
offerings or private placements

36. BROKER & TRADER
COMPLIANCE
5.6 Unauthorized Discretionary Trading
NEVER enter an order in a client account without having obtained prior authorization from an
authorized account holder (or authorized designate) to do so. Furthermore, a Broker should not execute
transactions in a client account based on past conversations with the client. order.

37. BROKER & TRADER
COMPLIANCE
4.2 Know Your Client and Suitability
Brokers must, with respect to each trade/transaction in the client’s account:
ensure that investment recommendations are appropriate and in keeping with the client’s
investment objectives;
determine if the client understands the risk involved in proposed recommendations and, if
the client can afford the risks both psychologically and financially in volatile markets;
properly caution the client and ensure that the client understands the risk involved with an
investment;
ensure that any order is within the bounds of good business practice; and
periodically review the portfolio to ensure that the client’s holdings are in line with client’s
investment objectives and risk tolerance.

38. BROKER & TRADER
COMPLIANCE
5.9 Sales Practices/ Solicited Trades
In accordance with securities regulations,
 “Suitability - In making recommendations to a client, in exercising discretion, and in advising
about the client’s instructions, a broker shall ensure as far as it can, having taken reasonable
steps to inform itself of what is available on the market, that purchases and sales are not
unsuitable for the client and that they are positively suitable for him if he is a private investor.
And,”
 “Informed investment decisions - A broker shall take all reasonable steps to enable clients to
make informed investment decisions and shall avoid misleading or deceptive representations
or practices. “

39. SECTION III
Email Communications

40. EMAIL
COMMUNICATIONS
3.3 Email Communications
 LOM’s policy provides all written communications must always be of a professional nature.
This includes, your work e-mail, instant messaging, and any other electronic communication
used to correspond with clients.
 All emails that are sent received or composed using LOM systems or while in LOM offices
are the property of LOM, and are subject to review by management
9.4 Email Distribution
Brokers sending out emails to more than 10 recipients are required to obtain the approval of their Sales
Manager and/or Compliance, as there will need to be a review conducted to determine if the content of
the email would be considered advertising or solicitation.

41. EMAIL
COMMUNICATIONS
E-mail Misuse May Have Disastrous Results
DOs
Be factual and specific in your e-mail
communications
Be sensitive to the inclusion of confidential
information
Send the e-mail only to those people who really
need to see it; copy people infrequently and
judiciously
Call others or arrange a meeting to debate or
discuss issues rather than doing so on e-mail
DON’Ts
Engage in substantive debates in e-mail or deal
with sensitive issues by e-mail
Send emails containing sensitive information to
personal/internet outside email accounts (hotmail,
gmail, yahoo)
Copy people without seriously considering
whether its appropriate to do so
Forward e-mails to other people without informing
the author of the e-mail, particularly where the e-
mail contains legal advice

42. SECTION IX
Marketing & External
Communications

43. MARKETING
Generally, all advertising and marketing material must NOT contain:
a statement, promise or forecast which is untrue or misleading;
a statement of fact which the investment provider does not at the time the advertisement is
issued have reasonable grounds to believe to be true;
a statement of opinion held by any person (whether an investment provider or any other person)
which the investment provider does not at the time the advertisement is issued have reasonable
grounds to believe to be the honestly held opinion of that person at that time;
a statement of fact which the investment provider does not at the time the advertisement is
issued have reasonable grounds to believe will continue to be true for so long as it remains
relevant to the subject matter of the advertisement;
a statement about the nature or scale of the activities of, or the resources of (or available to), the
investment provider which is misleading in a material fashion

44. MARKETING
9.2 Approval Required
Content of all advertising, marketing or promotional material, including unsolicited marketing
letters, must be pre-approved by Compliance.
Examples;
9.3 LOM Logo and Letterhead
Brokers may not reproduce the LOM logo for use in their personal marketing materials.
When using letterhead, only official printed LOM letterhead may be used -
personalized or computer generated letterhead may not be used, unless specifically
approved in advance. Facsimile coversheets should conform to the standard of the
local office.
9.6 Direct Mail
Use of unsolicited direct mail is discouraged, but may be allowed in some limited cases
with Compliance approval and where the mailing list is directed at a specific, non-
random group (e.g. estate planners). In those cases approved, care must be taken not
to directly solicit the opening of a securities account or trading of securities. Where
possible, the term “sophisticated” or “accredited” investor should be included.

45. MARKETING
9.7 Proprietary & Third Party Research Dissemination
LOM does permit brokers to circulate both proprietary and/ or third party research to clients,
provided that:
In the event that it is third party, the vendor has been approved by Compliance, contains
the applicable disclaimers, and is clearly identified as not being LOM material. Please
consult with Compliance for appropriate disclaimers.
The broker has not acted upon receiving advance knowledge of anything that might
possible by price sensitive prior to sending the information out to clients
9.8 Public Appearances and Marketing Trips
LOM representatives speaking outside of Bermuda or Bahamas, in public, should only speak
generically about offshore investing. If participating in a conference, investment seminar, or any
similar event in an onshore location, public remarks should be limited to the merits of offshore
investing in a general sense and should not include a specific LOM sales pitch. Because what is
permissible in a given situation is not always clear, brokers must consult with Compliance or their
manager regarding any planned marketing strategies or trips in advance.

46. SECTION III
Insider Trading
& Tipping

47. INSIDER TRADING
General Policy
No employee may trade, either personally or on behalf of others (such as
investment funds and private accounts managed any the LOM Companies),
while in the possession of material, nonpublic information, nor should any
employee of LOM communicate material, nonpublic information to others in
violation of the law.

48. INSIDER TRADING
Trading or tipping on the basis of inside information is prohibited. The
penalties are among the most severe under securities laws:
 include jail sentences
 fines
 regulatory proceedings
 civil liability
 damage to reputation
Penalties

49. SECTION III
Gifts & Entertainment

50. GIFTS &
ENTERTAINMENT
The policy applies to all LOM employees
Gifts cannot exceed an aggregate of $200 per person per year
from any one person or firm and must be approved by Compliance
Employees must disclose both gifts given and gifts received.
Both Gifts and Entertainment should be given in the spirit of
business courtesy and not as an attempt to influence business
decisions or create a sense of indebtedness.
Employees must avoid any kinds of Client Entertainment that
could be detrimental to the firm’s reputation or standing in the
community.

51. GIFTS &
ENTERTAINMENT

(a) (b)
Scenario

52. AML ATF TRAINING
Anti-Money Laundering & Anti-
Terrorist Financing (“AML/ATF”)

53. AML/ATF MISSION
STATEMENT
LOM is committed to reducing AML/ATF risk to the best of its ability.
LOM aspires to be the premier offshore financial company, through a commitment to
providing a consistently superior standard of service and investment products to our
customers. LOM has an equal commitment to preventing money laundering and terrorist
financing, and complying will all applicable legislative requirements.
Senior management and LOM Board of Directors are responsible and accountable for
ensuring compliance with such regulations.
The Company expects its managers and employees to promulgate a culture of
applying the “know-your-customer” tenet in the execution of their daily
responsibilities, as well as to constantly “think risk”.

54. ROLES &
RESPONSIBILITIES
LOM Managers & Employees
Managers and employees have the responsibility to protect the firm from exploitation
by money launderers and parties who fund terrorism. It is required that all employees
will follow these procedures as related to the employees’ daily activity. Each employee
must remain vigilant to any unusual or suspicious activity and bring such activity to the
attention of the MLRO, or Management in a timely manner.

55. ROLES &
RESPONSIBILITIES
LOM’s Senior Management
Appointing a director or senior manager overall responsibility for the establishment and
maintenance of effective AML/TF systems of control and the appointment of a person with
adequate seniority and experience as an MLRO;
That appropriate training on money laundering is identified, designed, delivered and
maintained to ensure that employees are aware of, and understand their AML requirements;
That regular and timely information is made available to senior management relevant to
the management of the firm’s money laundering and terrorist financing risks;
That the firm’s risk management policies are appropriately documented including the firm’s
application of those policies and methodologies

56. ROLES &
RESPONSIBILITIES
LOM’s Money Laundering Reporting Officer (“MLRO”)
MLRO is responsible for (amongst others) the implementation of the AML Program
including;
1. The development and application of AML compliance policies and
procedures.
2. Arranging and conducting periodic independent testing to ensure
effectiveness of the AML program.
3. Ongoing employee training for all employees
The MLRO overseas the day-to-day operation of the AML program.

57. WHAT IS MONEY
LAUNDERING

Illegally
obtained money
Conversion
Criminal Activity
Drugs / Arms Trafficking
Terrorism
Extortion
Appears to
originate from
legitimate
source

58. TERRORIST FINANCING
 Money to fund terrorist activities moves through the global financial
system via wire transfers and in and out of personal and business
accounts
 It can sit in the accounts of illegitimate charities and be laundered
through buying and selling securities and other commodities, or
purchasing and cashing out insurance policies.

59. MONEY LAUNDERING
METHODS
The Most Common methods used to launder the proceeds of
Grand Corruption;
1. Bribe taking, or kickbacks - Example, former president of the Philippines Joseph
Estrada received funds from gambling operators in exchange for their protection from
arrest.
2. Extortion – Example, the former Prime Minister of Ukraine Pavel Lazerenko required
entities wishing to do business in the Ukraine to split equally the profits of the enterprise
in exchange for his influence in making the business successful.
3. Self-dealing and conflicts of interest – Example, in a US State Department report, a
West African PEP was responsible for selling the right to harvest timber from public lands
whilst also owning the company awarded those rights.
4. Embezzlement from state funds – Example, the former President of Nigeria, Sani
Abacha, directed his national security advisor to create and present false funding
requests, the proceeds of which ere then laundered for personal use.

60. GRAND CORRUPTION
The following are the most common features of grand corruption:
1. Use of Corporate Vehicles and Trust – Cases show that PEP’s are particularly likely to use such
vehicles to launder the proceeds of their corrupt activities.
2. Use of Gatekeepers – Gatekeepers are individuals, such as legal and financial experts, that
“protect the gates to the financial system”. Cases have shown that lawyers are often used to
launder the proceeds of corruption by creating corporate vehicles, opening bank accounts, and
using other means to avert AML controls.
3. Use of domestic financial institutions – Historically, much of the focus has been on the risk
posed by foreign PEPs laundering their proceeds through foreign bank accounts. However, cases
also confirm that domestic PEPs present a substantial risk for corruption-related to money
laundering as well.
4. Use of offshore/foreign jurisdictions – In nearly every case, foreign bank accounts were used
as part of corruption-related to money laundering scheme; with the illicit funds typically flowing
from a developing Country to financial institutions in more developed countries.
5. Use of Nominees – Cases have indicated that the use of trusted associates, or family members,
as nominees is a common feature in the facilitation of the corrupt activities of PEPs
6. Use of Cash – In a significant number of cases, the corrupt PEP wanted the laundered funds to
be in the form of cash; PEP was then able to place the cash without attracting undue attention

61. ML/ATF RISK
What are the risks to LOM?
(i) Reputational risk
(ii) Legal risk
(iii) Operational risk - (failed internal processes, people and systems &
technology)
(iv) Concentration risk - (either side of balance sheet) All risks are inter-
related and together have the potential of causing serious threat to the
survival of the company

62. OPERATIONAL RISK
 The risk of direct or indirect loss resulting from inadequate or failed
internal processes, people and systems or from external events
 Weaknesses in implementation of LOMs’ programs, ineffective
control procedures and failure to practice due diligence

63. LEGAL RISK
 The possibility that lawsuits, adverse judgments or contracts that
turn out to be unenforceable can disrupt or adversely affect the
operations or condition of LOM
 LOM can become subject to lawsuits resulting from the failure to
observe mandatory KYC standards or from the failure to practice
due diligence
 LOM can suffer fines, criminal liabilities and special penalties
imposed by supervisors

64. CONCENTRATION RISK
 Mostly applies on the assets side of the balance sheet: Information
systems to identify credit concentrations; setting prudential limits to
restrict LOMs’ exposures to single borrowers or groups of related
borrowers
 On liabilities side: Risk of early and sudden withdrawal of funds by
large account holders- damages to liquidity

65. AML CASES
Footballer convicted of money laundering – Cambridge
A Cambridge footballer has received a six month suspended sentence for laundering funds
received through an eBay credit card scam.
Luxury lifestyle nabs money launderers – Manchester
Designer handbags, luxury cars and an expensive wedding while living on benefits and a
£15,000 wage from a car rental firm landed one Manchester couple in jail for money
laundering. The prosecution was not required to demonstrate that they had engaged in
any specific criminal activity but rather the court was satisfied that the complete lack of
a legitimate explanation for the source of funds meant that they were criminally
obtained. She received an 18 month sentence while her husband was sentenced to 11years
jail for money laundering, arson and escape from custody.
Account jailed for 6 years for laundering drug money – Wilmslow
An accountant who laundered more than £1.2m for his drug dealing boss was jailed for six
years. The laundering process involved the creation of a complex web of international trusts
and companies in jurisdictions including the UK, the BVI, the Seychelles and Azerbaijan. The
accountant utilised a hotel, also purchased as a part of the laundering scheme, to proceed to
defraud his boss to fund his lifestyle.

66. AML CASES
Portfolio criminal loses cash as penalty for laundering – Doncaster
A Doncaster man who had committed a series of frauds to fund a portfolio of properties and his
tanning salon business, obtained a loan by deception, failed to declare income for tax purposes
and was in possession of 10,000 illegal cigarettes was sentenced to two years in jail. He was
convicted of a money laundering charge for possessing £50,000 in cash, the origin of which he
could not explain. He did not receive any jail time for this offence but the cash was forfeited.
Loan shark given suspended sentence for laundering – Cumbria
An unlicensed money lender was given a nine month suspended sentence for laundering funds
received from his illegal business.
Family jailed for laundering proceeds of father's tax evasion – London
A family whose father's company failed to pay appropriate income tax on his security guard
business has paid a hefty price. His wife and three daughters were convicted of laundering
£1.3m through their bank accounts. The mother was sentenced to 16 months imprisonment
and the daughters each received community service orders with suspended prison sentences.

67. SUSPICIOUS
TRANSACTIONS
 gives rise to a reasonable ground of suspicion that it may
involve the proceeds of crime; or
 appears to be made in circumstances of unusual or unjustified
complexity; or
 appears to have no economic rationale or bonafide purpose;
Examples;
 Large cash deposits into same account
 Substantial increase in turnover in a dormant account
 Receipt or payment of large cash sums with no obvious
purpose or relationship to Account holder / his business
 Reluctance to provide normal information when opening an
Account or providing minimal or fictitious information

68. SUSPICIOUS
TRANSACTIONS
Vigilance is one of the most important safeguards to protect LOM from being used by money
launderers and terrorist financiers.
Unusual behavior is difficult to define and depends on individual circumstances. But a general
definition is: “A client’s behavior is unusual if it is not in keeping with their normal or expected
behavior or if it is at odds with the typical operation or use of a specific type of account or product.”
Knowing our clients, understanding the details of their transactions, and having an acute
awareness of the functions of the products they hold with LOM is critical not only to achieving our
business goals and in serving our clients but also in recognizing when their behavior – as a client of
LOM – becomes “unusual.”
By “knowing” their clients, employees will be alert to transactions or behavior that could be
considered unusual or suspicious. Although it is not your responsibility to "catch the
criminal,” it is your responsibility to be aware of and report internally unusual or suspicious client
activity.

69. RED FLAGS
Transactions involving cash or structuring
Client always wants to purchase investment with a cash only deposit
Client makes large or unusual settlements of securities with cash only deposits
Client wishes to purchase a number of investments with money orders, traveller’s cheques,
Cashier’s cheques, bank drafts or other bank instruments, especially in amount that are slightly less
than $10,000, and the transaction is inconsistent with the normal investment practice of the client or their
financial ability.
No regard to costs
Client seems unconcerned about the usual decisions to be made about an investment account such as
fees or suitable investment vehicles.
Client is will to deposit or invest at rates that are not advantageous or competitive
Client appears unconcerned about risks.
Inconsistent activity
Sudden substantial increases in cash deposits or levels of investment, without adequate
explanation
Reactivation of dormant account with a sudden large investment that is inconsistent with the
normal investment practice of the client or their financial ability.
Client uses securities or futures brokerage firm as a place to hold funds that are not being used in
trading of securities or futures for an extended period of time and such activity is inconsistent with the
normal investment practice of the client or their financial ability.

70. RED FLAGS
Signs of Market Manipulation, Insider Trading or other fictitious trading
• The entry of matching buying and selling of particular securities or futures contracts (called match
trading), creating the illusion of trading
• Several clients open accounts within a short period of time to trade the same stock.
• Client is an institutional trader that trades large blocks of junior or penny stock on behalf of an
unidentified party
Unrelated clients or third-party type transactions
• Transfers of funds or securities between accounts not known to be related to the client
• Unrelated clients redirecting funds towards the same account
• Payments made by way of third party cheques that are payable to, or endorse over to, the client
International /Offshore banking centers
• Customer uses their LOM account as a pass-through vehicle to wire funds, particularly to offshore
locations

71. WHAT IS CDD?
Under Bermuda regulations - POCA Reg. 5, Customer Due Diligence is defined as:
Customer IDENTIFICATION and VERIFICATION process
LOM responsibility to IDENTIFY the beneficial owner(s) and on a risk-sensitive basis VERIFY their
identity and understand the OWNERSHIP & CONTROL structure of a entity
UNDERSTAND and DOCUMENT the true purpose and intended nature for the account.
Take reasonable steps to determine the true identity of all personal and business clients requesting
services;
Ensure that verification of identity and verification of the existence of an entity is conducted as required
by law;
Identify the true ownership of, or interest in the account (by requesting the requisite beneficial
ownership and third party information);
Determine the source of funds for the initial deposit or transaction through the account (i.e. sale of
property or estate proceeds);
Determine the purpose of the account which should be an indication of anticipated activity levels and
types of transactions that will likely be processed through the account.

72. WHAT IS EDD?
EDD is;
1. Non-Face to Face meetings for identification purposes
2. Correspondent Banking relationships and
3. Initiating a business relationship or carrying out an occasional
transaction with a PEP
4. Situations that present a higher risk i.e. client in a high risk
jurisdictions.

73. CDD FOR INDIVIDUALS
IN PERSON NOT IN PERSON
Identification
Valid Passport or Drivers License Notarized Passport or Drivers License
IVF Form (each applicant) IVF Form (each applicant)
Reference Letter (each applicant)
Address Confirmation
(Any ONE of the following are acceptable for each applicant)
Utility Bill (Belco, Water Bil etc.) Utility Bill (Belco, Water Bil etc.)
Bank Statement Bank Statement
Other Bills (Cablevision, Digicel
etc.) Other Bills (Cablevision, Digicel etc.)
Drivers License Drivers License

74. CDD FOR BUSS/CORPS
CORPORATE/BUSINESS
APPLICANTS
Identification
(for each Signatory & Beneficial Owner)
Valid Passport or Drivers License Notarized Passport or Drivers License
IVF Form IVF Form
Reference Letter
Address Confirmation
(Any ONE of the following are acceptable for Each Signatory)
Utility Bill (Belco, Water Bil etc.) Utility Bill (Belco, Water Bil etc.)
Bank Statement Bank Statement
Other Bills (Cablevision, Digicel etc.) Other Bills (Cablevision, Digicel etc.)
Drivers License Drivers License
Account Applications
NCAF NCAF
Corporate Resolution Corporate Resolution
Certificate of Incumbency Certificate of Incumbency
Certificate of Incorporation Certified Certificate of Incorporation
Certificate of Good Standing (if
incorporated more than one year)
Certificate of Good Standing (if incorporated
more than one year)
Margin Agreement (if applicable) Margin Agreement (if applicable)
Other Required Documentation
Broker Sheet Broker Sheet
Manager Sign off Manager Signoff

75. WHAT IS KNOW YOUR
CLIENT
 true identity and beneficial ownership of accounts;
 Sources of funds
 Nature of customers’ business
 What constitutes reasonable account activity?
 Who your customer’s customer are?
Making reasonable efforts to determine to ensure that you
know;

76. KNOW YOUR CLIENT
KYC does NOT mean;
 Denial of Service to the Common Person
 Intrusive Behavior
 Use of information for cross selling
 Harassment of customers- threatening to close down the accounts
arbitrarily

77. PRO’S TO KYC
1. It helps to protect firms’ reputation and the integrity of its banking
systems by reducing the likelihood of the firm becoming a vehicle
for or a victim of financial crime and suffering consequential
reputational damage;
2. It also provides an essential part of sound risk management
system (basis for identifying, limiting and controlling risk
exposures in assets & liabilities)

78. SUMMARY FOR
PREVENTING ML/ATF
Compliance with
Laws
Identifying
Irregular / Suspicious
Transactions
Customer
Due Diligence
Money Laundering & Terrorist Financing
Prevention
On-going Monitoring

79. THE END
QUESTIONS?