AML/CFT Policy

GUIDELINES FOR ESTABLISHING AND EVALUATING BUSINESS RELATIONSHIPS

Erop Consulting e.U., with its registered office at Burggasse 25, 9020 Klagenfurt am Wörthersee, Austria, VAT-ID: ATU69287103 (hereinafter: the Company), within the scope of its activities provides clients with specialized high-level services as described in the Company’s General Terms and Conditions.

For this purpose, the Company and third parties cooperating with the Company must act in accordance with ethical requirements and maintain a high standard of professional conduct in order to avoid any possible damage to their reputation and the reputation of the Company.

The Company and third parties cooperating with it are obliged to assess any threat to compliance with the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional conduct if they know, or could reasonably be expected to know, of circumstances or relationships that could threaten compliance with these principles.

Compliance with ethical requirements must be assessed when initiating each individual engagement as well as upon completion of the engagement. The Company also continuously monitors factors that could lead to deviations from these requirements. Persons involved in business processes are familiar with the standards and requirements related to independence and must confirm independence from any financial interest.

The Company has established procedures regarding the acceptance and continuation of client relationships designed to provide reasonable assurance that the Company will accept or retain engagements only where:

the client’s integrity has been considered and there is no information indicating that the client lacks integrity;

the Company is competent to perform the engagement and has the capabilities, time, and resources to do so; and

the Company can comply with ethical requirements.

The Company accepts new engagements after the client has demonstrated integrity and after the Company determines that it has the capabilities, time, and resources to provide high-level services.

Before accepting a client, the Company performs an assessment of the potential client. This assessment includes obtaining relevant information such as:

management structure and ownership

nature of business

other specific information enabling identification of risks that form the basis for deciding whether to accept the client.

The Company also evaluates whether it has sufficient resources and expertise to perform the requested services and whether independence requirements are met. Reassessment of existing clients is conducted when new contracts are concluded.

The Company is committed to high standards and does not accept corruption in any form. This includes offering or accepting, directly or indirectly, money or other benefits to influence a recipient in order to encourage or reward the performance or non-performance of an activity (active corruption, passive corruption, public corruption, private corruption, direct corruption, indirect corruption), regardless of whether such corruption occurs before or after the act.

These Guidelines define principles and sensitive areas and establish processes for managing corruption risk in the Company’s business activities in order to protect the Company’s integrity, reputation, and credibility.

Furthermore, the Company establishes appropriate principles to prevent risks related to money laundering and terrorist financing. External collaborators (third parties) and partners who assist the Company must also comply with these principles.

The Company follows the basic principles contained in:

· the regulations of the Republic of Croatia

· EU legislation

· international conventions

In combating corruption, the Company follows principles contained in relevant conventions and international best practices, including:

· Criminal Law Convention on Corruption and Civil Law Convention on Corruption (Council of Europe, 1999)

· EU Council Framework Decision 2003/568/JHA on combating corruption in the private sector

· Wolfsberg Group Anti-Corruption Guidance (2011)

· ICC Rules on Combating Corruption (International Chamber of Commerce, 2011)

· Business Principles for Countering Bribery (Transparency International, 2013)

· G20 Anti-Corruption Implementation Plan (2015–2016)

The main national laws include:

· Criminal Code of the Republic of Croatia

· Anti-Money Laundering and Counter-Terrorist Financing Act

· Conflict of Interest Prevention Act

· Labour Act

· Act on Financing Political Activities and Election Campaigns

· Right of Access to Information Act

· Public Procurement Act

The Company applies a zero-tolerance policy with respect to corrupt activities and prohibits them in any form, direct or indirect.

The Company conducts its activities with the aim of providing services to clients while respecting the values of integrity, the principles of professionalism, diligence, determination, honesty, fairness and responsibility. In accordance with these principles and in compliance with ethical requirements and standards:

· it does not tolerate any type of corruption, in any way or in any form, even when such activities could potentially be considered acceptable, permissible or not questioned under the applicable legal regulations of the Republic of Croatia;

· it does not tolerate or allow any conduct aimed at offering or accepting money or other benefits – directly or indirectly – with the aim of encouraging or rewarding the performance of a task/activity or their omission. Such actions are not allowed even in cases of small payments whose purpose is to accelerate, promote or ensure the performance of routine activities or any other activities (known as facilitation payments).

Benefits that are prohibited to grant include, for example:

- free gifts and services (except those given as gifts, representation expenses and charitable contributions);

- unjustified employment;

- provision of services under conditions that are not in accordance with the principles of sound and prudent management;

- in general, all transactions that involve a loss for the Company and generate profit for the recipient (e.g. application of discounts or conditions that are not in accordance with market parameters).

With regard to third parties, the Company will terminate any type of relationship with a third party if that party, in its relationship with the Company, acts contrary to anti-corruption principles, including the provisions of relevant regulations, without prejudice to the Company’s right to compensation for damages if such conduct causes material damage to the Company. Accordingly, special contractual provisions will be provided.

Areas which, according to relevant standards, have been identified as risk areas, or areas where there is a higher risk, or where corrupt behaviour could particularly occur are as follows:

· gifts and representation expenses

· charitable donations and sponsorships

· relations with third parties

· purchase, management and disposal of investments and other assets

· employment

· purchase, management and sale of real estate

The Company does not tolerate the use of free gifts and representation expenses for the purpose of exerting any influence on the independent judgment of a client or encouraging any concessions and the following is unacceptable:

· to distribute gifts, promises or grant benefits of any kind that could be interpreted as exceeding normal business and/or institutional courtesy practices or as a means used to obtain more favourable treatment when performing any service related to the Company;

· to accept any gift that exceeds moderate value or any other benefit that is outside the usual practice of business and/or institutional courtesy or aimed at compromising the independence of judgment and business integrity.

The Company does not provide charitable donations nor allow sponsorships whose purpose is to obtain more favourable conditions and therefore, when conducting such activities, the Company must act in a transparent and responsible manner through actions that prevent potential corrupt conduct.

In any case, at least the following standards must be respected:

· donations and sponsorships must comply with standards of responsible spending of funds;

· beneficiaries of payments through donations or sponsorships may only be non-profit institutions established in accordance with the law whose activities are not contrary to ethical standards; when it comes to charitable activities, any sponsorship initiative must not simultaneously relate to payments such as donations;

· donations or sponsorships must not be granted to political parties and/or movements/political initiatives nor to their affiliated organizations, trade unions, social welfare associations, clubs, recreational associations and groups that were not established by the Company;

· due diligence must be conducted on the beneficiary institution for the purpose of:
- analysing the type of institution and the purpose for which it was established
-verifying the reliability and reputation of the beneficiary institution with particular attention to criminal records and/or charges
-verifying whether the beneficiary institution meets the conditions for operating in accordance with the provisions of relevant regulations
-identifying all risks that may be associated with the beneficiary institution

· all payments must be approved by units authorized for this purpose based on the current authorization and delegation system; only payments to the beneficiary institution’s bank account are permitted; payments in cash, in a country other than the beneficiary institution’s country, or to another party instead of the beneficiary institution are prohibited;

· monitoring of initiatives and archiving of all documentation must be ensured.

The Company establishes relationships with third parties – intermediaries, agents, consultants, experts, business partners, self-employed persons, partially employed persons or other parties that assist the Company in carrying out its activities – based on an assessment of expertise, competence, competitiveness and integrity. The Company manages these relationships in the most proper manner possible by adopting procedures intended to prevent potential corrupt conduct.

In any case, at least the following principles must be respected:

· the establishment of a business relationship must be preceded by due diligence for the purpose of:

· determining, in the case of legal entities, the chain of control, beneficial owners and persons performing management and control activities as well as their economic/financial status;

· verifying the reliability and reputation of the third party;

· in the case of companies, legal entities and associations, verifying their beneficial owners and persons carrying out management and control activities;

· determining the capacity and experience required to perform the contract;

· verifying the existence of conditions necessary for conducting business in accordance with the provisions of applicable laws;

· identifying all risks that could be associated with the third party.

When it comes to procedures for the purchase of goods and services and the assignment of professional duties (e.g. legal, tax, technical, labour law, administrative, organizational consulting, brokerage services, agency services or services of various intermediaries, etc.), at least the following additional standards must be met:

· procedures for the procurement of goods, services and professional services must be covered by specific internal procedures that regulate roles, responsibilities and authority for spending funds;

· approval of purchase requests, selection of suppliers, conclusion of contracts and issuance of orders shall be carried out exclusively by a person specifically authorized within the authorization system;

· approval of payment of invoices/shipments depends on individuals who have been assigned authority for spending funds and must be supported by confirmation of the quality of the purchased goods/fulfilment of contractual conditions and the consequent appropriateness of the requested amount; in any case, unjustified payments in the context of a contractual relationship are not permitted;

· monitoring of activities (with particular emphasis on the logical basis for the selection of suppliers of goods and/or services or experts as well as the significance and appropriateness of costs) must be ensured, as well as the archiving of all documentation relating to obligations undertaken within the framework of the procurement procedure for goods, services and professional services, in order to enable the subsequent identification of the related reasons and responsibilities.

The Company does not allow non-transparent conduct for the purpose of obtaining or granting preferential treatment as part of the purchase, management and disposal of investments (direct or indirect, qualified or non-qualified in the share capital of other companies and other similar forms of investment) as well as other assets (for example non-performing loans, business shares, assets and legal relationships identified as collective). This principle particularly affects the following areas:

· verification of the feasibility of a transaction and/or identification of business opportunities;

· management of pre-contractual relationships and implementation of activities preceding the signing of the contract and its execution;

· management of procedures related to the purchase, management and sale of investments and other assets.

In any case, at least the following standards must be respected:

· procedures for the purchase, management and sale of investments and other assets must be covered by procedures that include roles, responsibilities and authority for spending funds;

· appropriate levels of authority must be assigned and, within the framework of the authorization and delegation system, parties that may exercise approval and/or negotiation authority in the pre-contractual, contractual and management phases of the relationship must be determined;

· due diligence must be carried out on investment companies and the other contracting party, in accordance with criteria equivalent to those adopted for third parties;

· monitoring of activities and archiving of all documentation must be ensured in order to enable the subsequent identification of the related reasons and responsibilities.

The Company adopts transparent real estate management methods that mitigate the risk of preferential treatment. This principle particularly affects the following areas:

· identification and selection of investment and divestment opportunities;

· acquisition, management and sale of real estate;

· management of leases.

Within these activities, the Company expressly renounces any conduct that involves the promise, granting or acquisition of real estate under conditions different from market conditions or whose purpose is improper favouring of personal interests or the interests of the Company or which could otherwise be perceived as corrupt conduct.

In any case, at least the following standards must be respected:

· special internal regulations governing roles, responsibilities and authority for spending funds must be applied to the process of purchase, management and sale of real estate as well as lease management;

· due diligence must be conducted on the other contracting party according to criteria equivalent to those adopted for third parties;

· the fairness of the purchase price of real estate as well as active and passive leasing must be verified in comparison with market value using – in the event that potential corruption risks are identified based on due diligence results – valuation by independent appraisers;

· monitoring of activities must be ensured as well as archiving of all documentation relating to obligations undertaken within the framework of the process of purchase, management and sale of real estate as well as lease management, in order to enable the subsequent identification of the related reasons and responsibilities.

Considering the risk of corruption, the timely and accurate presentation of the Company’s financial results is one of the prerequisites for the effective prevention and suppression of corruption cases, therefore the Company is committed to preparing financial reports with the aim of ensuring:

· timely and accurate presentation of the Company’s economic and financial results which, in relation to corruption risk, represent one of the prerequisites for an effective fight against corruption.

· providing a true and objective view of the financial position and results of the Company.

Processes for managing corruption risk are part of the macro processes covered by the Guidelines, as follows:

· implementation of guidelines and methodological rules

· risk assessment

· activity planning

· regulatory compliance

· advisory activities

· subsequent verification

· dissemination of anti-corruption culture

Activities for preventing money laundering take into account mandatory requirements arising from national regulations.

Establishing periodic assessment of corruption risk and related management represents the first level of risk management.

Establishing periodic assessment of corruption risk and related management represents the first level of risk management.

Compliance with regulations is ensured through the following activities:

- identification and interpretation of rules and regulations;

- assessment of the impact of relevant rules on processes and procedures and proposal of organizational and procedural changes in order to ensure appropriate management of corruption risk.

Within the corruption risk management process, advice and assistance are provided for the implementation of activities within their competence in accordance with the business model for the purpose of preventing corruption.

The dissemination of corporate culture is based on the principles of honesty, fairness and compliance and on a positive contribution to corruption risk management. For this purpose, participation is ensured in spreading corporate culture in accordance with anti-corruption principles.

Planned initiatives are subject to verification and monitoring, and their goal is particularly that each recipient develops the following abilities:

· understanding the most important aspects of regulatory provisions aimed at combating corruption;

· acting in accordance with relevant provisions.

Compliance with anti-corruption legislation requires constant verification of compliance and effectiveness of adopted processes and procedures.
The Company will ensure the implementation of these activities in accordance with appropriate professional standards and, in particular, ensure that:

- controls are carried out with appropriate experience and professional qualifications;

- covered areas operate with resources and tools appropriate to the volume and complexity of activities subject to control;

- controls are planned, regularly focused on areas of greater corruption risk as determined in the context of risk assessment, carried out with the utmost care and attention and properly documented in order to support established findings and recommendations;

- the results of control activities are subject to reporting.

Prevention of money laundering:

- periodic monitoring of operations in high-risk sectors identified in the context of risk assessment and, if necessary, verification of processes and other activities;

- defining and monitoring corrective actions necessary to mitigate identified risks.

These Guidelines are aimed at conducting initial and periodic due diligence in relation to risk areas where the following are present: relations with third parties – suppliers, agents, consultants, experts, business partners, self-employed persons, partially employed persons or other parties assisting the Company in carrying out its activities – transactions related to real estate, ownership investments and other assets, charitable donations and sponsorships, and employee recruitment activities.

· Due diligence is proportionate to the risk of the other contracting party and is designed to, among other things, identify situations that serve as indicators of potentially high corruption risk (so-called “red flags”), as well as identify circumstances that mitigate those risks. The characteristics of the proposed transaction and those of the other contracting party are examined within the due diligence process.

Potential red flags are as follows:

· the other contracting party mainly operates in a country with a high corruption risk. High risk is considered to be a level below the average of the “Corruption Perceptions Index” prepared annually by Transparency International;

· the other contracting party is: i) a politically exposed person; ii) a public official or a person heading a public service with authority to make decisions regarding the Company’s activities, or is closely connected with any of the above-mentioned persons; iii) represented by any person from the previous points;

· the other contracting party shows unusual corporate characteristics (complex corporate or other non-transparent organizational structures, absence of operational units, etc.);

· the other contracting party adopts improper types of conduct (objections to including anti-corruption contractual clauses, requests for unusual contractual conditions, requests for non-standard commissions, requests for payments to parties that are not the other contracting party or to parties located in countries where the other contracting party does not conduct its own business, promotional activities or practices that are unusual or not aligned with professional standards);

· the involvement of intermediaries is expected in order to initiate, promote or complete the transaction;

· the other contracting party has previously been involved in proceedings with implications of criminal liability.

Based on these Guidelines, in addition to the contracting party with whom a contract will be concluded or a relationship maintained (direct contracting party or contracting party in the narrower sense), other contracting parties, for parties that are not natural persons, include a group of different persons that largely define their interests, activities as well as their reputation and reliability. In any case, these persons include:

· beneficial owners,

· entities exercising management and coordination or, with particular reference to foreign entities, entities performing similar general management functions over the corporate group (parent company of the other contracting party),

· senior management (e.g. CEO or general director) responsible for managing the other contracting party in the narrower sense as well as the parent company.

Methods for conducting due diligence activities are covered by internal procedures on business processes in the identified risk areas.

Business processes covering operations in risk areas may define further stricter risk thresholds due to the financial relevance of the transaction or the presence of certain risk indicators.

The Company ensures the integrity of employees and provides them with protection related to reporting any violation of internal and anti-corruption principles in cases where there is reasonable suspicion of a violation of the principles covered by these Guidelines.