manual to the anti-money laundering and combating …
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MANUAL TO THE ANTI-MONEY LAUNDERINGAND COMBATING THE FINANCINGOF TERRORISM SELF-CONTROLAND MANAGEMENT SYSTEMAML/CFT SCMS
Argos. Green Light.
MANUAL TO THE ANTI-MONEY LAUNDERING AND COMBATINGTHE FINANCING OF TERRORISM SELF-CONTROL AND MANAGEMENT SYSTEMAML/CFT SCMS
AML/CFT SCMS MANUALCEMENTOS ARGOS S.A.2014
CEMENTOS ARGOS S.A. manages and administrates the risk of money laundering and terrorism financing by adopting its Anti-Money Laundering and Combating the Financing of Terrorism Self-Control and Management System (AML/CFT SCMS) through this AML/CFT SCMS MANUAL (from now on referred to as “AML/CFT SCMS MANUAL” or “MANUAL”).
This MANUAL was created in accordance with the guideli-nes provided by Grupo Argos S.A., in its function as parent company, and its application and compliance are manda-tory for CEMENTOS ARGOS S.A. and all of its Subsidiaries, Shareholders and Investors, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A., and its Subsidiaries, when applicable.
PRESENTATION
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TABLE OF CONTENTSUPDATE CONTROL ....................................................................................10
INTRODUCTION ..........................................................................................11
1. GENERAL INFORMATION ..................................................................12
1.1. Objectives of the AML/CFT SCMS MANUAL .........................................13
1.1.1. General objective .............................................................................13
1.1.2. Specific objectives ............................................................................13
1.2. Scope .............................................................................................14
1.3. Approving body ................................................................................14
1.4. Dissemination .................................................................................14
1.5. Premises and legal basis ..................................................................14
1.6. Ethical and professional commitment ..............................................15
2. GENERAL ASPECTS OF MONEY LAUNDERING AND FINANCING OF TERRORISM ...................................................................................16
2.1. Concept of money laundering .............................................................17
2.1.1. Stages of money laundering ..............................................................17
2.1.2. Criminal behavior that leads to money laundering ................................17
2.1.3. Forms of committing money laundering ...............................................18
2.2. Concept of financing of terrorism .....................................................18
2.2.1. Stages of the financing of terrorism ..................................................18
2.2.2. Criminal behaviors related to the financing of terrorism ....................19
2.2.3. Ways of financing terrorism ...............................................................20
2.2.4. Ways of committing and sanctions for financing terrorism ....................20
2.3. Parallels between money laundering and the financing of terrorism ......21
2.4. General types of money laundering and financing of terrorism ............21
2.5. Purposes of money laundering and financing terrorism .......................23
2.6. Consequences of money laundering and financing of terrorism ............23
2.7. Best practices in the prevention and control of the risks of money laundering and the financing of terrorism ...........................................23
3. GENERAL ASPECTS OF THE AML/CFT SCMS ....................................25
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3.1. Nature of the ML/FT risks ..............................................................26
3.2. Setting for the application of the AML/CFT SCMS ..............................26
3.3. Scope of the AML/CFT SCMS ..........................................................26
3.4. Definition of the ML/FT risk ..............................................................26
3.5. Sources of risk of the AML/CFT SCMS ................................................26
3.6. Phases of the AML/CFT SCMS .........................................................28
3.7. Stages of the AML/CFT SCMS ..........................................................28
3.8. Due diligence processes of the AML/CFT SCMS .................................28
3.9. Elements of the AML/CFT SCMS ......................................................28
4. POLICIES FOR THE MANAGEMENT OF THE ML/FT RISK ...................29
4.1. General policies ................................................................................30
4.2. Policies of the stages of the AML/CFT SCMS ......................................32
4.3. Policies of the elements of the AML/CFT SCMS .....................................32
4.4. Guidelines .......................................................................................33
4.5. Conflicts of interest .........................................................................34
4.6. Relations with Shareholders, Management and Related Parties ...........35
4.7. Body in charge of the Policy ..............................................................35
4.7.1. Objectives and setting for application ...............................................35
5. METHODOLOGIES FOR THE SEGMENTATION, IDENTIFICATION, MEASUREMENT AND CONTROL OF THE ML/FT RISK AND MONITORING OF THE AML/CFT SCMS ..................................................................37
5.1. General objective .............................................................................38
5.2. Scope ............................................................................................38
5.3. Methodology for the management of the ML/FT risk ..........................38
5.3.1. Guidelines .......................................................................................38
5.3.2. Stages of ML/FT risk management ...................................................39
5.3.3. Database for suspicious transactions ...............................................43
6. ORGANIZATIONAL STRUCTURE OF THE AML/CFT SCMS, FUNCTIONS AND RESPONSIBILITIES ..................................................................44
6.1. Objective .........................................................................................45
6.2. Scope .............................................................................................45
6.3. Organizational structure ...................................................................45
6.3.1. Board of Directors ...........................................................................45
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6.3.3. Compliance Officer ...........................................................................46
6.3.4. People in charge of prevention and control of the AML/CFT SCMS ........48
6.3.5. Statutory Auditor .............................................................................49
6.3.6. Internal Audit ..................................................................................49
6.4. Organizational chart of the AML/CFT SCMS .......................................50
7. MEASURES TO ENSURE COMPLIANCE WITH THE POLICIES OF AML/ CFT SCMS AND DISCIPLINARY PENALTIES ......................................51
7.1. Objective ........................................................................................52
7.2. Scope .............................................................................................52
7.3. Guidelines .......................................................................................52
7.4. Measures of the preventive type ......................................................52
7.5. Procedure .......................................................................................53
7.6. Measures of the corrective type ........................................................53
8. PROCEDURES FOR INTERNAL CONTROL AND REVIEW OF THE AML/ CFT SCMS ......................................................................................54
8.1. Objective .........................................................................................55
8.2. Scope .............................................................................................55
8.3. Activities .........................................................................................55
9. PROCEDURES FOR THE ADEQUATE IMPLEMENTATION AND FUNCTIONING OF THE ELEMENTS AND STAGES OF THE AML/CFT SCMS .................................................................56
9.1. Objective .........................................................................................57
9.2. Scope .............................................................................................57
9.3. Guidelines .......................................................................................57
9.4. Policies regarding knowledge ...........................................................58
9.4.1. Knowledge on Shareholders .............................................................58
9.4.2. Knowledge on Customers .................................................................59
9.4.3. Knowledge on Publicly Exposed People (PEP) .....................................60
9.4.4. Knowledge on Employees ................................................................62
9.4.5. Knowledge on Suppliers, Independent Contractors, Strategic Partners or external Related Parties ...................................................................62
9.4.6. Determination of the maximum amount of cash money .......................64
9.4.7. Identification and analysis of unusual transactions .............................64
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9.4.8. Determination and documentation of suspicious transactions .............64
10. REPORTS OF THE AML/CFT SCMS ..................................................66
10.1. Objective .........................................................................................67
10.2. Guideline .........................................................................................67
10.3. Internal reports ................................................................................67
10.3.1. Internal Unusual Transaction Reports (IUTR) .......................................67
10.3.2. Internal Suspicious Transaction Reports (ISTR) ...................................67
10.4. External reports ...............................................................................67
10.4.1. Suspicious Transaction Reports (STR) ..............................................68
10.5. Dissemination strategy .....................................................................69
10.6. Confidentiality obligation ..................................................................69
11. REQUIREMENTS OF AUTHORITIES ...................................................70
11.1. Objective .........................................................................................71
11.2. Scope ............................................................................................71
11.3. Guidelines .......................................................................................71
11.4. Procedure to respond to requirements from authorities regarding information .......................................................................72
12. TRAINING PROGRAMS ON THE AML/CFT SCMS ..............................73
12.1. Objective .........................................................................................74
12.2. Scope .............................................................................................74
12.3. Guidelines .......................................................................................74
12.4. Functions ........................................................................................75
12.5. Frequency .......................................................................................75
12.6. Training elements ............................................................................76
13. RECORD KEEPING ..........................................................................77
13.1. Objective .........................................................................................78
13.2. Scope .............................................................................................78
13.3. Guidelines .......................................................................................78
INDEX 1: GLOSSARY ..................................................................................79
INDEX 2: CONSULTATION OF PUBLIC LISTS AND DATABASES ......................84
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UPDATE CONTROL
This AML/CFT SCMS MANUAL must be updated when this becomes necessary. This must be done by the Board of Directors of Cementos Argos S.A., who is in charge of approving all changes proposed by the Compliance Officer regarding po-licies, guidelines, methodologies, processes and procedures in effect.
The review and update process of this MANUAL is the responsibility of the Compliance Officer, in coordination with the Vice Presidency of Legal and Institutional Affairs of CEMENTOS ARGOS S.A., taking into consideration international standards, best practices, recommendations from multilateral organisms, the Conventions of the United Nations that are applicable and the norms established by local authorities in the jurisdictions in which the Company has operations, as well as in accordan-ce with changes in the internal policies of CEMENTOS ARGOS S.A.
VERSION DATE CHANGES CARRIED OUT
1 15-Dec-2014 AML/CFT SCMS MANUAL
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INTRODUCTIONKeeping in mind that money laundering (ML) and the financing of terrorism (FT) have become serious calamities for humanity that affect the economy and society in ge-neral, criminal organizations seek to use companies and businesses of the finan-cial and real sector to carry out their illicit activities. Therefore, businesses should prevent organized crime from using companies of the financial and real sector as a legal front for assets coming from criminal activities or to channel illicit resources used to carry out terrorist activities.
As an answer to this situation and to the growing concern of both the national and international community regarding money laundering and the financing of terrorism, CEMENTOS ARGOS S.A. identifies itself with society and the judicial and adminis-trative authorities by recognizing the importance of combatting these activities, as they affect essential aspects of economic and social life.
Therefore, CEMENTOS ARGOS S.A. has created this MANUAL TO THE ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM SELF-CONTROL AND MANAGEMENT SYSTEM, the AML/CFT SCMS MANUAL, in order to prevent illicit activities from taking place inside CEMENTOS ARGOS S.A. and its Subsidiaries, by adequately managing these risks, and thus comply with the internal policies and procedures and with what is established in applicable norms in effect.
The Company understands that the best way of complying with this commitment is by establishing effective, efficient, sufficient and opportune internal policies, norms and procedures that allow us to develop and implement the AML/CFT SCMS adequately.
The Board of Directors, Senior Management, external Related Parties, Shareholders and Investors, Independent Contractors, Suppliers and Employees of CEMENTOS ARGOS S.A. must show their commitment towards ensuring compliance with the internal and/or external norms related to the administration of the risks of ML/FT. Adherence to this policy is fundamental in order to ensure that all of the depart-ments of CEMENTOS ARGOS S.A. fully comply with what is established in terms of their prevention and control, through their active practices and resolute commitment.
Thus, this AML/CFT SCMS MANUAL plays the role of a navigational chart for everything related to the risks of ML/FT for CEMENTOS ARGOS S.A. and its Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties.
GENERAL INFORMATION
1.
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1.1. Objectives of the AML/CFT SCMS MANUAL
1.1.1. General objective
The AML/CFT SCMS MANUAL of CEMENTOS ARGOS S.A. is a document for con-sultation and a work instrument for all of the Employees and external Related Parties of CEMENTOS ARGOS S.A. that allows them to get to know the policies, methodologies and procedures aimed at preventing and controlling the risks of money laundering and the financing of terrorism, so as to prevent the Company from becoming the target of ML/FT and avoid the economic effects this could have.
1.1.2. Specific objectives
Furthermore, the AML/CFT SCMS MANUAL of CEMENTOS ARGOS S.A. seeks to:
a. Prevent and control situations in which CEMENTOS ARGOS S.A. could be used as an instrument to, in whichever way, hide, handle, invest in or take advantage of money or other assets coming from illicit activities, to serve as a legal front for any of these activities or transactions and funds related to them, or to use any of the money or assets delivered or managed by CEMENTOS ARGOS S.A. for money laundering or the financing of terrorism.
b. Describe the policies, procedures, documentation, organizational structure, control organisms, technological infrastructure, information dissemination sys-tems, and training programs that are part of the AML/CFT SCMS.
c. Describe the methodologies used for the segmentation of the sources of the risks of money laundering and the financing of terrorism.
d. Describe the methodologies used for the identification, measurement, con-trol, monitoring and reporting of the risks of money laundering and the fi-nancing of terrorism.
e. Establish the necessary measures to ensure compliance with the policies of the AML/CFT SCMS.
f. Create a common denominator for the understanding of the implementation and functioning of the AML/CFT SCMS within CEMENTOS ARGOS S.A.
g. Protect the reputation of CEMENTOS ARGOS S.A., minimizing the possibility or probability of being used in transactions related to money laundering and/or the financing of terrorism.
h. Establish policies and procedures, taking into account the characteristics of the products and services that are offered by CEMENTOS ARGOS S.A., ma-king it possible to identify the true nature and origin of the resources of its Customers, Suppliers, Associates and external Related Parties, whether they are natural or legal persons.
i. Have an adequate compliance program for the prevention and control of the risks of money laundering and the financing of terrorism that is in accordan-ce with the organization, structure, resources and characteristics of the opera-tions of CEMENTOS ARGOS S.A.
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EMj. Establish control mechanisms for the prevention of money laundering and the
financing of terrorism within CEMENTOS ARGOS S.A.
k. Promote compliance with legal regulations and business practices, pursuant to legal norms in effect.
l. Standardize work methods of the staff and third parties involved with the prevention and control of the risks of money laundering and the financing of terrorism.
m. Create a basis for the preparation and training of staff in terms of the pre-vention and control of the risks of money laundering and the financing of terrorism.
1.2. Scope The AML/CFT SCMS MANUAL of CEMENTOS ARGOS S.A. is aimed at all of the Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A. or any of the other Stakeholders of CEMENTOS ARGOS S.A.
1.3. Approving bodyThe AML/CFT SCMS MANUAL of CEMENTOS ARGOS S.A. was approved by the Board of Directors of CEMENTOS ARGOS S.A. through Act No. 1144 of 2014, both for the Company itself and for its Subsidiaries.
1.4. DisseminationThis AML/CFT SCMS MANUAL is available for all the Employees and exter-nal Related Parties of CEMENTOS ARGOS S.A. so that it can accomplish its functions within CEMENTOS ARGOS S.A. The AML/CFT SCMS MANUAL must not be handed over to parties not related to CEMENTOS ARGOS S.A., except when this has been authorized in writing by its Management and/or requested by surveillance and control organisms, such as the Audit and Statutory Audit Departments.
The Compliance Officer must ensure proper knowledge and understanding of the existence of the AML/CFT SCMS MANUAL by the Employees and external Related Parties of CEMENTOS ARGOS S.A., who must execute it and provide written con-firmation of their understanding.
1.5. Premises and legal basisThis AML/CFT SCMS MANUAL was established based on the Political Constitution of Colombia, the laws and decrees related to the fight against money laundering and the financing of terrorism, the External Circular Letters sent by the Colombian Superintendence of Companies, and other internal norms of CEMENTOS ARGOS S.A.
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1.6.Ethical and professional commitmentCEMENTOS ARGOS S.A. has established a culture of compliance within its AML/CFT SCMS, starting from the bases of the ethical and professional commitment of its Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A., so that the products and services of CEMENTOS ARGOS S.A. cannot be used to provide a legal front for funds that stem from illicit activities or to channel licit or illicit resources to fund terrorist acti-vities. As a result, CEMENTOS ARGOS S.A. is willing to comply with the obligation of collaborating with all competent national and international authorities in order to combat the crimes of money laundering and financing of terrorism.
The ethical qualities and abilities of our Employees, especially those holding po-sitions that require much contact with our Customers; the handling and adminis-tration of resources, money or assets; and the control of information all constitu-te the most effective tools at the disposal of CEMENTOS ARGOS S.A. to prevent and control the risks of money laundering and the financing of terrorism across all of the jurisdictions in which it operates.
GENERAL ASPECTSOF MONEY LAUNDERINGAND FINANCING OF TERRORISM
2.
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2.1. Concept of money launderingMoney laundering is the process through which goods, resources or assets of illi-cit origins are tried to be given a legal appearance with the intention of introducing them into the formal economy through the real or financial sector.
2.1.1. Stages of money laundering
The process of money laundering implies the development of four independent stages, which can take place either one after the other or simultaneously:
a. Obtaining: This happens by means of any of the criminal behaviors stipulated in penal legislation in effect (Article 323 of the Colombian Penal Code and/or applicable international regulations) that entail the creation of illicit goods, re-sources or assets.
b. Placement: This is the activity that seeks to place the goods, resources or as-sets from illicit origins in the formal economy, especially in the financial sector or through goods or services of the real sector.
c. Layering: This is the execution of several transfers, purchases, sales, con-tracts or transactions, in different ways and sectors, aimed at trying to hide the illicit origin and make it difficult to trace it, which is why generally, many com-plex economic transactions are done.
d. Integration: This is the mixture of illicit money and funds from legal origins, aimed at trying to use the assets and take advantage of the goods or resour-ces with a legal appearance.
2.1.2. Criminal behavior that leads to money laundering
In accordance with Article 323 of the Colombian Penal Code, criminal behaviors that are typically associated with money laundering are the following:
a. Migrant trafficking
b. Human smuggling
c. Extortion
d. Illicit enrichment
e. Extortive kidnapping
f. Rebellion
g. Arms trafficking
h. Trafficking of children
i. Financing of terrorism and administration of resources related to terrorist activities
j. Trafficking of toxic drugs, narcotics or psychotropic substances
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EMk. Crimes against the Financial System, such as:
i. Wrongful use of funds raised from the public
ii. Unauthorized transactions with Shareholders or Associates
iii. Massive and habitual raising of funds
iv. Fraudulent use of securities registered in the national registry of securi-ties and issuers
l. Crimes against the Public Administration, such as:
i. Embezzlement
ii. Omission of the retaining or collecting agent
iii. Use of treasury resources to wrongfully stimulate or benefit exporters and precious metal dealers
iv. Extortion
v. Bribery
vi. Wrongful signing of contracts
vii. Illicit enrichment of public servants
m. Conspiracies to commit crimes
n. Any other behaviors considered as such by international norms that are appli-cable in the jurisdictions in which the Company operates
2.1.3. Forms of committing money laundering
Money laundering can be committed by any person that acquires, protects, in-vests, transports, transforms, stores, keeps, guards or administrates goods that stem directly or indirectly from the abovementioned criminal activities.
2.2. Concept of financing of terrorismThe financing of terrorism is the process through which goods, resources or as-sets of illicit or licit origins are obtained and used to carry out terrorist activities, which means activities that lead to anxiety, fear or terror in the general popula-tion, through actions that endanger the lives, the physical integrity or the freedom of other people, buildings, communication media, means of transportation and means of processing or conducting fluids or driving forces through means that can cause damage.
2.2.1. Stages of the financing of terrorism
The process of the financing of terrorism that is carried out with goods, resources or assets that stem from licit or illicit sources implies the carrying out of certain stages that are similar to the ones of money laundering, as follows:
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a. Obtaining: This is the gathering of funds from legal or illegal sources with the intention of supporting terrorist activities.
b. Placement: This is the activity of placing legal or illegal resources in some kind of formal or informal system with the intention of covering up their desti-nation or using them for terrorist ends or for a terrorist organization.
c. Layering: This is the mixing of goods, resources or assets from illicit or licit sources through diverse financial transactions.
d. Integration: This is the way in which the funds are used and/or the goods, re-sources or assets are taken advantage of with a legal appearance, hiding their terrorist purposes or using them to support terrorist organizations.
2.2.2. Criminal behaviors related to the financing of terrorism
The criminal behaviors that are typically related to the financing of terrorism in Colombia can be, and generally are, the same ones that are typical for money laun-dering, i.e.:
a. Migrant trafficking
b. Human smuggling
c. Extortion
d. Extortive kidnapping
e. Rebellion
f. Arms trafficking
g. People trafficking
h. Financing of terrorism and administration of resources related to terrorist activities
i. Trafficking of toxic drugs, narcotics or psychotropic substances
j. Crimes against the Financial System, such as:
i. Wrongful use of funds raised from the public
ii. Unauthorized transactions with Shareholders or associates
iii. Massive and habitual raising of funds
iv. Fraudulent use of securities registered in the national registry of securi-ties and issuers
k. Crimes against the Public Administration, such as:
i. Embezzlement
ii. Omission of the retaining or collecting agent
iii. Use of treasury resources to wrongfully stimulate or benefit exporters and precious metal dealers
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EMiv. Extortion
v. Bribery
vi. Wrongful signing of contracts
vii. Illicit enrichment of public servants
l. Conspiracies to commit crimes
Additionally, funds obtained in legal ways or others funds stemming from crimes not mentioned by Article 323 of the Colombian Penal Code or other behaviors con-sidered as such by international norms that are applicable in the jurisdictions in which the Company operates can be added to these.
2.2.3. Ways of financing terrorism
In the case of Colombia, the crime of financing terrorism affects public safety and is directly related to criminal behavior such as:
a. Training for illicit activities
b. Terrorism
c. Illegal use of uniforms and insignias
d. Threats
e. Incitement
f. Instigation to commit military crimes
Furthermore, this crime is usually committed to favor or benefit:
a. Groups of organized crime and their members
b. Groups outside the law and their members
c. National or foreign terrorist groups and their members
d. National or foreign terrorists
2.2.4. Ways of committing and sanctions for financing terrorism
Article 345 of the Colombian Penal Code, regarding the crime of financing terro-rism and groups of organized crime and the administration of resources associa-ted with terrorist activities and organized crime, stipulates the following: A crime that directly or indirectly provides, gathers, delivers, receives, administrates, con-tributes, guards or keeps funds, goods or resources, or carries out any other action that economically promotes, organizes, supports, maintains or finances groups in-volved in organized crime, armed groups outside the law or their members, natio-nal or foreign terrorist groups, national or foreign terrorists, or terrorist activities, will be subject to a sentence in prison of between thirteen (13) and twenty-two (22) years and a fine of between one thousand three hundred (1,300) and fifteen thousand (15,000) monthly legal minimum salaries in effect.
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2.4. General types of money laundering and financing of terrorism
Committing crimes of money laundering and financing of terrorism can happen through different means, such as activities like the following:
a. Fictitious export of services
b. Fictitious export of goods
c. Fictitious foreign investment in a “local company”
d. Replacement of external debt incurred for a Customer of a “local company”, using illicit money
e. International foreign exchange arbitrage through transport of illicit money
f. Split transfers of illicit money through international transfers
g. A “Peso Broker”, or black market peso exchange
h. Use of illicit funds to decrease indebtedness or capitalize legitimate companies
i. Purchase of “awards” by a criminal organization
j. Declaration of a fictitious award obtained abroad to enter illicit money into a country
k. Use of bank accounts that are lent to hide payments for crimes
l. Transactions on hacked accounts
2.3. Parallels between money laundering and the financing of terrorism
Table 1: Parallels between money laundering and the financing of terrorism.
Aspects
Motivation
Source ofthe money
Channels
Detection
Quantities oftransactions
Financial activity
Tracing of money
Money Laundering Financing of Terrorism
Pro�t Ideology
Internal, stemming from the criminal organizationInternal, stemming from cells that �nancethemselves through commercial activities,or external, through benefactors
Informal systems to transfer money
Suspicious relations, such as the sendingof money between parties that do nothave any relation
Small amounts, usually belowreporting limits
There is no clear operational pro�le forterrorists, according to the report of the9/11 Commission of the U.S. Senate
Lineal – the money that is generatedis used to pay terrorist groupsand criminal activities
Formal system
Suspicious transactions, such as those that do not match the Customer’s wealthand pro�le
Large amounts that are usually structured so asto avoid reporting requirements
Online transactions, which often includefront companies, bearer sharesand tax paradises
Circular – the money eventually ends up inthe hands of the one who generated it
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EMm. “Cinderella” operations (a type of express kidnapping that is also known as
millionaire tour or millionaire walk)
n. Supply of goods, groceries or livestock to illegal groups
o. Collecting of ransom for safety or so-called “permits”
p. Use of bank accounts or businesses of formerly kidnapped people that faci-litate them to provide a legal appearance for the money of an organization of kidnappers
q. Acquisition of goods or properties by family members of kidnappers or extortionists
r. Carrying out of transnational economic transactions
s. In-kind payments for illicit activities with goods that were smuggled into the na-tional territory
t. Smuggling of inputs for networks of “piracy”
u. Transport of money from illicit sources to other countries in order to acquire goods that enter the local country through technical smuggling by means of under-invoicing
v. Export of over-invoiced goods and subsequent entry of smuggled goods into the national territory
w. Change in destination of raw materials that enter the country under the spe-cial import/export systems of the “Plan Vallejo” policy.
x. Imports done by a customs intermediary replacing a recognized importer and using a program approved by means of the special import/export systems of the “Plan Vallejo” policy.
y. Smuggling and counterfeit
z. Technical smuggling by means of overvaluation of goods
aa. Smuggling through triangulation of goods
ab. Technical smuggling of rice through export or import
ac. Simulation of quality of rice harvest
ad. Simulation of production of rice harvest
ae. Simulation or irregular use of forward arrangements
af. Simulation of transactions with goods of different value
ag. Use of legally established companies to support activities of drug-trafficking terrorist organizations
ah. Creation of cooperatives or companies for the raising and/or establishing or production of agro-industrial elements
ai. Notarial transactions
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2.5. Purposes of money laundering and financing terrorismKeeping in mind that both money laundering and the financing of terrorism stem from illicit activities, criminal organizations seek to use their illicit gains that appear legal with the purposes of:
a. Hiding the origin and the destination of goods, resources or assets
b. Making the work of authorities more difficult
c. Introducing them into the legal market, whether through the financial or the real sector of the economy
d. Ensuring their use of the illicit/licit goods, resources or assets, or using them for terrorist activities
2.6. Consequences of money laundering and financing of terrorism
It is possible that, through companies of the real sector, money can be laundered and terrorism can be financed, as there are companies that carry out transactions of large amounts of money. Therefore, it is necessary to prevent, detect and con-trol money laundering and the financing of terrorism given that, besides being acti-vities that are forbidden by criminal regulations, they imply disastrous consequen-ces, such as the following:
a. Deterioration of the corporate reputation
b. Being included in international restrictive lists, such as the OFAC List and the UN List, among others
c. Loss of access to services and products of the financial system
d. Loss of commercial relations with other countries
e. Deterioration of democratic and national and international security institutions
f. Business risks
g. Personal and institutional criminal, administrative, labor and equity sanctions
h. Strengthening of delinquents
i. Creation of more crime
2.7. Best practices in the prevention and control of the risks of money laundering and the financing of terrorism
These are the best practices1 that are suggested by the Colombian Financial Information and Analysis Unit (UIAF – Unidad de Información y Análisis Financiero)
1. ABC del Lavado de Activos y de la Financiación del Terrorismo. Unidad de Información y Análisis Financiero – UIAF.
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EMand that should be taken into account for the prevention and control of the risks of money laundering and the financing of terrorism:
a. Never lend your name as a natural or legal person.
b. Never lend your financial products.
c. Always ask about the origin and destination of goods, resources or assets you deal with for business.
d. Always document all the transactions you carry out.
e. Always apply mechanisms to gather knowledge about Customers.
f. Always check and analyze Customers’ information.
g. Always monitor Customers’ transactions.
h. Always update manuals and procedures.
i. Always include controls in processes.
j. Always get to know your own market and that of your Customers.
k. Always rely on technology to determine high-risk Customers, markets and transactions.
l. Always raise awareness about risks and train all of your Employees.
m. Always establish codes of conduct in which you identify risky situations and the way in which Employees should act.
n. Always be wary of “easy business”.
o. Get to know the types and methods through which crimes of money laundering and financing of terrorism are committed.
p. Identify warning signals.
It is the duty of all Shareholders and Investors, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties associated with CEMENTOS ARGOS S.A. to raise awareness about and commit to combatting money laundering and the finan-cing of terrorism, doing everything possible to prevent CEMENTOS ARGOS S.A. from being involved in these illicit activities, not just because of reasons of loyal-ty, but also because of ethical and legal reasons, in compliance with a policy that is pursuant to legal norms.
GENERAL ASPECTS OF THE AML/CFT SCMS
3.
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EM3.1. Nature of the ML/FT risksMoney laundering and the financing of terrorism are seen as risks. Nevertheless, their nature is different from other types of risks, such as credit, market or liqui-dity risks, in which there are options to win or lose. In the case of the ML/FT risk, the only option for CEMENTOS ARGOS S.A. is a loss, and therefore, CEMENTOS ARGOS S.A. focuses its efforts, through its AML/CFT SCMS, on preventing it, de-tecting it, and reporting it opportunely and effectively.
3.2. Setting for the application of the AML/CFT SCMS The AML/CFT SCMS MANUAL is aimed at the Employees of Cementos Argos S.A. and its Subsidiaries, in order to take measures with all of their external Related Parties and Stakeholders to execute the Anti-Money Laundering and Combating the Financing of Terrorism Self-Control and Management System in all of the juris-dictions in which it operates.
3.3. Scope of the AML/CFT SCMSCEMENTOS ARGOS S.A. implemented the AML/CFT SCMS as a system for self-control and management through procedures and tools that take into account all of the activities carried out by CEMENTOS ARGOS S.A. when fulfilling its corpo-rate purpose, and it is adjusted to the size, economic activity, ways of commercia-lizing and other particular characteristics of the business.
Thus, the AML/CFT SCMS includes the design, approval and implementation of policies aimed at preventing and controlling the ML/FT risk, which are then trans-lated into rules for behavior and procedures that guide the actions of CEMENTOS ARGOS S.A. and its Employees, Stakeholders and external Related Parties.
3.4. Definition of the ML/FT riskThe ML/FT risk refers to the possibility or probability of economic losses or dama-ge that CEMENTOS ARGOS S.A. could suffer due to its vulnerability to being used directly or through its operations as an instrument for money laundering and/or channeling resources for the carrying out of terrorist activities, or when people try to hide assets that stem from said activities.
3.5. Sources of risk of the AML/CFT SCMSFor the AML/CFT SCMS, at CEMENTOS ARGOS S.A., the risk sources or factors are the following:
a. Customers
b. Suppliers
c. Employees
d. Shareholders
e. Products/Services
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f. Distribution Channels
g. Jurisdictions
Customers
a. Economic activity
This refers to the classification of and/or grouping of Customers codes accor-ding to the main or complementary economic activity they carry out, whether it is dependent or independent.
b. Volume or frequency of transactions
This refers to the amount and frequency of the transactions carried out during a period of one year or the last months, based on past records of CEMENTOS ARGOS S.A.
c. Amount of revenues, expenditure and shareholders’ equity
This refers to the amounts of revenues and expenditure and information regar-ding equity provided to CEMENTOS ARGOS S.A. by its Customers, which must be duly updated.
Products and/or Services
a. Nature
This refers to the different types of existing products of CEMENTOS ARGOS S.A., which are put into groups, such as dry loads, liquid loads and mixed loads, and duly classified according to risk levels.
Distribution Channels
a. Nature
For this variable, own and external channels through which the products and services of CEMENTOS ARGOS S.A. are marketed are defined.
Jurisdictions
a. Location
The location of the operations, businesses or offices of CEMENTOS ARGOS S.A. are taken into account in order to assess this source of risk.
b. Characteristics
For this variable, the location of the channels and of the Customers (Suppliers and other third parties) are associated with the services they market or sell.
c. Nature of the operations
The type of transactions carried out by Customers is taken into account with the objective of establishing usual transactional behaviors for each source of risk, based on the commercial segment to which the Customer belongs, whe-ther they are legal or natural persons, including the location of the Customer and their transactions (loading or unloading). The purpose of this is to be able
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EMto compare the monthly average of their transactions with the monthly avera-ge of the variable being analyzed and identifying any possible variations or de-viations that make it possible to determine any unusual behaviors.
• Segmentation results
Once each of the sources of risk is segmented, an inventory of risky events is made based on the warning signals of the corporate purpose of CEMENTOS ARGOS S.A.
3.6. Phases of the AML/CFT SCMSThe AML/CFT SCMS at CEMENTOS ARGOS S.A. is divided in two stages: preven-tion and control. In the first stage, CEMENTOS ARGOS S.A. takes measures wi-thin its reach in order to mitigate exposure to the ML/FT risk and prevent itself from being used for the carrying out of criminal activities. In the second stage, CEMENTOS ARGOS S.A. implements all the mechanisms and uses all the tools within its reach to detect transactions, contracts or businesses that people try to carry out or have carried out to provide a legal front for illicit activities or to chan-nel licit or illicit resources towards terrorist activities.
3.7. Stages of the AML/CFT SCMSThe stages of the AML/CFT SCMS at CEMENTOS ARGOS S.A. are systematic and interrelated steps through which CEMENTOS ARGOS S.A. administrates the ML/FT risk. The stages of the AML/CFT SCMS are the segmentation of the sources of risk, the identification of the ML/FT risk, the measuring of the ML/FT risk, the control of the ML/FT risk, the monitoring of the ML/FT risk management system and the reporting on exposure levels and performance of the ML/FT risk management system.
3.8. Due diligence processes of the AML/CFT SCMSThe due diligence processes of the AML/CFT SCMS at CEMENTOS ARGOS S.A. refer to the following:
a. Knowledge on Customers
b. Knowledge on Shareholders
c. Knowledge on Employees
d. Knowledge on Publicly Exposed People (PEP)
e. Knowledge on Suppliers
3.9. Elements of the AML/CFT SCMS The elements of the AML/CFT SCMS are the set of aspects through which the ma-nagement of the ML/FT risk at CEMENTOS ARGOS S.A. is done, in an organized and methodical way, among which we can find policies, procedures, documenta-tion, organizational structure, control bodies, reports and training.
POLICIES FOR THE MANAGEMENT OF THE ML/FT RISK
4.
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EMAt CEMENTOS ARGOS S.A., instructions to manage the ML/FT risk are divided in general and specific policies. Thus, specific policies are defined for each chapter of the AML/CFT SCMS MANUAL.
4.1. General policiesThese are the policies that provide guidelines and instructions that must be fo-llowed by Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A. in terms of the prevention and control of the risk of money laundering and the financing of terrorism.
a. CEMENTOS ARGOS S.A., within the Colombian legal framework in effect and following the international recommendations of the FATF, the GAFILAT and other similar organisms, focuses its efforts on preventing and controlling the risk of money laundering and the financing of terrorism.
b. CEMENTOS ARGOS S.A. promotes and establishes, within its organization, an anti-money laundering and counter-terrorism financing culture in its gover-ning and controlling bodies, Management, Shareholders and, in general, all of its Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties.
c. CEMENTOS ARGOS S.A. has guidelines for the prevention and resolu-tion of conflicts of interest in this area, which are included in its Code of Corporate Conduct.
d. CEMENTOS ARGOS S.A. establishes adequate requirements for recruitment of and the carrying out of transactions with its Customers and Suppliers and rejects the establishment or renewal of contractual relations that do not meet the requi-rements demanded by law and the internal norms of CEMENTOS ARGOS S.A.
e. CEMENTOS ARGOS S.A. negotiates its products with and renders its services to Customers that have complied with the recruitment or information upda-te procedures established for the prevention and control of the risk of money laundering and the financing of terrorism, including the exceptions mentioned in this MANUAL.
f. CEMENTOS ARGOS S.A. does not negotiate products and/or services with Suppliers that have not complied with the recruitment or information upda-te procedures established for the prevention and control of the risk of money laundering and the financing of terrorism, including the exceptions mentioned in this MANUAL.
g. All Employees of CEMENTOS ARGOS S.A. that have direct contact with Customers and Suppliers must make sure they comply with the established procedures and provide all the information required according to the products and/or services being negotiated, making sure to document them in accordan-ce with the established guidelines.
h. CEMENTOS ARGOS S.A. firmly prohibits the establishing of commercial rela-tions with natural or legal persons that have fictitious or inaccurate names.
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i. CEMENTOS ARGOS S.A. monitors the transactions of domestic or foreign na-tural or legal persons that, due to their profile or they functions they carry out, could expose CEMENTOS ARGOS S.A. to a higher degree to the risk of money laundering and the financing of terrorism.
j. CEMENTOS ARGOS S.A. has methods aimed at identifying, measuring, contro-lling, monitoring and reporting the sources of risk and associated risks.
k. CEMENTOS ARGOS S.A. does not disclose information reported to competent authorities, as well as information used for the analysis of unusual and suspi-cious transactions.
l. CEMENTOS ARGOS S.A. has a system of sanctions that regulates the conse-quences that come with incompliance of the AML/CFT SCMS by its Employees, Managers and other external Related Parties, which is included in its Code of Corporate Conduct.
m. CEMENTOS ARGOS S.A. demands from its Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Contractors, Strategic Partners and other external Related Parties that they comply with the norms regarding the management of the risk of money laundering and the financing of terrorism, for which these have priority over all commercial and financial goals.
n. CEMENTOS ARGOS S.A. monitors all of the transactions, affairs and con-tracts that have characteristics that qualify them as unusual or abnormal ac-cording to previously established criteria, reason for which these are con-trolled, documented and reported by means of existing forms designed for these purposes to the Compliance Officer or corresponding authorities, ac-cording to each case.
o. CEMENTOS ARGOS S.A. adequately archives all the records, with the in-tention of keeping them available and informing its Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties about the prohibition to disclose or publish reports of unusual or suspicious operations.
p. The Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A. must commit towards CEMENTOS ARGOS S.A. to fully complying with and applying the Code of Good Governance, the Code of Corporate Conduct and the AML/CFT SCMS MANUAL.
q. All Employees, without exceptions, must commit towards CEMENTOS ARGOS S.A. to participating in the training programs on the prevention and control of the risk of money laundering and the financing of terrorism, which must be organized periodically under the supervision of the Compliance Officer.
r. All Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties must commit towards CEMENTOS ARGOS S.A. to maintain absolute confidentiality with regard to the information that is elaborated and distributed in the context of the prevention and control of the risk of money
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EMlaundering and the financing of terrorism, except in the cases of requirements by competent authorities.
s. All of the Employees of CEMENTOS ARGOS S.A. must immediately inform the Compliance Officer on any unusual transactions, whether attempted or actua-lly carried out, they acquire knowledge of in the context of their job, role or function, through the mechanisms established to such end.
4.2. Policies of the stages of the AML/CFT SCMSThese are specific instructions related to the identification, measurement, control, monitoring and reporting of the risk of ML/FT mentioned in the ML/FT risk mana-gement system.
a. The identification of the risks of money laundering and the financing of terro-rism of CEMENTOS ARGOS S.A. is the responsibility of all of its Employees, and they must be reported, through the people in charge in every department, to the Compliance Officer or whomever is appointed in the internal procedures of CEMENTOS ARGOS S.A.
b. The measurement of the risks of money laundering and the financing of terro-rism of CEMENTOS ARGOS S.A. is the responsibility of the Compliance Officer, in coordination with the Vice Presidency of Legal and Institutional Affairs, who have to report them to the competent Committees of the Board of Directors and the Governance Committee.
c. The design of the control mechanisms for the risks of money laundering and the financing of terrorism of CEMENTOS ARGOS S.A. is the responsibility of the Compliance Officer, in coordination with the Vice Presidency of Legal and Institutional Affairs, who have to report them to the competent Committees of the Board of Directors and the Governance Committee. The execution of said controls is the responsibility of the person in charge of each of the processes within the Company.
d. The monitoring and reporting of the AML/CFT SCMS of CEMENTOS ARGOS S.A. is the responsibility of the Compliance Officer, in coordination with the Vice Presidency of Legal and Institutional Affairs, who have to report to the competent Committees of the Board of Directors and the Governance Committee.
4.3. Policies of the elements of the AML/CFT SCMSThese are specific guidelines related to procedures, documents, organizational structure, control bodies, informative reports and training.
a. Compliance with the policies and procedures of the AML/CFT SCMS of CEMENTOS ARGOS S.A. is mandatory for all of its Shareholders, Members of the Board of Directors, Management, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other external Related Parties.
b. Documents associated to the control and prevention of ML/FT used in the pro-cesses are the responsibility of each process department.
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c. Documents associated to the risks, analysis and investigations related to the prevention of ML/FT of CEMENTOS ARGOS S.A. is the responsibility of the Compliance Officer, in coordination with the Vice Presidency of Legal and Institutional Affairs.
d. In the two previously mentioned cases, the integrity, reliability, availability, com-pliance, effectivity and efficiency of the documents must be guaranteed. To this effect, they must be recorded in writing and on magnetic media with the necessary safety measures required for each case.
e. The Members of the Board of Directors, the Management, the Compliance Officer and the special members or officials appointed by CEMENTOS ARGOS S.A. with functions related to the management of the ML/FT risk must commit to fully com-plying with their functions and carrying out their tasks related to the AML/CFT SCMS of CEMENTOS ARGOS S.A.
f. The control bodies of CEMENTOS ARGOS S.A. must commit to assessing the AML/CFT SCMS of CEMENTOS ARGOS S.A. in accordance to applicable standards.
g. The Employees of CEMENTOS ARGOS S.A. must commit to using the infras-tructure or technological platform of the AML/CFT SCMS appropriately, when applicable, and to use it to carry out their functions.
h. The Employees of CEMENTOS ARGOS S.A. are prohibited to disclose any in-formation related to the internal and external reports of the AML/CFT SCMS to third parties.
i. The Employees of CEMENTOS ARGOS S.A. must be trained at least once per year on the AML/CFT SCMS. New Employees and external Related Parties of CEMENTOS ARGOS S.A. must receive this training as part of their induction or recruitment process.
j. At least once per semester, the Compliance Officer must do a follow-up of the functionality of the AML/CFT SCMS with the objective of detecting any possi-ble deficiencies and proceeding with their correction.
k. Periodically, and at least once per semester, a report must be elaborated, ma-king it possible to establish the residual risk profile of CEMENTOS ARGOS S.A., the individual and consolidated evolution of the risk profiles, the sour-ces of risks, and associated risks. This report must be provided to the Senior Management and the Board of Directors, and it must be included in the Management Report at the end of each annual reporting period.
4.4. Guidelinesa. The Board of Directors, the Management, the Senior Management, the Control
Bodies and any other people that render services to CEMENTOS ARGOS S.A. must ensure compliance with the internal and/or external norms related to AML/CFT SCMS.
b. The Compliance Officer and their support team, in coordination with the Company’s Risk Department, are in charge of designing the methodologies
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EMfor the measurement and monitoring of risks, applying them to determine the risks profiles (inherent and residual), and monitor them periodically.
c. The AML/CFT SCMS must have its own policies, procedures, manual, organi-zational structure, event log, control bodies, technological support and perio-dic disclosure of information.
d. The ML/FT risk identification and measurement stage must be carried out at the following moments:
i. Before the launch of any product or service, modifications to any of their characteristics or the penetration of a new market.
ii. Before starting operations in new jurisdictions.
iii. Before launching or modifying any of the distribution channels used by CEMENTOS ARGOS S.A. to offer its products and/or services.
4.5. Conflicts of interestThe Shareholders, Members of the Board of Directors, Management, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other ex-ternal Related Parties are considered to be involved in a conflict of interest when any situation presents itself in which their personal interests or those of a third party are opposed to those of Cementos Argos in personal or commercial activi-ties or in dealing with other people or entities, in such a way that it affects the free-dom and independence of decision, due to differences in the motives of those who take part in the relation, thus ignoring a legal, contractual, statutory or ethical duty.
At CEMENTOS ARGOS S.A., conflicts of interest related to the risk of money laun-dering and the financing of terrorism arise in the following cases:
a. Detection of unusual transactions and determination of suspicious transac-tions: It should be understood that there is a conflict of interest in the detec-tion of unusual transactions and the determination of suspicious transactions, whether attempted our actually carried out, when these were done by spouses or permanent partners or relatives to the second degree of consanguinity, the second degree of affinity or one rank removed in civil law, or when it regards transactions in which the person in charge of carrying out the analysis has any type of personal interest or seeks a favor of a third person.
b. Suspicious Transaction Reports (STR): It should be understood that there is a conflict of interest when during the decision-making process of the elabora-tion of the STR, personal situations arise regarding the person elaborating the report or when it regards transactions carried out with spouses or permanent partners, or relatives to the second degree of consanguinity, the second de-gree of affinity or one rank removed in civil law.
When a conflict of interest arises, or there are doubts about the existence of one, the following procedure must be followed:
a. The Corporate Behavior Officer must be informed, with details regarding the si-tuation, and they in turn must appoint an Employee or officer that must continue
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the respective process. If the Compliance Officer is the one reporting the conflict of interest, this latter decision must be made by the Governance Committee.
b. Everyone that knows about a conflict of interest must restrain from directly or indirectly intervening in the activities and decisions that are related to the de-cisions regarding the conflict and suspend all their associated actions.
c. The Members of the Board of Directors must fully inform the Board of Directors about any situation that presents a conflict of interest. Any doubts regarding the configuration of actions that imply conflicts of interest do not release the Member of the Board of Directors from the obligation of abstaining from parti-cipating in the respective activities.
In all cases, that what is stipulated regarding conflicts of interest in the Code of Good Governance and the Code of Corporate Conduct of CEMENTOS ARGOS S.A. must be applied.
4.6. Relations with Shareholders, Management and Related Parties
The ML/FT risk analysis must also focus on knowledge on Shareholders, which is any natural or legal person that holds at least one share of CEMENTOS ARGOS S.A., Administrators, which include the Members of the Board of Directors and the Legal Representatives, and the Related Parties, Suppliers, Customers, Independent Contractors, Employees and Strategic Partners of CEMENTOS ARGOS S.A. Thus, the information of these groups must also be periodically checked through diffe-rent available databases and public consultation channels (Index 2).
4.7. Body in charge of the PolicyThe body in charge of the AML/CFT SCMS Policy is the Board of Directors of CEMENTOS ARGOS S.A., which approves it, taking into account the proposal of the Compliance Officer. All subsidiaries must also adhere to this Policy.
4.7.1. Objectives and setting for application
The main objectives of the AML/CFT SCMS were defined as follows:
a. Implement an AML/CFT SCMS in order to prevent CEMENTOS ARGOS S.A. from being used as an instrument for ML/FT.
b. The AML/CFT SCMS that is implemented must fit the nature, corporate purpo-se and other specific characteristics of CEMENTOS ARGOS S.A.
c. Make all the members of CEMENTOS ARGOS S.A. aware of the importance of preventing and controlling the risk of ML/FT, because of the threat that it re-presents for the economic and financial systems and the integrity of markets.
d. Make all the members of CEMENTOS ARGOS S.A. aware of the importance of applying control measures in order to ensure the reduction or mitigation of the ML/FT risk.
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EMe. Implement an adequate and efficient ML/FT risk management that makes it
possible to identify, measure, control, monitor and report this risk.
f. Ensure compliance with internal and external regulations by the Board of Directors and those who directly or indirectly render services to CEMENTOS ARGOS S.A.
g. Define the levels of control and responsibility of all the Employees of CEMENTOS ARGOS S.A. that intervene in the AML/CFT SCMS, in order to monitor the risks and seek to improve its indicators.
h. Take into account, in the design and update of the AML/CFT SCMS, what the international standards for the prevention and control of the risk of money laundering and the financing of terrorism are, especially those published by the FATF and the GAFILAT.
METHODOLOGIES FOR THE SEGMENTATION, IDENTIFICATION, MEASUREMENT AND CONTROL OF THE ML/FT RISK AND MONITORING OF THE AML/CFT SCMS
5.
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EM5.1. General objectiveImplement a methodology that allows CEMENTOS ARGOS S.A. the comply with local and international regulations in effect, through the management of the risks related to ML/FT, by means of preventive and/or corrective actions aimed at the effective control of the identified risks.
5.2. ScopeIn order to ensure that CEMENTOS ARGOS S.A. is not used in issues related to ML/FT, the following aspects related to the identification and administration of the ML/FT risk must be taken into account:
a. Identification of the sources of risk to which CEMENTOS ARGOS S.A. is exposed.
b. Selection of a methodology to identify risks and assess the levels of exposure.
c. Identification and association of controls to mitigate the ML/FT risk and as-sess residual exposure levels.
d. Implementation of the necessary action plans and measures to maintain the levels of exposure to the ML/FT risk, according to the tolerance level establi-shed for said risk.
5.3. Methodology for the management of the ML/FT risk
5.3.1. Guidelines
CEMENTOS ARGOS S.A. has certain corporate objectives that must be develo-ped through different plans, programs and projects, which could possibly not be complied with due to the presence of risks related to ML/FT, i.e. by the probabili-ty that certain facts or actions happen as a consequence of factors related to illi-cit business that could hinder the normal development of the corporate purpose of CEMENTOS ARGOS S.A.
To manage the ML/FT risk, the following aspects must be taken into account:
a. Commitment of Senior Management: To successfully implement an adequa-te risk management, the commitment of Senior Management is essential, as they are in charge of defining the policies and stimulating a culture of com-pliance and ML/FT risk management. In order to achieve this, it is necessary to be very clear about the policies defined within CEMENTOS ARGOS S.A.
b. Assembly of a work team: It is important to assemble an interdisciplinary and multidisciplinary work team that is in charge of leading the ML/FT risk mana-gement process within CEMENTOS ARGOS S.A. and that supports the func-tions and responsibilities of the Compliance Officer.
c. Training on the methodology: Once the work team is defined, its members must be trained on the ML/FT risk management methodology.
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5.3.2. Stages of ML/FT risk management
ML/FT risk management consists of the following five stages: Identification, Measurement or Assessment, Control, Monitoring and Reporting of the risk. For each of these, people are involved who execute the processes in order to ensure that the previously determined actions reach the expected levels of effectiveness.
5.3.2.1. Methodology applicable to the ML/FT risk identification stage
For this stage, a methodology aimed at segmenting the risk sources is establi-shed as follows:
5.3.2.1.1. Methodology for the segmentation of ML/FT risk sources
For the segmentation of risk sources, the following aspects must be taken into account:
•Conceptofsegmentation
Segmentation is the process through which a series of elements is separated into groups that are internally homogenous and heterogeneous when compared to each other. This separation is based on the recognition of significant diffe-rences in their characteristics, known as segmentation variables, in such a way that makes it possible to be described and analyzed according to their particular characteristics.
•Benefitsofsegmentation
a. Isolation of segments that are more vulnerable to the presence of ML/FT risks, with the objective of having more control and supervision over these.
b. Development of points of control and supervision, taking into account the cha-racteristics of each segment.
c. Identification of the segments in which the controls are effective or have the smallest impact on ML/FT.
• Definition of segmentation variables
To this effect, different variables that are associated with each of the sources of risk described in Chapter 3 of this MANUAL must be established.
• Classification of risk events
In accordance to the risk sources that are identified and the segmentation cri-teria that are determined for the analysis, risk events must be identified and classified, taking into account the following aspects regarding the warning sig-nals of the sector:
1. Definition of warning signals
According to the Oxford English Dictionary, “to warn”2 means to put (a person) on his guard, or to caution against some person or thing as dangerous.
2. See: http://www.oed.com/
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3. Superintendence of Finance of Colombia. External Circular Letter No. 026 of 2008. SARLAFT.
4. Superintendence of Finance of Colombia. External Circular Letter No. 0100-5 of 2014. SARLAFT.
Warning signals or early warnings are thus all facts, situations, events, amounts, quantitative and qualitative indicators, financial reasons and any other type of information that is considered relevant, based on which it can be inferred that it is probable or possible that a fact or situation that is not con-sidered normal3 or specific circumstances require special attention and justi-fy deeper analysis4.
As opposed to unusual transactions, they are not related to the economic ac-tivity of the company or do not fall within the additional parameters set by the entity, and they do not have an explanation or justification found and conside-red reasonable by the entity.
Along these same lines, the norm establishes that the determination of suspi-cious transactions is a result of the comparison of detected transactions thou-ght of as unusual with the information of Customers or users and markets, pursuant to the objective reasons established by CEMENTOS ARGOS S.A.
5.3.2.2. Methodology applicable to the ML/FT risk measurement stage
To measure ML/FT risks, the measuring methodology defined by the Integrated Risk Management System of Cementos Argos must be used, which is based on the application of qualitative methodologies aimed at estimating the probability of occurrence and impact, as follows:
a. The method known as the “Delphi Method”, “experience-based opinion” or “panel of experts” must be used, which consists in the meeting of several peo-ple who are familiar with and experts in the topics.
b. The Panel of Experts must be suitable and have the necessary knowledge on all processes and risks to be analyzed. Their meetings just be held quarterly and minutes of all of these meetings must be kept as records.
c. By means of the technique known as “brainstorming”, different situations are proposed to identify the different risk events, in a spontaneous and professio-nal way. Thus, each of the identified risks must be analyzed using the corpora-te measuring scales defined by the Integrated Risk Management System, crea-ting a ML/FT risk map.
d. Then, a risk matrix must be elaborated, identifying each of the risk sources and risk events assessed by the probability of occurrence and economic impact.
• Methodology applicable to the ML/FT risk control
CEMENTOS ARGOS S.A., with the intention of decreasing the probability and/or the impact in case any of the inherent risks materialize, has established controls for the detected ML/FT risks that are based on the following aspects:
a. Legislation: laws, decrees, circular letters, resolutions, etc.
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b. Internal identified risks or events: risk situations or events, whether or not they have occurred in the past (fraud, findings or audit reports, reports of sus-picious transactions, etc.), that could lead to the Company being used as an instrument for ML/FT.
c. External identified risks or events: types of ML/FT that are detected, events that occurred in the past or documents of warning signals in the corporate ac-tivity or that are specific to the cement, concrete and aggregates business, pu-blished by entities, such as the UIAF; organizations, such as FATF and GAFILAT; or professional associations, such as BASC.
• Methodology to define ML/FT risk control measures
With the objective of obtaining the residual risk of CEMENTOS ARGOS S.A., an assessment is carried out of the controls associated to each inherent risk, considering their design and effectiveness, as well as their execution. The as-sessment of the controls has to take into consideration, as a minimum, their design, their effectiveness, their documentation, the person responsible for the control, and the following types of control:
i. Preventive control: This is an action that is implemented in order to pre-vent deviations or incompliance of a process. It establishes the conditions necessary so that the error or intentional act does not occur. It is execu-ted before starting a process or critical step. Generally, preventive controls are those that are most efficient in terms of costs.
ii. Detecting control: This is an action that is implemented in order to iden-tify deviations during the execution of a process or its incompliance. The efficiency of this type of control depends mainly on the time interval be-tween the execution of the process and the execution of the control. It identifies the error but does not avoid it. It acts as an alarm system that makes it possible to register the problem and its causes. Its purpose is to verify the functioning of processes and their preventive controls.
iii. Corrective control: This is an action that is implemented with the inten-tion of correcting the deviations identified once the process is concluded, or its incompliance. It makes it possible to investigate and rectify errors and their causes. It is aimed at ensuring that the actions necessary for their solution are taken.
• Methodology for the implementation of action plans for treating ML/FT risks
To execute the actions that must be taken with regard to the ML/FT risk, ac-tion plans must be implemented in accordance to the level of impact that it presents, so as to verify their compliance. Otherwise, the necessary correcti-ve measures must be adopted.
To implement said action plans, the following aspects must be taken into account:
a. The process or procedure during which the identified risk events could take place and those that could be affected by the materialization of the risks.
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EMb. The description of the action or measure that needs to be taken.
c. The attribution levels defined by the Risk Retention Matrix that is defined as part of the Integrated Risk Management System, for decision making regarding the identified risks.
d. The start date of the measure or action plan.
e. The end date of the measure (if it is transitory) or action plan.
f. The people responsible for its management.
All of this should be kept in writing or recorded by means of the technical tools that are defined for the ML/FT risk management process.
5.3.2.3. Methodology applicable to monitoring and reporting
The objective of this stage is to permanently follow up on the risk profile of CEMENTOS ARGOS S.A. and, in general, on the AML/CFT SCMS, and to elabo-rate the reports regarding the general state of exposure to the ML/FT risks at di-fferent levels of the organization, according to what is defined by the policies for the prevention of ML/FT, the reports required by competent authorities and obliga-tions established by legislation, and the reports regarding the performance of the AML/CFT SCMS.
The monitoring of the AML/CFT SCMS is the responsibility of the Compliance Officer and its main purpose is to watch over the application of the corrective ac-tions and necessary adjustments in order to ensure an effective risk management.
During the monitoring stage, the Compliance Officer is responsible for assessing the effectiveness, efficiency and timeliness of the controls implemented to miti-gate the risks of ML/FT, carrying out field tests, which must be duly documented. This activity could be supported by the control bodies of CEMENTOS ARGOS S.A.
Furthermore, in this stage, unusual and suspicious transactions must be detected.
The revision that is carried out must include a follow-up and comparison of the in-herent and residual risks of each risk factor and their associated risks. In case in-creases are detected in certain risks, the necessary action plans have to be imple-mented with the objective of having the residual risk return to the previously defi-ned levels established by CEMENTOS ARGOS S.A. (desired risk level).
Also, the correct functioning of the implemented controls must be validated, as well as whether their coverage includes all the detected risks in an effective and efficient way.
Besides the aforementioned, the reports that are provided by the control bodies, regulatory entities and people in charge of the mission and support departments that are appointed shall be used as a source of information for the monitoring pro-cess. This information is extremely useful, as it is by means of these documents that recommendations can be formulated or that flaws that are detected in the system can be noticed, along with new risks to be controlled.
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5.3.3. Database for suspicious transactions
Pursuant to Colombian regulations, a database for records on unusual and suspi-cious internal transactions was created in order to register said situations in which it is believed a ML/FT risk could have been materialized, along with the analysis and the obtained results for each of these.
The purpose of this database is to gather statistical information that makes it pos-sible to improve the ML/FT risk measurement methodology towards the future.
ORGANIZATIONALSTRUCTURE OF THE AML/CFT SCMS, FUNCTIONS AND RESPONSIBILITIES
6.
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6.1. ObjectiveEstablish the functions and assign the responsibilities of the different Employees and bodies of CEMENTOS ARGOS S.A. that are involved in the AML/CFT SCMS.
6.2. ScopeThe application of the functions of Employees and members of the control bodies that are involved in the AML/CFT SCMS is mandatory.
6.3. Organizational structureWith the objective of ensuring the proper functioning of the AML/CFT SCMS at CEMENTOS ARGOS S.A., an organizational model was defined in accordance with its needs, in which the Board of Directors, Administrators and Senior Management, the Compliance Officer and the Statutory Auditor are all included.
6.3.1. Board of Directors
The AML/CFT SCMS of CEMENTOS ARGOS S.A. foresees the following functions for the Board of Directors, as a minimum:
a. Design the policies for the prevention and control of the ML/FT risk that must be incorporated in the AML/CFT SCMS.
b. Request the technical and human resources necessary to implement and maintain the functioning of the AML/CFT SCMS, keeping in mind the size and characteristics of CEMENTOS ARGOS S.A.
c. Approve the AML/CFT SCMS MANUAL, as well as all of its updates.
d. Approve the mechanisms and instruments that make up the policies of the AML/CFT SCMS of CEMENTOS ARGOS S.A.
e. Appoint the Compliance Officer.
f. Include the review of reports presented by the Compliance Officer in the agen-da of their meetings at the occasions established by the law and others con-sidered convenient, and formulate an opinion about each of the points inclu-ded in said reports, leaving explicit records of this in the respective minutes.
g. Formulate an opinion about the reports presented by the Compliance Officer and the Statutory Auditor on the AML/CFT SCMS and follow up on the com-ments or recommendations that are mentioned, leaving explicit records of this in the respective minutes.
h. Approve the procedures for the recruitment of Customers and Suppliers that could expose the Company to a greater extent to the ML/FT risks, as well as the respon-sible instances, ensuring that these involve Employees of Senior Management.
i. Approve the procedure for the recruitment and carrying out of operations, affairs or contracts with Publicly Exposed People (PEP), as well as the respon-
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EMsible instances and adequate employee procedures, in accordance with appli-cable legal regulations.
j. Define and approve the objective criteria to be used to elaborate Suspicious Transactions Reports (STR) to the UIAF and/or foreign authorities that have ju-risdiction over CEMENTOS ARGOS S.A.
k. Define and approve procedures and controls to regulate the maximum amount of cash money that can be handled by Customers.
6.3.2. Administrators – CEO and Legal Representatives
The AML/CFT SCMS of CEMENTOS ARGOS S.A. foresees the following functions for its Administrators, as a minimum, especially for the Company’s CEO and Legal Representatives:
a. Provide the technical and human resources necessary to implement and main-tain the functioning of the AML/CFT SCMS.
b. Make sure that the policies, processes and procedures that are established develop all of the policies elaborated by the Board of Directors.
c. Provide effective, efficient and timely support to the Compliance Officer.
6.3.3. Compliance Officer
The AML/CFT SCMS of CEMENTOS ARGOS S.A. foresees the following require-ments and functions for the Compliance Officer, as a minimum:
6.3.3.1. Requirements
The Compliance Officer must at least comply with the following requirements:
a. Be appointed by the Board of Directors.
b. Be a Senior Employee that is easily identifiable throughout CEMENTOS ARGOS S.A.
c. Have good decision-making abilities.
d. Be supported by the Senior Management and have the time necessary to de-velop their functions.
6.3.3.2. Functions
The Compliance Officer must fulfill the following functions, as a minimum:
a. Implement and develop the processes through which the policies approved for the implementation of the AML/CFT SCMS are put into practice.
b. Submit the AML/CFT SCMS MANUAL and its updates to the Board of Directors for their approval, in coordination with the Vice President of Legal and Institutional Affairs.
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c. Identify the situations that could lead to the risks of ML/FT in the operations of CEMENTOS ARGOS S.A., with the support of the people in charge of the pro-cesses of the business and support.
d. Define and develop controls for the situations that could imply ML/FT risks in the operations, affairs and contracts of CEMENTOS ARGOS S.A.
e. Follow up on or monitor the efficiency and effectiveness of the policies, proce-dures and controls that are established.
f. Watch over the adequate archiving of supporting documents and other infor-mation regarding the risk of ML/FT at CEMENTOS ARGOS S.A.
g. Participate in the design and development of the training programs on ML/FT risks and watch over their compliance.
h. Propose necessary adjustments or modifications to the policies of the AML/CFT SCMS to the Board of Directors.
i. Receive and analyze the internal reports for possible unusual, attempted and suspicious transactions, and elaborate the report to the UIAF and/or compe-tent authorities in other jurisdictions.
j. Keep the documents that contain the policies and procedures of the AML/CFT SCMS up-to-date.
k. Present a written report, quarterly, to the Governance Committee and, every semester, to the Board of Directors or Board Committee that has similar func-tions, with details regarding the management of the Compliance Officer. This report is confidential and must cover the following aspects, as a minimum:
i. The processes put in place in order to put the approved policies into prac-tice, as well as their additions or modifications
ii. The results of the follow-up or monitoring process aimed at determining the efficiency and effectiveness of the policies, procedures and controls that were established.
iii. The measure adopted in order to correct flaws that were found during the controls monitoring process.
iv. Compliance with the requirements of different authorities, in case these existed.
v. Proposals for adjustments or modifications to the policies for the preven-tion and control of the risks of ML/FT that are considered necessary.
vi. Compliance with adjustments or modifications to policies for the prevention and control of the risks of ML/FT approved by the highest governing body.
vii. The latest norms or regulations issued regarding the prevention and con-trol of the risks of ML/FT and the measures adopted to comply with them.
l. Present the requirements of the IT, technological, physical and human resources that are necessary to comply with their functions to the Governance Committee.
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EMm. Promote the adoption of corrections to the AML/CFT SCMS.
n. Assess and consider reports presented by the Statutory Auditor and/or Internal Audit Department and adopt measures necessary in the light of the reported deficiencies.
o. Respond to and coordinate any requirements, requests or diligence of legal or administrative competent authorities in this field.
p. Coordinate the development of internal training programs.
q. Propose updates of the manual of procedures to the Management and watch over its dissemination to Employees.
r. Watch over the elaboration and timely sending of the Suspicious Transactions Reports (STR) to the Financial Information and Analysis Unit (UIAF) and/or the competent authority, in accordance with the objective criteria defined by the Board of Directors.
s. Previously assess any change to the segment of Customers, Products, Services, Distribution Channels or Jurisdictions in which CEMENTOS ARGOS S.A. is present.
No functions of the Compliance Officer can be outsourced to third parties, nor can those related to the identification and analysis of unusual transactions, as well as those related to the determination and reporting on suspicious transactions (STR).
6.3.4. People in charge of prevention and control of the AML/CFT SCMS
With the objective of ensuring the proper management of the risks of ML/FT, the Compliance Officer must appoint AML/CFT SCMS Officers in each of the depart-ments of CEMENTOS ARGOS S.A., taking into account the nature of the position and not the person that holds it.
Nevertheless, all staff, regardless of their job, role, function or position, are res-ponsible for preventing and controlling the materialization of the risks of money laundering and financing of terrorism.
The AML/CFT SCMS Officers of each department must be informed of their appoint-ment in writing, by the Compliance Officer.
6.3.4.1. Functions
The AML/CFT SCMS Officers must fulfill the following functions:
a. Promote a culture of compliance with the AML/CFT SCMS within their work de-partment and their colleagues.
b. Act as a link with the Compliance Officer and provide support to them with re-gard to the tasks of prevention, control and management of the risks of ML/FT.
c. Apply and supervise the norms, policies and procedures for the prevention and control of the risks of ML/FT in the department they are in charge of.
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d. Advise and support staff in the department they are in charge of with regard to the procedures for prevention and control and the regulations in effect appli-cable to the AML/CFT SCMS.
e. Ensure that norms, policies and procedures that were established in the AML/CFT SCMS are complied with, and report any flaws they detect to the Compliance Officer.
f. Support the department they are in charge of through education and trai-ning on topics related to the risks of ML/FT, and also the departments they were assigned.
6.3.5. Statutory Auditor
The Statutory Auditor must fulfill the following functions in the context of the AML/CFT SCMS:
a. Check whether the transactions, affairs and contracts entered into or carried out by CEMENTOS ARGOS S.A. are in line with the instructions and policies approved by the highest governing body, pursuant to Article 207 of the Code of Commerce.
b. Inform the highest governing body, the Board of Directors or the Compliance Officer, in writing, about compliance or incompliance with the instructions con-tained in the AML/CFT SCMS.
c. Inform the Compliance Officer about the inconsistencies and flaws they de-tect with regard to the implementation of the AML/CFT SCMS or the establi-shed controls.
d. Forward reports on incompliance with the AML/CFT SCMS whenever this is re-quested by an authority.
6.3.6 Internal Audit
The Internal Auditor must fulfill the following functions with regard to the AML/CFT SCMS:
a. In writing, inform the Audit and Finance Committee and the Compliance Officer on compliance or incompliance with the instructions contained in the AML/CFT SCMS.
b. Make the Compliance Officer aware of the inconsistencies and flaws they de-tect with regard to the implementation of the AML/CFT SCMS or the establi-shed controls.
c. Provide reports on compliance with the AML/CFT SCMS when the Board of Directors or Senior Management request them.
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Assembly of Shareholders
Statutory Auditor and Internal Auditor Assessment of the AML/CFT SCMS
Approval of policiesand assignment ofresources
Board Of Directors – Auditand Finance Committee
Ceo of Cementos Argos S.A.and Vice President of Legaland Institutional Affairs
Compliance Manager – ComplianceOf�cer - (Manages The AML/CFT SCMS)
Governance Committee (body the ComplianceOf�cer Reports to in case of incompliance)
Internal departments with AML/CFT SCMSfunctions
Operational departments with ML/FTrisk management
Management ofthe ML/FT risk
6.4. Organizational chart of the AML/CFT SCMS
MEASURES TO ENSURE COMPLIANCE WITH THE POLICIES OF AML/CFT SCMS AND DISCIPLINARY PENALTIES
7.
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EM7.1. ObjectiveImplement the procedure designed to apply necessary sanctions in case any Administrators, Employees, Customers, Suppliers or Related Parties of CEMENTOS ARGOS S.A. do not comply with the regulations, policies and procedures defined for the functioning of the AML/CFT SCMS.
7.2. ScopeThis procedure applies to all of the Employees of CEMENTOS ARGOS S.A., regard-less of their position, role or function.
7.3. Guidelinesa. All of the Employees of CEMENTOS ARGOS S.A. must heed and comply with the
different regulations implemented for the functioning of the AML/CFT SCMS.
b. The Human Resources Management Department of the Regional Division to which the Employee belongs and/or the Design Human Resources Management Departments are in charge of carrying out the administrative sanctions neces-sary when any policies, procedures or controls established in this MANUAL are not complied with.
c. The AML/CFT SCMS Officers appointed for each department must ensure compliance with norms, policies and procedures established in the AML/CFT SCMS MANUAL and any cases of incompliance must be reported directly to the Compliance Officer.
d. When incompliance by any of the Employees of CEMENTOS ARGOS S.A. is de-tected, with regard to issues related to the AML/CFT SCMS, the Compliance Officer must document them and present them to the Governance Committee by means of a written report, and depending on the decision of said Committee, it must send a notification to the Human Resources Management Department of the Regional Division to which the Employee belongs and/or the Design Human Resources Management Department for them to take the necessary administrative actions, depending on the type of incompliance, without prejudi-ce to any other administrative or criminal actions that must be taken.
The measures aimed at ensuring compliance with the policies of the AML/CFT SCMS can be of both the preventive and corrective type, each of which must be in accordance to the Code of Good Governance, the Code of Corporate Conduct, the Internal Work Regulations, the Employment Contract in place and the AML/CFT SCMS MANUAL of CEMENTOS ARGOS S.A.
7.4. Measures of the preventive typea. Authority: The Senior Management of CEMENTOS ARGOS S.A. is committed to
carrying out all the functions it has with regard to the prevention and control of the risk of money laundering and the financing of terrorism, with the intention of supporting the decisions and recommendations of the Compliance Officer.
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b. Resources: The Senior Management must assign the human, technological and economic resources necessary to ensure the adequate execution of the tasks of prevention and control of the risk of money laundering and the finan-cing of terrorism in CEMENTOS ARGOS S.A.
c. Independence: The Senior Management of CEMENTOS ARGOS S.A. must en-sure the independence of the Compliance Officer for the carrying out of acti-vities of prevention and control of the risk of money laundering and the finan-cing of terrorism.
d. Processes: The Senior Management of CEMENTOS ARGOS S.A. must ensure the effectiveness and efficiency of the processes related to the prevention and control of the risk of money laundering and the financing of terrorism.
7.5. ProcedureIncompliance with the norms, policies and procedures of the AML/CFT SCMS by any of the Employees of CEMENTOS ARGOS S.A. leads to CEMENTOS ARGOS S.A. being more exposed to the ML/FT risk, which could lead to sanctions from state bo-dies that perform inspection, surveillance and control tasks.
Therefore, the Compliance Officer, when they detect situations that go against the policies, procedures and controls defined in this MANUAL, must elaborate the res-pective report and hand it in to the Governance Committee so that this latter can start the respective disciplinary and/or labor process, seeking to determine the type of sanction applicable in accordance with the impact of the omission and the gravity of the mistake.
The Human Resources Management Department, after receiving instructions from the Governance Committee, must carry out the disciplinary and/or labor adminis-trative process according to what is defined in the Code of Corporate Conduct, wi-thin the framework of the principles of justice and equity and unifying the legal and regulatory criteria and parameters, without prejudice to legal or criminal ac-tions that could follow.
On the other hand, the Compliance Officer must inform the Board of Directors of CEMENTOS ARGOS S.A. about the situations that presented themselves so that they can adopt the necessary measures to maintain an adequate level of control and prevent the materialization of the ML/FT risk.
7.6. Measures of the corrective typeThe Sanction System of CEMENTOS ARGOS S.A. means that its Employees must take into account that any behavior that violates the norms and procedures for the prevention and control of the risk of ML/FT implies administrative, criminal, finan-cial and labor sanctions, as stipulated by norms in effect.
PROCEDURES FOR INTERNAL CONTROL AND REVIEW OF THE AML/CFT SCMS
8.
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8.1. ObjectiveCarry out the necessary internal control tests to ensure that the AML/CFT SCMS is working correctly. These tests are the responsibility of the Statutory Auditor and the Internal Auditor.
8.2. ScopeThe Compliance Officer must elaborate an Annual Compliance Plan (ACP) for the AML/CFT SCMS, which must be presented to the Board of Directors and delivered to the Statutory Auditor and the Internal Auditor.
8.3. Activitiesa. The Statutory Auditor and the Internal Auditor must have access to the docu-
ments, files and processes that make up the AML/CFT SCMS, except for docu-ments that are confidential or that have any legal restrictions.
b. The Statutory Auditor and the Internal Auditor must elaborate a Revision Program for the AML/CFT SCMS, complying, as a minimum, with the fo-llowing functions:
i. Carry out periodic tests on the AML/CFT SCMS in order to check its inte-grity, precision and reasonability and formulate any recommendations con-sidered necessary to the Board of Directors, the Senior Management and the Compliance Officer.
ii. Watch over the correct implementation of all the methodologies and proce-dures of the AML/CFT SCMS.
iii. Ensure a timely flow of information to the Board of Directors and the Senior Management.
iv. Check compliance by the different departments of CEMENTOS ARGOS S.A. with the limits, policies and procedures established for the AML/CFT SCMS.
v. Check the consistency and sufficiency of the information processing sys-tems dedicated to the analysis and reporting in the ML/FT risks.
vi. Check the precision, consistency and integrity of the data and databa-ses of Employees in order to provide an input for the systems and models aimed at measuring the ML/FT risk.
PROCEDURES FOR THE ADEQUATE IMPLEMENTATION AND FUNCTIONING OF THE ELEMENTS AND STAGES OF THE AML/CFT SCMS
9.
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9.1. ObjectiveDescribe the guidelines and basic requisites for the incorporation, maintenance and withdrawal of Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and other ex-ternal Related Parties of CEMENTOS ARGOS S.A.
9.2. ScopeThis procedure applies to all of the distribution channels of CEMENTOS ARGOS S.A. and other departments involved in the recruitment and management processes in-volving external Related Parties.
9.3. Guidelinesa. No potential Shareholders4, Members of the Board of Directors, Employees,
Customers, Suppliers, Independent Contractors, Strategic Partners or external Related Parties of CEMENTOS ARGOS S.A. can be associated as long as they do not comply with the procedures established by CEMENTOS ARGOS S.A. or completely fill in the respective forms and gather the required supporting do-cuments and as long as this information has not been confirmed and checked.
b. Every Shareholder, Member of the Board of Directors, Employee, Customer, Supplier, Independent Contractor, Strategic Partner or external Related Party of CEMENTOS ARGOS S.A. must be fully identified.
c. No products or services can be offered, nor can any affair or contract be ente-red into, with natural or legal persons that do not fully identify themselves or that have fictitious names.
d. At least once per year, the information on Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners and external Related Parties of CEMENTOS ARGOS S.A. must be updated. In case this information has not changed or is impossible to update, this must be recorded in writing.
e. In case there is a contractual or commercial relation with a legal person, they must be identified with their full name (natural or legal person) and identifica-tion number (ID or TIN) to members that hold a stake of more than 5% of equity.
f. All natural or legal persons that are related to the Company or that have to inten-tion of establishing a relation by means of transactions, affairs or contracts with CEMENTOS ARGOS S.A. as Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners or Third Parties must be checked on the restrictive list or consulted in relevant databases. If they are indeed registered in one of these restrictive lists, they cannot establish relations with CEMENTOS ARGOS S.A. In the case of legal per-
5. In the case of Shareholders, it must be taken into account that a certificate of compliance with their AML/CFT SCMS must be requested from the financial institution through which the Shareholder is tied to the Company or that manages the Shareholder’s account.
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EMsons, also the information regarding their associates, members of the Board of Directors, legal representatives and statutory auditors must be checked.
g. Knowledge about Shareholders, Members of the Board of Directors, Employees, Customers, Suppliers, Independent Contractors, Strategic Partners or external Related Parties of CEMENTOS ARGOS S.A. is gathered in accordance with the instructions regarding Due Diligence.
h. In case CEMENTOS ARGOS S.A. establishes a contractual or commercial re-lation with natural or legal persons dedicated to High-Risk Activities or with Publicly Exposed People (PEP), the instructions of Improved Due Diligence must be applied. This means that stricter measures must be taken in order to gather more knowledge about these people and that their association and the carrying out of transactions with them must be approved by an employee ranked higher than the one usually approving them.
i. When a significant increase is noted in equity, revenues, sales or other finan-cial aspects that do not have an apparent justification, as a result of the analy-sis and update of the information about Customers, Suppliers, Independent Contractors, Employees, Shareholders, Strategic Partners or external Related Parties, the necessary processes must be implemented in order to check their cause, with the intention of ensuring it does not stem from an illicit source.
9.4. Policies regarding knowledge
9.4.1. Knowledge on Shareholders
When CEMENTOS ARGOS S.A. carries out a share issuance or checks the infor-mation of its current Shareholders, it must comply with the following requirements:
a. Having knowledge about the Shareholders becomes necessary as soon as a natural or legal person acquires securities issued by CEMENTOS ARGOS S.A. that are enlisted on the stock market.
b. To update the information on Shareholders, al the established internal proce-dures must be respected, the required documentation must be obtained and all said information must be validated.
c. When the administration of shares is in the hands of a third party, this must be a financial institution, and a certificate of compliance with their AML/CFT SCMS must be requested from them.
In case any of the information provided by a Shareholders cannot be confirmed or if it is inaccurate, this fact must be reported to the Compliance Officer immediate-ly, in accordance with this AML/CFT SCMS MANUAL.
If the information provided by the Shareholder is false or allegedly false, this fact must be reported to the Compliance Officer immediately, in accordance with this AML/CFT SCMS MANUAL.
All the verifications that are carried out in the restricted lists or consultations in da-tabases regarding the establishing of relations or updating of information of sha-
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reholders must be recorded in writing. In case situations present themselves that could be related to the risks of ML/FT, this fact must be reported to the Compliance Officer immediately, in accordance with this AML/CFT SCMS MANUAL.
In the case of CEMENTOS ARGOS S.A. as an issuer of securities listed on the stock market, the aforementioned is only applicable in the following cases:
a. When CEMENTOS ARGOS S.A. directly places issued securities in the primary market, which means when said placement is not done through an interme-diary of an entity monitored by the Superintendence of Finance of Colombia.
b. When the securities issued by CEMENTOS ARGOS S.A. are transferred in the secondary market. In this case, it must be taken into account that, in accor-dance with what is explicitly established in this MANUAL, in some cases, com-pliance with the control mechanisms must be verified by entities other than CEMENTOS ARGOS S.A.
9.4.2. Knowledge on Customers
Pursuant to local norms and international standards, information must be gathe-red on Customers in order to prevent CEMENTOS ARGOS S.A. from being used to carry out illicit activities or be associated with the risk of ML/FT. Therefore, Customers must meet the following requirements:
a. Knowledge on Customers, whether they are natural or legal persons, implies having permanent access to updated information regarding their identification, economic activity, characteristics, transaction amounts, and origin and desti-nation of their revenues and expenditure.
b. To establish a new relation with a Customer or update their information, infor-mation must be collected in order to make it possible to compare the charac-teristics of their transactions with those of their economic activity, in order to validate it and establish whether the behavior can be considered normal, or should be considered unusual.
c. All transactions, affairs and contracts of Customers must be continuously mo-nitored, by means of any suitable technological mechanism.
d. In order to do the aforementioned things, the Compliance Officer must have cri-teria that allow them to analyze unusual transactions of Customers and deter-mine the existence of suspicious transactions, whether attempted or actually carried out, in accordance with the objective criteria established by the Board of Directors.
e. To update the information on Customers, forms must be established in order to be completely filled out, signed and attached to the necessary supporting documents. This information must be validated and confirmed by the depart-ment of CEMENTOS ARGOS S.A. in charge of establishing new relations.
In case the information supplied by a Customer cannot be confirmed or when it is found inaccurate, this fact must be immediately reported to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
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EMIf the information supplied by a Customer is found to be false or allegedly false, this fact must also be reported immediately to the Compliance Officer, in accor-dance with this AML/CFT SCMS MANUAL.
Records must be kept of the verifications carried out with different restrictive lists or of consultations in databases with regard to the establishing of new relations or the upda-ting of the information of Customers. If said consultations come back positive, showing results that could be related to the risk of ML/FT, this fact must also be reported imme-diately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
9.4.3. Knowledge on Publicly Exposed People (PEP)
CEMENTOS ARGOS S.A. establishes the following procedure for knowledge on and the establishing of new relations with natural persons that, due to their profile or the functions they fulfill, expose CEMENTOS ARGOS S.A. to a higher degree of risk of ML/FT. These people can include people that, in the light of their position, manage public resource, that have the power to decide over these, or that have a certain degree of public recognition.
For the Customers and/or Suppliers of CEMENTOS ARGOS S.A. that meet this profile of PEP, control and monitoring procedures that are stricter than the regular ones must be applied and their transactions, affairs and contracts must be appro-ved by an employee of a higher rank than the one who would normally do so. The following aspects must also be taken into account:
a. Knowledge on PEP Customers and/or Suppliers implies permanent access to up-dated information regarding their identification, economic activity, characteristics, transaction amounts, and origin and destination of their revenues and expenditure.
b. To establish a new relation with a PEP Customer or Supplier or to update their information, without any exceptions, information must be gathered that makes it possible to compare the characteristics of their transactions with their eco-nomic activity, in order to validate it and establish whether the behavior can be considered normal or whether it should be considered unusual.
c. The transactions, affairs and contracts of PEP Customers and/or Suppliers must be continuously monitored through any suitable technological mechanism.
d. To do the aforementioned, the Compliance Department must have criteria that allow them to analyze the unusual transactions of PEP Customers and/or Suppliers and determine the existence of suspicious transactions, whether at-tempted or actually carried out, in accordance with the objective criteria esta-blished by the Board of Directors.
e. To update information on PEP Customers and/or Suppliers, forms must be esta-blished in order to be filled in completely, signed, and attached to the necessary supporting documents. This information must be validated and confirmed by the department of CEMENTOS ARGOS S.A. in charge of establishing new relations.
In case the information supplied by a PEP Customer and/or Supplier cannot be confirmed or when it is found inaccurate, this fact must be immediately reported to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
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If the information supplied by a PEP Customer and/or Supplier is found to be false or allegedly false, this fact must also be reported immediately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
Records must be kept of the verifications carried out in different restrictive lists or of consultations in databases with regard to the establishing of new relations or the updating of the information of PEP Customers and/or Suppliers. If said con-sultations come back positive, showing results that could be related to the risk of ML/FT, this fact must also be reported immediately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
This type of PEP Customers and/or Suppliers can in turn be broken up into three categories: Politically Exposed People (PEP), People with Public Recognition (PPR), and People that Manage Public Resources (PMPR).
For example, people that hold important public functions, such as the following, can be considered PEP:
a. The President of a country
b. Heads of State
c. Heads of Government
d. The Vice President of a country
e. Ministers
f. Senators
g. Representatives of Congress
h. Magistrates of Supreme Courts
i. Governors
j. Mayors
k. Representatives of Departmental Assemblies
l. City Councilors
m. Directors of Administrative Departments
n. Directors of the different Secretariats at department, district and municipal levels
o. Directors of decentralized entities
p. Active members of the Military or of the Police, from the rank of Officer until the rank of Coronel or above, and their similar ranks in other armed forces
q. Treasurers of different State entities, of the national, departmental or munici-pal levels
This list is not exhaustive.
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EMAlso people that are widely known in the community due to their activity, their rela-tion with the community or any special skills, can be considered PEP. Some exam-ples of people with public recognition are the following:
a. Politicians (members of political parties)
b. Artists (which can include important representatives of different cultural ex-pressions, such as acting, painting, sculpting, writing, etc.)
c. Celebrities (models, beauty queens, TV presenters, designers, stylists, etc.)
d. Athletes
e. Scientists
f. Representatives of religious organizations
This list is not exhaustive.
9.4.4. Knowledge on Employees
In order to comply with the policy regarding knowledge on Employees, CEMENTOS ARGOS S.A. must do the following:
a. Have personal information on its Employees and their close family, at the moment a new relation is established or when periodically updating their information.
b. Have and verify the supporting documents that justify academic and work skills.
c. Confirm family, personal and work references from its Employees.
d. Train staff on the prevention and control of the risk of money laundering and the financing of terrorism.
e. The department in charge of managing Employees must be aware of warning sig-nals associated to these and report them immediately to the Compliance Officer.
In case the information supplied by an Employee cannot be confirmed or when it is found inaccurate, this fact must be immediately reported to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
If the information supplied by an Employee is found to be false or allegedly false, this fact must also be reported immediately to the Compliance Officer, in accor-dance with this AML/CFT SCMS MANUAL.
Records must be kept of the verifications carried out in different restrictive lists or of consultations in databases with regard to the establishing of new relations or the updating of the information of Employees. If said consultations come back positive, showing results that could be related to the risk of ML/FT, this fact must also be reported immediately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
9.4.5. Knowledge on Suppliers, Independent Contractors, Strategic Partners or external Related Parties
The Suppliers, Independent Contractors, Strategic Partners and other external Related Parties of CEMENTOS ARGOS S.A. that render services or provide pro-
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ducts to the mission or support departments of the Company must comply with the requirements indicated below so as to prevent any illicit activities from taking place or being related to the risk of ML/FT:
a. Knowledge on Suppliers, Independent Contractors, Strategic Partners and other external Related Parties, whether they are natural or legal persons, im-plies permanent access to updated information regarding their identification, economic activity, characteristics, transaction amounts, and origin and desti-nation of their revenues and expenditure.
b. To establish a new relation with a Supplier, Independent Contractor, Strategic Partner or external Related Party, or to update their information, information must be gathered that makes it possible to compare the characteristics of their contractual relation with those of their economic activity, in order to vali-date it and establish whether the behavior can be considered normal or whe-ther it should be considered unusual.
c. The transactions, affairs and contracts of Suppliers, Independent Contractors, Strategic Partners and other external Related Parties must be continuously monitored through any suitable technological mechanism.
d. To do the aforementioned, the Compliance Department must have criteria that allow them to analyze the unusual transactions of Suppliers, Independent Contractors, Strategic Partners and other external Related Parties and determine the existence of suspicious transactions, whether attempted or actually carried out, in accordance with the objective criteria established by the Board of Directors.
e. To update information on Suppliers, Independent Contractors, Strategic Partners and other external Related Parties, forms must be established in order to be filled in completely, signed, and attached to the necessary suppor-ting documents. This information must be validated and confirmed by the de-partment of CEMENTOS ARGOS S.A. in charge of establishing new relations.
In case the information supplied by a Supplier, Independent Contractor, Strategic Partner or external Related Party cannot be confirmed or when it is found inaccu-rate, this fact must be immediately reported to the Compliance Officer, in accor-dance with this AML/CFT SCMS MANUAL.
If the information supplied by a Supplier, Independent Contractor, Strategic Partner or external Related Party is found to be false or allegedly false, this fact must also be reported immediately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
Records must be kept of the verifications carried out in different restrictive lists or of consultations in databases with regard to the establishing of new relations or the updating of the information of Suppliers, Independent Contractors, Strategic Partners or external Related Parties. If said consultations come back positive, showing results that could be related to the risk of ML/FT, this fact must also be reported immediately to the Compliance Officer, in accordance with this AML/CFT SCMS MANUAL.
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EM9.4.6. Determination of the maximum amount of cash money
With the objective of preventing the ML/FT risk at CEMENTOS ARGOS S.A., the payment behavior of Customers must be analyzed in order to identify those that pay in cash. CEMENTOS ARGOS S.A. must define a maximum amount of cash money that can be allowed to be used in transactions, affairs and contracts with Customers, trying to get them to use, as much as possible, payment and collec-tion mechanisms offered by the financial institutions in the countries in which the Company operates.
The Compliance Officer and Administrators of CEMENTOS ARGOS S.A. must pre-sent a proposal to the Board of Directors in order to define the maximum amount of cash money that can be handled by CEMENTOS ARGOS S.A. when dealing with its Customers, in order to be approved by said body.
9.4.7. Identification and analysis of unusual transactions
The objective of this policy is to identify unusual transactions, which should be un-derstood as transactions whose amounts or characteristics are not in line with the economic activity of Customers, Shareholders, Suppliers, Employees or exter-nal Related Parties, or that, due to their number, transaction amounts or speci-fic characteristics, fall outside the normal parameters established by CEMENTOS ARGOS S.A.
To such end, any Employee or the department in charge of the ML/FT risk that de-tects an unusual transaction, must report it immediately to the Compliance Officer, either through e-mail or written or verbal communication, if the circumstances or urgent character demand it.
For their part, the Compliance Officer or other employee appointed by them must analyze said unusual transaction with the objective of assessing the reasonable or unreasonable nature of its origin and determine if it can be associated to the ML/FT risk. The analysis must be done with information, documents and any other data that can contribute to its full understanding.
In case there is an explanation or justification that makes the transaction that is considered unusual reasonable, it can be archived, along with said explanation, for its subsequent follow-up.
9.4.8. Determination and documentation of suspicious transactions
The comparison and analysis of operations considered unusual must make it possi-ble, in accordance with the objective reasons established by CEMENTOS ARGOS S.A., to determine whether or not an operation is suspicious and report it timely to the UIAF and/or competent authority.
Therefore, all unusual transactions that, after having been sufficiently analyzed and documented, cannot be explained or justified reasonably, must be identified as suspicious operations.
These suspicious internal operations must be duly documented so that the Compliance Officer can determine whether or not they need to be reported to the UIAF.
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In this context, the following aspects, among others, must be considered objecti-ve reasons to qualify a transaction as suspicious:
a. Increases (in equity, revenues, transactions, amounts, etc.) that are not justi-fiable or above average for the respective sector or economic activity.
b. The alleged wrongful use of identities, for example by using inexistent ID num-bers or ID numbers of deceased people, identity theft or falsification in names.
c. Presentation of documents, data or information that is allegedly false.
d. Actions in the name of third parties or affairs with the possible use of fronts.
e. Carrying out of fictitious or simulated transactions, such as the use of compa-nies that appear to be fronts.
f. Relations with people allegedly or actually associated with criminal activities.
g. Relations with assets of alleged illicit origins.
h. Fractioning or wrongful use of cash money.
Once a transaction is qualified as suspicious by the Compliance Officer, the UIAF must be informed immediately, by means of the respective Suspicious Transaction Report (STR), in accordance with the procedures and methodologies established by this entity.
When any attempted transactions, affairs or contracts lead to a STR, CEMENTOS ARGOS S.A. must immediately reject said action and not carry out the transaction or not establish the contractual relation with CEMENTOS ARGOS S.A.
The detection of a suspicious transaction of a natural or legal person that is as-sociated with CEMENTOS ARGOS S.A. does not necessarily imply the immediate termination of the contractual or commercial relation.
Once a transaction is detected that is qualified as suspicious and reported to the UIAF, the Compliance Officer, together with the Senior Management, must decide whether or not to keep the contractual or commercial relation in place. In case they decide to do so, a special surveillance procedure must be set in place for the Customer, Shareholders, Supplier, Employee or external Related Party and their transactions, in order to detect possible new unusual transactions. If they decide to terminate the relation, the department in charge must carry out the necessary relations to disassociate or cancel the contractual or commercial relation.
Both the STR and the previous studies and analysis that lead to the transaction being labeled as suspicious are subject to legal restrictions, for which they must be handled with confidentiality and secrecy by all of the Employees and Relates Parties of CEMENTOS ARGOS S.A., without prejudice to the sanctions foreseen here.
Under no circumstances can information regarding transactions reported as suspi-cious to the UIAF be disclosed. Any incompliance with this rule will be punished in accordance with the Internal Work Regulations, the Code of Good Governance, the Code of Corporate Conduct and any other applicable norms or regulations.
REPORTS OF THEAML/CFT SCMS
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10.1. ObjectiveDescribe the functional scheme implemented by CEMENTOS ARGOS S.A. to ma-nage the internal and external reports of the AML/CFT SCMS.
10.2. GuidelineEnsure the functioning of the procedures of the AML/CFT SCMS and meet the re-quirements of the competent authorities through internal and external AML/CFT SCMS reports.
10.3. Internal reports
10.3.1. Internal Unusual Transaction Reports (IUTR)
Any Employee of CEMENTOS ARGOS S.A. that detects an unusual transaction is obliged to inform the Compliance Officer immediately, indicating the reasons for which they consider the transaction unusual, either by e-mail or by written or verbal communication, depending on the nature or circumstances of the case.
The Compliance Officer or the employee appointed by them must then assess and analyze the IUTR with the intention of establishing whether or not it indeed implies an unusual transaction.
Records must be kept of all the IUTRs that are made, so that the Compliance Officer can assess the proper functioning of the AML/CFT SCMS.
10.3.2. Internal Suspicious Transaction Reports (ISTR)
Any Employee of CEMENTOS ARGOS S.A. that detects a suspicious transaction is obliged to inform the Compliance Officer immediately, indicating the reasons for which they consider the transaction suspicious, either by e-mail or by written or ver-bal communication, depending on the nature or circumstances of the case.
The Compliance Officer or the employee appointed by them must then assess and analyze the ISTR with the intention of establishing whether or not it indeed implies a suspicious transaction.
Records must be kept of all the ISTRs that are detected, so that the Compliance Officer can assess the proper functioning of the AML/CFT SCMS.
10.4. External reportsThe external reports of the AML/CFT SCMS are those that CEMENTOS ARGOS S.A. must hand in to the UIAF, pursuant to the protocols and method established by this entity. These reports have to be elaborated in accordance to what is establi-shed in this MANUAL, by CEMENTOS ARGOS S.A. and by each of the Subordinates that, as stipulated in Colombian law, must hand them in.
The reports that must be handed in to the UIAF by companies of the real sector are the following:
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EMa. Suspicious Transaction Reports
b. Suspicious Transaction Absence Reports
c. Multiple Loading Transactions Reports (for transport companies)
d. Multiple Loading Transactions Absence Reports (for transport companies)
e. Individual Cash Transaction Reports6
f. Foreign Trade Report (port companies, transport companies, international frei-ght agents, permanent customs users and highly exporting users, and public or private warehouses)
10.4.1. Suspicious Transaction Reports (STR)
In accordance with what is stipulated in Article 42 of Law 190 of 1995, modified by Law 526 of 1999 and Law 1121 of 2006, a Suspicious Transaction Report (STR) does not imply any responsibility for the reporting legal person, nor for the Management or Employees of CEMENTOS ARGOS S.A. that had a part in the de-tection and/or reporting process.
Any transaction, attempted or actually carried out, that must be reported by means of an STR, is directly reported to the UIAF in accordance with the guidelines and instructions disclosed by said entity.
This must be done as soon as CEMENTOS ARGOS S.A. makes the decision to classify the transaction as attempted or suspicious. To this effect, CEMENTOS ARGOS S.A. must not be certain that it regards a criminal activity, nor identify the criminal type or verify whether the resources come from illicit sources; they just need to identify that the transaction is considered suspicious in legal terms, as in-cluded in the glossary and policies of this AML/CFT SCMS MANUAL.
As has been mentioned before, the sending of a STR to the UIAF does not cons-titute a denunciation, nor does it imply any type of responsibility for CEMENTOS ARGOS S.A. as reporting entity, nor for the people that participated in the detec-tion or reporting process.
No natural or legal person associated to CEMENTOS ARGOS S.A. can disclose the sending of a suspicious transaction report to the UIAF, as established by Section 4 of Article 11 of 526 of 1999.
All the supporting documents of transactions reported to the UIAF must be organi-zed and kept for a period of at least five (5) years, given the fact that they can be requested by the competent authorities.
Suspicious transactions reports must meet the objective criteria established by CEMENTOS ARGOS S.A.
6. UIAF Resolution No. 285 of 2007: “All transactions that take place during the ordinary course of business and that are carried out by an obligated party, and that involve payments by means of cash (bank notes or coins) in the amount of ten million Colombian pesos or more, or its equivalent in other currencies.”
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If during any given quarter, CEMENTOS ARGOS S.A. does not report any suspi-cious transactions to the UIAF, within the first 10 calendar days of the following month, it must report to said entity that NO suspicious transactions were detec-ted during said quarter.
10.5. Dissemination strategyCEMENTOS ARGOS S.A., seeking to maintain transparency in all of its actions and transactions, and with the objective of complying with legal and internal norms related to the keeping, elaboration and dissemination of the information of the AML/CFT SCMS, must design an internal and external reporting system that ensu-res compliance with normative requirements.
The method adopted by CEMENTOS ARGOS S.A. to disseminate information re-garding the risk of money laundering and financing of terrorism to the public is through its website or other public dissemination mechanisms.
10.6. Confidentiality obligationIn order to comply with the obligation of confidentiality, all Employees of CEMENTOS ARGOS S.A. must keep information regarding what is reported to authorities and everything related to the AML/CFT SCMS confidential.
REQUIREMENTSOF AUTHORITIES
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11.1. ObjectiveThe objective of this procedure is to describe the method established by the Compliance Officer, with the help of the legal department of CEMENTOS ARGOS S.A., aimed at meeting the requirements regarding information and documents imposed by different competent authorities, with regard to the crimes of money laundering and the finan-cing of terrorism, and any associated crimes.
11.2. ScopeThis procedures applies to all requests that are received in a centralized way by the Compliance Officer and the stem from different entities and units, among which can find the following:
a. The Attorney General’s Office
b. The Colombian Technical Investigation Body (Cuerpo Técnico de Investigación – CTI)
c. The Colombian Financial Information and Analysis Unit (Unidad de Información y Análisis Financiero – UIAF)
d. Criminal Judges of the specialized Circuit
e. The Superintendence of Companies
f. The Colombian National Tax and Customers Directorate (Dirección de Impuestos y Aduana Nacional – DIAN)
g. The National Police
h. Other associated entities in the jurisdictions in which the Company operates
11.3. GuidelinesIn this context, the Compliance Officer, with the help of the legal department of CEMENTOS ARGOS S.A., must do the following:
a. Effectively collaborate with and support different judicial, administrative and control authorities by providing any information requested by these bodies.
b. Respond to the requests of the different authorities within the deadlines esta-blished by them. In case said deadlines cannot be respected, for whichever re-ason, partial information must be sent or an extension of the deadline for their delivery must be requested.
c. Keep information that is requested, managed and handed in confidential.
d. Establish a database to keep records of which requirements have been handled.
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EM11.4. Procedure to respond to requirements from authorities
regarding informationThe Compliance Officer of CEMENTOS ARGOS S.A. can receive the requests or re-quirements from the previously mentioned entities by any of the following means:
a. Regular mail
b. E-mail
c. Telegram
All of said communications must be responded by the Compliance Officer, who, once they receive them, must assign them a reference number based on the order of arrival and continue with the following procedure:
a. Record the received request in the database for Requests for Information of Authorities, with the objective of keeping a record of these, including the fo-llowing data:
i. Request number
ii. Requesting entity
iii. Names of the natural and legal persons on whom information is requested
iv. ID number (if available) of the natural and legal persons on whom informa-tion is requested
v. Date of reception
vi. Date of response
b. This database for requests of information of authorities makes it possible to keep a record about the management of requests and to gather statistical information.
c. If the requested information is not available, this must be reported to the res-pective authority, along with the reason for which it is not available.
TRAINING PROGRAMSON THE AML/CFT SCMS
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EMAt CEMENTOS ARGOS S.A. training on the AML/CFT SCMS is designed, sche-duled and coordinated through the plans aimed at all of the departments and Employees of CEMENTOS ARGOS S.A.
12.1. ObjectiveEstablish the training programs and other instruments designed by CEMENTOS ARGOS S.A. with the same purpose, including the way of assessing and the cove-rage of deficiencies that are detected in knowledge regarding norms, policies, pro-cedures and instruments that are implemented by the AML/CFT SCMS.
With the implementation of training programs, the Company seeks to familiarize everyone with the policies, internal and external norms, and procedures related to the AML/CFT SCMS, so as to create an organizational culture in the Employees of CEMENTOS ARGOS S.A. that is focused on managing the risk of ML/FT, in order to prevent and control CEMENTOS ARGOS S.A. from being used to these ends.
12.2. ScopeThis procedure applies to the Employees of CEMENTOS ARGOS S.A. However, co-verage on the AML/CFT SCMS must also include induction for temporary staff that renders services to CEMENTOS ARGOS S.A.
12.3. Guidelinesa. Any person that starts working for CEMENTOS ARGOS S.A. must receive, at
least once per year, training on the policies, procedures, tools and implemen-ted controls necessary to comply with the AML/CFT SCMS.
b. When the AML/CFT SCMS MANUAL is updated, this must be communicated to all Employees of CEMENTOS ARGOS S.A.; if the changes made to it are con-siderable, training must be scheduled in order to disseminate the new norms and parameters to the AML/CFT SCMS.
c. Every semester, the Human Resources Management Departments of the Regional Divisions and the Human Resources Management Design Department must inform the Compliance Officer about the results of assessments carried out with Employees and the training on the AML/CFT SCMS, so as to detect any flaws in knowledge on the subject and together figure out how training can be improved and which procedure should be followed to correct it.
d. The training plan on the topics of the AML/CFT SCMS must be presented to the Governance Committee of CEMENTOS ARGOS S.A. for their approval, and its scope must be included in the reports that are presented by the Compliance Officer to the Board of Directors.
e. Every semester, the Compliance Officer must check, by means of a revision of a selective sample of the files of different Employees, whether the duly filled in Letters of Reading and Understanding of the AML/CFT SCMS MANUAL and AML/CFT SCMS training assessments are attached to these.
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f. When the Compliance Officer detects any problems with these documents that are included in the files of Employees, this situation should be notified to the department in charge so that they can implement action plans to correct and normalize the situation.
g. Written records must be kept of all the organized training, in which, as a mi-nimum, the date, the topic dealt with and the names of the participants must be recorded.
12.4. FunctionsThe Human Resources Management Departments of the Regional Divisions and the Human Resources Management Design Department, together with the Compliance Officer of CEMENTOS ARGOS S.A., have the following functions:
a. Make sure that training on the topics related to the AML/CFT SCMS is offe-red to respective staff, and that the necessary controls of its results are put in place, in order to detect flaws in the knowledge on these topics and imple-ment extra training.
b. Keep an updated presentation in accordance with the internal norms and in-ternational and local legislation in effect with regard to the AML/CFT SCMS. This presentation and its respective updates are the responsibility of the Compliance Officer.
c. Include training on the topics related to the AML/CFT SCMS in the corporate induction days for new staff.
d. Draw up an annual schedule for the training on the AML/CFT SCMS to staff.
e. Disseminate the location where the AML/CFT SCMS MANUAL can be consul-ted to staff, so they read and study it, making them sign, at the moment the Employee is recruited, the Statement of Commitment regarding the AML/CFT SCMS, which must be kept in the Employee’s file.
f. In the case of temporary Employees, the Human Resources Management Department of the Regional Division of the Employee and the Human Resources Management Design Department, through CEMENTOS ARGOS S.A., as the contractor that hires these temporary workers, must inform them on the AML/CFT SCMS MANUAL.
g. Keep a paper and digital copy of the AML/CFT SCMS MANUAL at the dispo-sal of the Employees of CEMENTOS ARGOS S.A. The level of dissemination of this MANUAL must be defined by the Compliance Officer.
12.5. FrequencyTraining on the AML/CFT SCMS must be given to Employees at least one a year, or when changes are made to the policies, norms and procedures of the AML/CFT SCMS that would require training on said updates.
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EM12.6. Training elementsThe training programs must be recorded in writing, and for their development and dissemination, any tools that fulfill this function can be used, including the following:
a. Periodic publications through the dissemination channels of CEMENTOS ARGOS S.A.
b. Conferences
c. Face-to-face training
d. Virtual tools
e. E-learning
RECORD KEEPING
13.
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EM13.1. ObjectiveEstablish adequate procedures for archiving and keeping documents that were used for the implementation of the different stages and elements of the AML/CFT SCMS, and those necessary for the establishing of new relations with Customers and/or Suppliers, during the information collection process, and those that su-pport their transactions, which could be requested by competent authorities.
13.2. ScopeThis procedures is applicable to all of the branches of CEMENTOS ARGOS S.A.
13.3. Guidelinesa. So as to cooperate with competent and control authorities, all supporting do-
cuments of the AML/CFT SCMS must be kept, as well as those related to the establishing of new relations with Customers and/or Suppliers, those related to transactions that were carried out, and those used to qualify transactions as unusual or suspicious.
b. All documents and records related to compliance with norms on prevention and control of the risk of money laundering and the financing of terrorism must be kept for a period of minimum five (5) years.
c. After the previously indicated period, records can be destroyed as long as they meet the following conditions:
i. That there are no pending requests to deliver this information, made by a competent authority.
ii. That they are kept on a technical medium that ensures the possibility of their subsequent exact reproduction and the preservation of their value as proof, pursuant to what is stipulated in Decrees 2527 of 1950, 3354 of 1954 and 2620 of 1993, and in Article 12 of Law 527 of 1999.
d. In the cases of business acquisition, the acquiring company must ensure con-tinuity in terms of strict compliance with these regulations.
e. In the case of liquidation, it is the liquidator’s responsibility to adopt the ne-cessary measures to ensure the archiving and protection of the documents of the AML/CFT SCMS, in accordance with what is stipulated in Numeral 21 of Article 5 of Decree 2418 of 1999.
f. For the documents that support the decision to qualify a transaction as suspi-cious, a centralized, sequential and chronological conservation system must me ensured, including the necessary security measures, together with the res-pective report to the UIAF, with the objective of keeping them available or at the disposal of the competent authorities, should they request them. Said in-formation must be managed by the Compliance Officer.
INDEX 1
GLOSARIO
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EMBelow, the definition and meaning of the most used terms, acronyms and abbre-viations of this AML/CFT SCMS MANUAL are provided, to ensure their better knowledge, understanding and application.
Administrators: These are the Administrators, the liquidator, the deciders, the members of boards or directive councils and the people who, according to the bylaws of the Company, carry out or hold these same functions.
Risk Analysis: This is the systematic use of available information in order to de-termine how often specific events can occur and what the magnitude of their con-sequences is.
Associates/Shareholders: These are the people that hold shares (ordinary and/or with preferred dividend and without voting right) of Cementos Argos S.A. and/or any of its Subsidiaries.
Self-Control: This is the will of a business and its administrators to detect, con-trol and manage the risks to which CEMENTOS ARGOS S.A. is exposed efficient-ly and effectively.
Distribution Channel: This is an own or external structure through which the pro-ducts and services of CEMENTOS ARGOS S.A. are promoted and sold.
Cementos Argos S.A./Argos/the Company: This refers to the company Cementos Argos S.A. and all of its subsidiaries.
Customer: This refers to any natural or legal person with whom CEMENTOS ARGOS S.A. establishes and maintains a contractual or legal relation for the su-pply of any of its products or services.
High-Risk Customer: These are the natural or legal persons, whether domestic or foreign, that maintain a contractual relation with CEMENTOS ARGOS S.A. and that have a high-risk additional economic activity or that are located in a high-risk juris-diction, according to the analysis carried out by the Company.
Third Parties: These are the natural or legal persons with whom CEMENTOS ARGOS S.A. has business, contractual or legal ties of any type. For the purpo-ses of this MANUAL, the concept refers to Customers, Suppliers, Employees, Shareholders, Strategic Partners and other external Related Parties.
ML/FT Risk Control: This includes the implementation of policies, processes, practices or other existing actions that are aimed at minimizing the ML/FT risk in transactions, affairs or contracts carried out by CEMENTOS ARGOS S.A.
Due Diligence: This is the set of measures that are necessary at the moment a contractual or business relation is established, based on the behavior that a good parent or businessman would have. It refers to doing something carefully. There are two interpretations of the use of this concept for business activities. The first regards it as acting with the necessary care in order to prevent the possibility of being considered guilty due to negligence and being exposed to the respective ad-ministrative, civil or penal responsibilities. The second, with a more economic and proactive content, defines it as the set of processes that is necessary to make well-informed decisions.
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Improved Due Diligence: This is the term that is used to suggest to public and private companies to take measures or additional precautions when establishing a contractual or business relation, based on the behavior that a good parent or business man would display, in order to identify possible risks or possibly hidden activities.
Risk Assessment: This is the process aimed at determining the priorities in terms of risk management, by comparing a certain risk level with predetermined stan-dards, objective risk levels or other criteria.
Risk Event: This is an incident or situation of ML/FT that occurs in CEMENTOS ARGOS S.A. during a particular time interval.
Risk Source: These are agents that imply risks of ML/FT in the Company, and that must be taken into account in order to identify the situations that could expose transactions, affairs or contracts that are carried out to this risk.
Financing of Terrorism: This is the crime committed by any person that displays any of the behaviors described in Article 345 of the Colombian Penal Code, as well as those considered as such by applicable international legislation.
FATF: This stands for Financial Action Task Force, which is an inter-governmental body whose purpose it is to elaborate and promote measures to combat money laundering and the financing of terrorism.
GAFILAT: This refers to the Financial Action Task Force of Latin America (known in Spanish as Grupo de Acción Financiera de Latinoamérica), which is the regional chapter of the FATF that promotes the fight against money laundering and the fi-nancing of terrorism. Colombia is an active member of the GAFILAT.
ML/FT Risk Management: This consists of the adoption of policies that make it possible to prevent and control the risk of ML/FT.
Tools: These are the media used by CEMENTOS ARGOS S.A. to prevent the ML/FT risk from arising and to detect attempted, unusual or suspicious transactions. Within these tools, we can find, among others, warning signals, unusual tran-saction indicators, business risk management programs and electronic control sheets.
Jurisdiction: Place or geographic location in which CEMENTOS ARGOS S.A. sells or promotes its products or offers its services, which can be either local or international.
ML/FT: This is the abbreviation of money laundering and the financing of terrorism.
Money Laundering: This is the crime committed by any person that seeks to provi-de a legal front for goods or money that stem from any of the activities described in Article 323 of the Colombian Penal Code, as well as those considered as such by applicable international legislation.
National or International Lists: These are records of people and companies that, according to the body that publishes them, might be associated with activities of money laundering or the financing of terrorism, such as, for example, the lists of
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EMthe United Nations Security Council, which are binding for Colombia. Additionally, lists of the OFAC, INTERPOL and the Colombian National Police, among others, can be consulted online.
Highest Governing Body: This is the Assembly of Shareholders.
Monitoring: This is the continuous and systematic process through which the effi-ciency and effectiveness of a policy or process is verified, by means of the iden-tification of its achievements and weaknesses, in order to recommend corrective measures aimed at optimizing the expected results. It is a condition to rectify or perfect the execution and to ensure feedback between objectives, theoretical bu-dgets and lessons learned based on reality.
Omission of Denunciation of Private Individual: This consists in knowing about the committing of a crime defined by Article 441 of the Colombian Penal Code and not reporting it to the competent authorities, as well as any situation considered as such by applicable international legislation.
Unusual Transaction: This is a transaction of which the amount or characteris-tics are not in line with the economic activity of the Customer or that, due to their number, amount, or particular characteristics, are outside established nor-mal parameters.
Suspicious Transaction: This is any transaction that, due to its number, amount or characteristics, does not fit in the normal business systems and practices of a specific industry or sector and that, furthermore, according to the uses and habits of the activity concerned, cannot be justified reasonably. When this type of tran-sactions is detected, they must be reported to the UIAF in Colombia and/or the local authority in the jurisdictions other than the Colombian one in which a juris-diction has been defined to which any of the Company’s Subsidiaries that operate in other countries must adhere.
Attempted Transaction: This occurs when people have knowledge about the in-tention of a natural or legal person to carry out a suspicious transaction, which is eventual not carried out because the person who was planning on carrying it out withdraws or because the established or defined controls prevented it from being carried out. These operations have to be reported only and exclusively to the UIAF in Colombia and/or the local authority other jurisdictions other than the Colombian one, in which a jurisdiction has been defined to which one of the Company’s Subordinates that operate in other countries must adhere.
Publicly Exposed Person (PEP): This is a domestic or foreign person that, in the context of their position, manages public resources or has the right to dispose of them, or that has a certain degree of public recognition.
Policies: These are guidelines, directions or aspects that are used for the preven-tion and control of the ML/FT risk at CEMENTOS ARGOS S.A. They must be a part of the ML/FT risk management process.
Product: This refers to goods and services that are offered by CEMENTOS ARGOS S.A. in the context of the fulfillment of its corporate purpose.
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Internal Reports: These are reports that are managed inside CEMENTOS ARGOS S.A., directed at the Compliance Officer, and potentially elaborated by any Employee or member of the Company that has knowledge on a possible attempted, unusual or suspicious transaction.
ML/FT risk: This is the possibility of losses or damages the Company could su-ffer as a result of being used to commit the crimes of money laundering and the financing of terrorism.
Inherent Risk: This is the level of own risk of an activity, without taking into ac-count the effect of the controls.
Residual or Net Risk: This is the level of risk that remains after applying controls to the inherent risk.
Segmentation: This is the process through which a set of elements is separated into groups that are internally homogeneous, and heterogeneous when compared to each other. The separation is based on the recognition of significant differences in their characteristics, which are known as segmentation variables.
Warning Signals: These are particular circumstances that call for attention and justify a deeper analysis by a natural or legal person.
Parties obliged to adopt ML/FT prevention measures: These are the commer-cial companies, branches of foreign companies and one-person companies that are monitored by the Superintendence of Companies and that have or could have gross revenues of 160,000 monthly legal minimum salaries in effect or more.
AML/CFT SCMS: This is the abbreviation for Anti-Money Laundering and Combating the Financing of Terrorism Self-Control and Management System.
UIAF: This stands for Unidad de Información y Análisis Financiero, or the Colombian Financial Information and Analysis Unit, which is a specialized administrative unit, of the technical type, that falls under the Ministry of Internal Revenue and Public Credit of Colombia, whose objective is the prevention and detection of transac-tions that could be used for money laundering or the financing of terrorism. Also, it imposes reporting obligations for operations to certain economic sectors.
Related Parties: This refers to all natural and legal persons that have a contrac-tual relation, either verbal or in writing, with CEMENTOS ARGOS S.A., whichever its nature.
INDEX 2
CONSULTATION OF PUBLIC LISTS AND DATABASES
85M
ANU
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Below is a summary of several public databases and national and international lists that can be consulted as tools to verify and control natural or legal per-sons that have or could have a relation (transactions, contracts or affairs) with CEMENTOS ARGOS S.A.:
1. NATIONAL CONSULTATIONS1.1. Office of the Attorney General of Colombia: Consultation of disciplinary, penal, contractual and fiscal records and loss of investiture.
1.2. Colombian National Police: Consultation of criminal records. NOTE: This con-sultation must be done with private and personal purposes. Every natural or legal person other than the one the information is about is explicitly forbidden from using the personal information used on the website and its different sections, as well as any applications that allow access to them.
2. INTERNATIONAL CONSULTATIONS2.1. OFAC Specially Designated Nationals List (also known as “Clinton List”,
of the United States Department of the Treasury): designated drug dea-lers, terrorists, blocked people and other programs of the OFAC (Office of Foreign Assets Control).
2.2. United Nations Al-Qaida Sanctions List (of the UN Security Council): te-rrorist groups and people that are stakeholders of Al-Qaida and desig-nated as international terrorists through Resolution 1267 of 1999 and Resolution 1989 of 2011.
2.3. Interpol Wanted Persons List: people that are missing and wanted by Interpol (International Police).
2.4. DEA (Drug Enforcement Agency) Wanted Persons List (of the United States Department of Justice): national and international fugitives wan-ted by the DEA.
2.5. FBI (Federal Bureau of Investigation) Wanted Persons list (of the United States Department of Justice): most wanted people, terrorists, kidna-ppers and missing persons.
2.6. ATF (U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives) Wanted Persons List: people most wanted in the context of investigations of the ATF.
2.7. ICE (U.S. Immigration and Customs Enforcement) Wanted Persons List: people most wanted in the context of investigations of the ICE.
2.8. U.S. Secret Service Most Wanted List: people most wanted by the U.S. Secret Service.
