Management of Prevention and Control of Money Laundering, Terrorism Financing and Proliferation of Weapons of Mass Destruction at Mercantil Servicios Financieros, C.A.

Legal framework in Venezuela

Mercantil Servicios Financieros, C.A., being a legally bound subject of the following laws, pays close attention to the Prevention and Control of Money Laundering, Terrorism Financing and Proliferation of Weapons of Mass Destruction.

  1. Organic Law Against Organized Crime and Terrorism Financing, (LOCDO/FT – Ley Orgánica contra la Delincuencia Organizada y Financiamiento al Terrorismo) published in Official Gazette N° 39,912 of April 30, 2012.

  2. Organic Anti-Drug Law, published in Official Gazette N° 39,546 of November 5, 2011.

  3. Decree-Law of the Stock Market, published in Official Gazette N° 6,211 Extraordinary of December 30, 2015.


The following Resolutions and Official Notices (Circulares) are also part of the legal framework regarding this matter: “Regulations for the Risk Administration and Oversight related to the crimes of Money Laundering and Terrorism Financing applicable to Institutions under the National Securities Superintendency (SNV – Superintendencia Nacional de Valores), Resolution N° 110 of May 19, 2011 issued by the SNV, published in Official Gazette N° 39,691 of June 8, 2011; Joint Resolution N° 122 from the Interior and Justice Ministry and the Planning and Finances Ministry on June 15, 2012, with the “Administrative Regulations and Procedures for Legally Bound Subjects in order to identify and apply adequate measures for the Preventive Blocking of Funds or Other Assets, according to the Resolutions of the United Nations Security Council”, published in Official Gazette N° 39,945 of June 15, 2012; Resolution N° 158 from the Interior and Justice Ministry of August 13, 2012, with Norms for regulating the Process of Implementing and Application of Resolution N° 1373 of the United National Security Council, regarding the Enlisting and Discharge of Persons who incur or try to incur in Acts of Terrorism or its Financing, published in Official Gazette N° 39,986 of August 15, 2012; Official Notice (Circular Letter) N° DSNV-CJ 1630-2012 issued by the SNV on August 24, 2012, with Norms for the Application of Resolutions of the United Nations Security Council for the Preventive Blocking of Goods or Other Assets related to Terrorism.

Mercantil Servicios Financieros, C.A. has an efficient structure for the administration of Risks of Money Laundering, Terrorism Financing and Proliferation of Weapons of Mass Destruction

In order to comply with the legal framework mentioned above and mitigate the various risks associated with Money Laundering, Terrorism Financing and the Proliferation of Weapons of Mass Destruction, Mercantil Servicios Financieros C.A. has a permanent procedure in place for the administration of such risks, through the preparation, adoption, implementation and development of a “Comprehensive System for the Administration of Risks of Money Laundering and Terrorism Financing” (SIAR – Sistema Integral de Administración de Riesgos). This SIAR includes appropriate, sufficient and efficient policies, procedures and measures for the identification, evaluation and application of corrective measures in order to reduce the possibility of transactions of Mercantil Servicios Financieros, C.A. Stock Market being used as a means to hide the origin, purpose and destination of illicit capital, or to allocate any funds to financing terrorist groups or activities.


The SIAR requires and includes a commitment of all personnel up to the highest level, and allows the application of appropriate, sufficient and efficient measures through policies and procedures that contribute to the prevention, control and detection of any attempt of money laundering or terrorism financing activities.


SIAR is structured by a Board, its President, the CEO, the Compliance Officer for Prevention and Control of Money Laundering/Terrorism Financing (ML/TF), the Committee for the Prevention and Control of ML/TF, the Unit of Prevention and Control of ML/TF, and the employees designated as responsible for compliance.

What is Money Laundering, and what are the Law’s provision for sanctions?

Money Laundering is defined as the process of hiding or giving an appearance of legality to capitals, goods and other assets obtained from illegal activities (Article 4.15 of the LOCDO/FT).

The Law has severe punishments in place (10-15 years in prison, fine for the amount of capital increase illegally obtained and confiscation of goods or assets involved in the crime), for the person who, by himself or through another person, knowingly owns or possesses capitals, goods, funds, assets or benefits, directly or indirectly originating in illicit activities. The same punishment applies to those who, by themselves or through other persons: 1. Converts, transfers, or moves by whatever means, the goods, capitals, assets, benefits or surplus in order to hide or cover their illicit origin, or attempts to aide any person taking part in those crimes in order to evade the legal consequences of their actions; 2. Hides, covers or simulates the nature, origin, location, disposition, destination, movement or ownership of goods and assets and the rights to them; 3. Acquires, owns or uses goods resulting from a crime; and, 4. Safeguards, invests, transforms, guards or manages assets or capital originating in illicit activities (Article 35 of LOCDO/FT).

Harm caused by Money Laundering to Society

Money Laundering is a phenomenon with international dimensions which interferes with the nations’ development, and gives rise to negative consequences affecting the various sectors of society, mainly regarding social, political and economic matters, as it weakens the values of any society, generates corruption, promotes the existence of unequal conditions for those honestly pursuing economic activities, damages the international image of countries, destabilizes their economy, and negatively impacts the reputation of institutions, by exposing them, and their representatives, managers and staff to administrative and criminal charges. For these reasons, it was necessary to generate solutions at State policy level, with international support for measures to prevent Money Laundering.

What is Organized Crime?

Organized Crime is defined as the action or inaction of 3 or more persons in association over some time, in order to commit the crimes included in the LOCDO/FT and profit, directly or indirectly, for themselves or for others. It is also considered Organized Crime the activity carried out by a single person acting in representation of a legal person or an association, in order to commit the crimes included in the Law (Article 4.9 of LOCDO/FT).

The Law provides for prison sentences from 6 to 10 years to members of Organized Crime groups just by being a member of the group (Article 37 of LOCDO/FT).

What is Terrorism?

Terrorism is the deliberate act that, by its nature or context, may seriously harm a country, or an international organization; this act is deemed a crime according to the Venezuelan legal system, when intentionally committed to intimidate the population; unduly force governments or international organizations to specific actions or to abstain from those actions; or to seriously destabilize or destroy the fundamental political, constitutional, economic or social structures of a country or of an international organization (Article 4.1 of LOCDO/FT).

The Law provides for serious punishment (from 25 to 30 years of prison) for the individual terrorist or members of a terrorist organization, who carry out or attempt to carry out one or several terrorist acts (Article 53 of LOCDO/FT).

What is Terrorism Financing?

Terrorism financing is the action of providing, facilitating, safeguarding, managing, collecting or obtaining funds by any direct or indirect means, in order to be used, in part or completely, by terrorist individuals or groups, or to carry out one or several terrorist actions, even if the funds are not actually used or the terrorist act or acts have not been completed. The penalty will be applied regardless of the funds being used by a terrorist individual or by an organization operating abroad, and regardless of the country where the terrorist action takes place, the sentence for this crime being prison from 15 to 25 years (Article 53 of LOCDO/FT).

Due Diligence Regarding Investors

Mercantil Servicios Financieros, C.A. strives to protect the interests of investors and, at the same time, safeguard its reputation as an institution, in compliance with the current legal requirements regarding Prevention and Control of Money Laundering, Terrorism Financing and Weapons of Mass Destruction Proliferation in Venezuela, with the application of the “Due Diligence Regarding Investors”: This policy aims at obtaining and updating the truthful, transparent and complete information that individuals and legal persons must provide in order to become and remain shareholders. Similarly, Mercantil Servicios Financieros, C.A. follows up closely all operations with its shareholders, focusing in the low or high risk they might represent.

Information that individuals and legal persons must provide when becoming shareholders with Mercantil Servicios Financieros, C.A.

  • Full names, valid laminated identity card for Venezuelan nationals, foreign residents and foreign transients in the country, and current passport with valid visas (if applicable) for non-resident individuals.
  • Valid Fiscal Information Registry (RIF - Registro de Información Fiscal).
  • Place and date of birth, nationality, marital status.
  • Profession or occupation, occupational category and economic or employment activity.
  • Home and work addresses and telephones.
  • Services or other investment products being held at Mercantil Servicios Financieros, C.A.
  • Salary and other monthly income.
  • Estimated monthly average investment, and average number of monthly transactions to be traded through Mercantil Servicios Financieros, C.A. The information provided by the investor must be consistent with the corresponding economic activity.
  • Reasons for requesting the services of Mercantil Servicios Financieros, C.A.
  • In case of requiring regular incoming or outgoing transfers from abroad, provide the country of origin or destination.
  • Bank references.
  • Affidavit or sworn statement regarding the origin and destination of the funds (included in the format that the new shareholder must fill and sign).
  • Affidavit or sworn statement of the legal person acting as Legally Bound Party of the Non-Financial Sector, under Res. N° 110 of SNV and LOCDO/FT, stating that programs, regulations and controls have been adopted and executed to mitigate the use of services provided by Mercantil Servicios Financieros, C.A. as instruments for Money Laundering, for Terrorism Financing or for Proliferation of Mass Destruction Weapons.
  • Indicate and provide documentation regarding the condition of politically exposed person, either nationally or abroad.
  • Signature and fingerprint.

Legal Persons

  • Name or trade name of the company.
  • Valid RIF.
  • Current incorporation documents and social statutes.
  • Addresses and telephone numbers.
  • Identity documents of the legal representatives of the company: valid laminated identity card for Venezuelans, and foreign residents or transients, and passport with a valid Venezuelan visa (if applicable) for non-resident individuals.
  • Bank references.
  • Last three (3) Income Tax declarations, as the case may be.
  • Full names, places and dates of birth, nationality, marital status, home and work addresses and telephones, professions or occupations, economic or work activities, salaries and other monthly incomes, services or other investment products being held with Mercantil Servicios Financieros, C.A., and bank references for all signatories.
  • Professional, commercial or industrial activity and products or services offered by the company.
  • Volume of monthly sales and related Companies.
  • Estimated monthly average investment and average monthly number of transactions to be traded through Mercantil Servicios Financieros, C.A.
  • Reasons for requesting the services of Mercantil Servicios Financieros, C.A.
  • In case of requiring regular incoming or outgoing transfers from abroad, provide the country of origin or destination.
  • Affidavit or sworn statement regarding the origin and destination of the company funds (included in the format that the new shareholder must fill and sign).
  • In case of requiring regular incoming or outgoing transfers from abroad, provide the country of origin or destination.
  • Affidavit or sworn statement of the legal person acting as Legally Bound Party of the Non-Financial Sector, under Res. N° 110 of SNV and LOCDO/FT, stating that programs, regulations and controls have been adopted and executed to mitigate the use of services provided by Mercantil Servicios Financieros, C.A. as instruments for Money Laundering, for Terrorism Financing or for Proliferation of Mass Destruction Weapons..
  • Indicate and provide documentation regarding the condition of politically exposed person, either nationally or abroad, of any individual shareholders of the company, legal representatives or authorized signatories of the company acquiring shares from Mercantil Servicios Financieros, C.A.
  • Signature and fingerprint of individual signatories.

National and Foreign Politically Exposed Persons

A Politically Exposed Person (PEP) is an individual currently or formerly holding a powerful public position, or a position of trust or similar, and family members and close associates, due to a position as an important officer in an executive, legislative, judicial or military entity, of a national or foreign government, by election or nomination; or being a high-level member of a national or foreign political party, or a high-level executive in a corporation owned by a foreign government. Among close family members, parents, siblings, spouses, children and in-laws are included. Also included in this category is any legal person such as a corporation, business or any other entity created by the PEP for his/her benefit (Article 4.19 of LOCDO/FT).

In its condition as Legally Bound by the LOCDO/FT, Mercantil Servicios Financieros, C.A. designed, implanted and continues to apply Due Diligence procedures when establishing or maintaining commercial relations with individuals qualified as PEPs.

Mercantil Servicios Financieros, C.A. obligations according to the Resolutions of the United Nations Security Council.

Resolutions N° 1267 and 1373 of October 15, 1999 and September 28, 2001, respectively, were issued in order to prevent the use of funds and assets of legal or illegal origin for Terrorist Acts and their Financing, as well as Resolutions N° 122 and 158 of the Ministries of the Interior and Justice, and of Planning and Finances, of June 15, 2012 and August 13, 2012, respectively, and the SUNAVAL Circular Letter N° DSNV/CJ 1630/2012 of August 24, 2012, to regulate the implementation and application of Legally Bound Subjects of the Obligations in the cited UNSC Resolutions.

Mercantil Servicios Financieros, C.A., as Legally Bound Subject of those regulations, must review the list prepared by the United Nations Security Council and by the National Office Against Organized Crime and Terrorism Financing (ONDO – Oficina Nacional Contra la Delincuencia Organizada y Financiamiento al Terrorismo), which includes individuals and legal persons allegedly qualified as terrorists or possible financiers of such activities.

If any phonetic or written similarities are established, or with the identification numbers (identity cards or passports), date of birth or any other data of interest, a preventive blocking of funds, financial instruments or other assets of the corresponding client will be immediately set in place.

The same celerity will be applied for the notification of the National Financial Intelligence Unit, in order for it to carry out the intensive revision of the case, and to ratify the preventive blocking

How can investors prevent surprises in their good faith, and avoid being used by third parties in operations that might be related to Money Laundering, Terrorism Financing and the Proliferation of Weapons of Mass Destruction, as well as to prevent fraud and embezzlement?

 

  • Stopping third persons from using you to invest in their representation, or to invest funds with doubtful origins; in the case of such an occurrence, notifying the case immediately to Mercantil Servicios Financieros, C.A.
  • Securing all personal identity cards, so that third parties cannot usurp your identity.
  • Submitting all required information and documentation when acquiring shares with Mercantil Servicios Financieros, C.A.
  • Adequately updating personal and business data whenever Mercantil Servicios Financieros, C.A. requests it, or when any changes take place in the information provided.


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