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`
`By Email to bradford.geyer@formerfedsgroup.com
`
`Bradford L. Geyer
`FormerFedsGroup.Com LLC,
`141 I Route 130 South
`Suite 303
`Cinnaminson, NJ 08077
`
`
`
`
`21 December 2023
`
`
`Dear Sir
`Himalaya International Clearing Limited ("Himalaya Exchange")
`We refer to our letter dated 12 December 2023. As you know, we act for Himalaya Exchange.
`
`As foreshadowed by that letter, please find enclosed herein: (1) an independent expert report dated 21
`December 2023 produced by Mazars LLP; and (2) a witness statement from Sam H Claydon, a Partner
`in this firm, to file with the Court today.
`
`If you have any questions, please do not hesitate to contact us.
`
`For the avoidance of doubt, if and to the extent that this letter or its enclosures are disclosed to any
`third party, nothing in this letter or those enclosures is intended to nor does it waive any applicable
`privilege. Further, if and to the extent that this letter or its enclosures is disclosed to any third party, and
`to the extent that it is later determined that this letter or any of its enclosures does contain a waiver of
`privilege in relation to the information above, we do not intend to nor do we make any wider waiver of
`any applicable privilege in relation to our instructions or our work product.
`
`Yours faithfully
`
`CANDEY
`Encl.
`
`
`
`
`
`
`
`
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`Case 1:23-cr-00118-AT Document 208-2 Filed 12/21/23 Page 1 of 10Case 1:23-cr-00118-AT Document 612-6 Filed 04/04/25 Page 16 of 145
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`Demonstration of the
`
`Client Onboarding
`and Compliance Process
`
`June 2022
`
`
`
`
`
`Case 1:23-cr-00118-AT Document 208-2 Filed 12/21/23 Page 2 of 10Case 1:23-cr-00118-AT Document 612-6 Filed 04/04/25 Page 17 of 145
`
`Our Team
`
`Here at Himalaya Exchange, we are committed to protect
`our customers and crypto community.
`
`Himalaya Exchange aims to set the crypto industry standard
`for Know Your Customers.
`
`Our compliance teams are located in United Kingdom and
`Australia and provide compliance services to the group.
`
`Most of our compliance team members have more than 5
`years compliance experience in leading international banks
`and crypto companies.
`
`Our CDD Process
`
` Customer Registration Process
`
` Identification and Verification
`
` Name Screening
`
` Risk Assessment
`
` Auto Approval, Auto Rejection and Manual Risk Review
`
` Ongoing Due Diligence
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Customer Registration Process (Individual)
`
`Create User
`Account
`
`Security
`Questions Setup
`
`Email & SMS
`Verification
`
`KYC
`Questionnaire
`
`
`
`
`
`
`
`
`Create Username
`
`Customer Info
`(Name, DOB )
`
`
`
`
`
`Residence and citizenship.
`
`Create Security Questions
`
`
`
`Security Questions add an
`extra layer of customer
`protection to the
`authentication process.
`
`Send One Time Password
`(OTP) to both registered
`email address and phone
`number to authorise the
`account creation
`
`
`
`
`
`
`
`KYC Questionnaire for
`customer to provide
`customer profiles.
`
`Provides the basis for initial
`Financial Crime Risk Rating.
`
`Risk Based Approach for
`further verification e.g.
`bank statements / SoW /
`SoF.
`
`Document and
`Facial
`Verification
`
`
`
`
`
`ID Document submission
`
`AI verification on the
`customer’s identity and
`biometric information
`(facial recognition).
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Customer Registration Process (Corporate)
`
`Company
`Appointed
`Representative
`
`
`
`
`
`Appointed Representative
`registers an account with
`email address, password.
`
`Same registration process as
`Individual including Security
`Questions setup.
`
`Acceptable Customer
`Type
`
`Document
`Check List
`
`Manual Review (EDD)
`
`
`
`Based on the result of the Business
`Risk Analysis, Himalaya Exchange
`only accepts the following legal
`entities:
`
`
`
`
`
`- Personal Investment
`- Companies (PIC)
`- Corporate and Partnerships
`- Trusts
`- Funds
`
`Due Diligence is conducted on the
`corporate entity.
`
`Key documents to verify the
`ultimate ownership structure and
`legal status like:
`
`- Certificate of Incumbency
`- Board Resolution
`- Organisation Chart, etc .
`
`
`
`
`
`
`
`Every Corporate customers undergoes
`EDD regardless of their initial Financial
`Crime Risk Rating.
`
`In addition to the main party (the legal
`entity), the connected parties have to
`go through complete KYC process and
`provide POA. For example, UBO with
`10% or above ownership, Directors,
`Authorised Representative. For Trust -
`Settlor, Protector, Beneficiary, etc.
`
`For merchant account, an extra due-
`diligence process will be adopted due
`to the high risk nature.
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Identification and Verification (ID&V) , Screening
`
` Identification and Verification. Customer provides
`name, address and relevant data from our secured
`online portal. Customer’s identity is verified against
`the government issued ID card. AI powered facial
`recognition is used to ensure the picture in ID
`matches selfie picture.
`
` Proof of Address. Customer address is manually
`verified against the bank statement, government ID,
`and utility bills
`
` Name Screening is performed against PEP
`(Politically Exposed Person), Sanctions, Adverse
`Media to fully compliant with AML regulations.
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Business Risk
`
`Controls in Place
`
`Reflected in Customer Risk Model
`
`Identification, verification, full KYC data required for
`all users
`
`• Expected deposit level
`
`• Risk factors include employment, business sectors
`
`• Additional risk loading for customer for investment
`vehicles and complex structures.
`
`Risk Identified
`
`Product Risk
`
`Customer Type Risk
`
`Description
`
`Crypto Exchange
`•
`Payment App
`•
`• Merchant
`
`Individual Customers
`Individuals across the globe
`•
`High Net Worth Individuals
`•
`PEPs
`•
`
`Corporate Customers
`Personal Holding Companies
`•
`Trusts
`•
`Funds
`•
`Investment Vehicles
`•
`Complex Structures
`•
`
`•
`
`•
`
`Identification, verification, full KYC data required for
`all users
`
`• Name Screening against sanctions, PEP, adverse
`media
`
`• Enhanced due diligence for higher risk customers
`(verification of employment, source of funds)
`
`Delivery Channel Risk
`
`Non-Face-to-Face
`
`Geographical Risk
`
`Clients with linkage to countries
`subject to:
`Sanctions
`•
`AML deficiencies listed by
`•
`FATF
`High level of corruption
`
`•
`
`• Jumio – Biometric verification against ID photo and
`selfie taken during onboarding
`• Certain countries prohibited from registration
`
`• Risk level assigned to each country according to
`recognised global organisations (e.g. FATF
`countries, Transparency International) and regularly
`updated country risk score based on Corruption
`Perceptions Index (CPI).
`
`• Residence country, citizenship, expected country of
`origin of funds
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Risk Model Assessment
`
`Geography Risk
`
`Product Risk
`
`Transaction Risk
`
`Customer Risk
`
`
`
`
`
`Resident Country
`Citizenship
`Fund deposit to / receive from
`
`
`Crypto Exchange
`
`Payment Product
` Merchant / Peer-to-Peer
`
`
`
`
`Planned annual deposit
`Transaction Monitoring
`
`
`
`
`Occupation Status
`Individual or Business
`Activity Areas
`
`Automated Risk Assessment
`
`Final Financial Crime Risk Rating
`
`Score
`
`0-30
`
`31-59
`
`60-75
`
`75-99
`
`Classification
`
`Low
`
`Medium
`
`High
`
`Ultra-High
`
`Fraud Signals
`
`Sanction List
`
`PEP Risk
`
`Adverse Media Coverage
`
`Red flags from Manual Review
`
`Manual Adjustment
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Approval and Escalation Process
`
`Auto Approval
`
`Medium /
`Low Risk
`
`Quality Control
`(Sampled Review)
`
` Monthly based sampling
`
`Review completed cases
`
`Remediate Case or Offboard
`customers if needed
`Identify thematic issues and
`suggest correction measures
`(e.g. training / system
`enhancement )
`
`
`
`Completed KYC
`Profiles
`
`Manual Review
`
`
`
`
`Conduct EDD
`Customer outreach to obtain
`documents to support
`- Source of Wealth
`- Source of Funds
`
`Auto-Rejected
`
`High
`Risk
`
`Self Approval
`
`Ultra-High /
`Prohibited Risk
`
`Senior Manager
`Review
`
`
`
`
`4 eyes checking
`For PEP, special situations like
`charity escalate to CRO
`committee review and approval
`
`Customer Review and
`Onboarding (CRO) review
`
`
`
`
`
`Consists of senior stakeholders of
`Himalaya Exchange
`Provides guidelines for approval
`requests and steers the risk appetite
`of the firm
`
`
`
`
`
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`Customer
`Registration
`
`ID&V
`
`Screening
`
`Risk
`Assessment
`
`Approval and
`Escalation
`
`On Going
`Monitoring
`
`Ongoing Due Diligence
`
`Onboarded
`Customers
`
`Reverse Screening
`
`Transaction
`Monitoring
`
`Periodic Review
`
`Event Trigger
`
`SAR Reporting
`
`Offboarding
`
`Refreshed KYC
`Profiles
`
`
`
`
`
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`Demonstration of the
`Client Onboarding and Compliance Process
`
`Thank you.
`
`June 2022
`
`
`
`
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`MERCANTILE BANK
`INTERNATIONAL CORP.
`
`
`ONLINE CUSTODY & BANKING SERVICES AGREEMENT
`
`
`ALL CLIENTS OF MERCANTILE BANK INTERNATIONAL CORP. (“MBI”)
`THAT OPEN ACCOUNTS SHALL BE SUBJECT TO, AND SHALL BE BOUND
`BY, THIS ONLINE CUSTODY & BANKING SERVICES AGREEMENT.
`
`THIS ONLINE CUSTODY & BANKING SERVICES AGREEMENT IS SUBJECT
`TO MODIFICATION BY MBI AT ANY TIME. REVISED TERMS SHALL BE
`EFFECTIVE IMMEDIATELY UPON PUBLICATION IN ELECTRONIC FORM ON
`MBI’S WEBSITE OR RECEIPT BY CLIENT VIA EMAIL.
`
`
`
`
`
`VERSION 2022-09
`LAST REVISED: 2020-06
`
`
`
`
`
`
`1
`
`
`
`
`
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`
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`
`
`TABLE OF CONTENTS
`
`1. DEFINITIONS
`
`2. OVERVIEW OF ONLINE BANKING SERVICES
`
`2.1. ACCOUNT APPLICATION AND APPROVAL
`
`2.2. INFORMATION YOU GIVE US AT ACCOUNT OPENING
`
`2.3. ACCOUNT INFORMATION
`
`2.4. NOT FDIC INSURED
`
`2.5. CHANGES TO THIS AGREEMENT
`
`2.6. ACCOUNT CLOSURES
`
`3. E-SIGN DISCLOSURE AND CONSENT
`
`3.1. INTRODUCTION
`
`3.2. ADDITIONAL DEFINITIONS THAT APPLY TO THIS SECTION
`
`3.3. RECORDS AND COMMUNICATIONS MAY BE PROVIDED IN ELECTRONIC FORM
`
`3.4. REQUESTING PAPER COPIES
`
`3.5. SYSTEM REQUIREMENTS
`
`3.6. WITHDRAWAL OF YOUR CONSENT
`
`3.7. UPDATING YOUR INFORMATION
`
`3.8 FEDERAL LAW
`
`3.9. TERMINATION OF THE E-SIGN DISCLOSURE PROVISION
`
`3.10. CONSENT TO RECEIVE ELECTRONIC RECORDS
`
`
`
`4. PRIVACY POLICY
`
`4.1. IN GENERAL
`
`4.2. THIRD PARTY DISCLOSURES
`
`4.3. ANONYMIZED CLIENT DATA
`
`4.4. DATA PROTECTION
`
`5. GENERAL TERMS
`
`5.1. ACCOUNT OPENING AND OWNERSHIP
`
`5.2. RELIANCE ON INFORMATION
`
`5.3. MANAGEMENT OF YOUR ACCOUNT
`
`5.4. ASSIGNMENT OF YOUR ACCOUNT
`
`6. CUSTODY ACCOUNT SERVICES
`
`
`
`
`
`6.1. OUR RELATIONSHIP WITH YOU
`
`6.2. INSTRUCTIONS REGARDING MANAGEMENT OF CUSTODIAL FUNDS
`
`6.3. MANAGEMENT OF FUNDS HELD IN CUSTODY
`
`6.4. ADDITIONAL CUSTODY ACCOUNT FEATURES
`
`6.5. NOT FDIC INSURED
`
`2
`
`
`
`
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`6.6. LIMITATIONS ON WITHDRAWALS
`
`
`
`7. TRANSFER SERVICES
`
`7.1. FUNDING YOUR ACCOUNT
`
`7.2. LINKING EXTERNAL ACCOUNTS; EXTERNAL ACCOUNT TRANSFERS
`
`
`
`8. FUNDS AVAILABILITY
`
`8.1. WHEN ARE FUNDS AVAILABLE?
`
`8.2. PROCESSING TRANSACTIONS
`
`
`
`9.
`
`INSUFFICIENT FUNDS AND OVERDRAFT PROTECTION
`
`10. FEES & SET-OFF
`
`11. OTHER TERMS AND CONDITIONS
`
`11.1. ADDITIONAL DEFINITIONS THAT APPLY TO THIS SECTION
`
`11.2 BANK SECRECY ACT COMPLIANCE
`
`11.3. SUSPENSION OF SERVICES
`
`11.4 INVESTIGATIONS, GOVERNMENTAL AUTHORITIES AND LEGAL PROCEEDINGS
`
`11.5 SETOFF AND SECURITY INTEREST
`
`11.6. LIMITS ON LIABILITY
`
`11.7. CLIENT RESPONSIBILITIES, REPRESENTATIONS AND WARRANTIES
`
`11.8. CHOICE OF LAW AND DISPUTE RESOLUTION
`
`11.9. UNRETURNED OR ABANDONED PROPERTY
`
`11.10. TAXES
`
`11.11. MISCELLANEOUS
`
`SCHEDULE OF FEES
`
`
`
`
`
`3
`
`
`
`
`
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`
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`1. DEFINITIONS
`
`The following terms and definitions apply when used in this Online Custody & Banking Services Agreement. Terms used but not
`defined below shall have the meaning assigned to them in the Uniform Commercial Code. References to the Uniform Commercial
`Code are to the Uniform Commercial Code in the State of New York.
`
`“ACH” means the Automated Clearing House electronic funds transfer network.
`
`“Affiliates” means, with respect to any specified Person any other Person that controls, is controlled by, or is under common
`control with such specified Person. As used herein, the term “control” means, with respect to any Person, the power, directly or
`indirectly, to direct or cause the direction of the management and policies of such Person, whether through the ability to exercise
`voting power, by contract or otherwise.
`
`“Agreement” means this Online Custody & Banking Services Agreement, as amended, modified and supplemented from time
`to time.
`
`“Authorized Persons” means any Person authorized in writing by a Client of MBI pursuant to this Agreement to act as an agent
`on the Client’s behalf in dealing with MBI.
`
`“Available Account Balance” means, the balance of funds in your Account available for transfer to an External Account subject
`to the limitations described in this Agreement. The Available Account Balance may be more or less than the amount of your
`posted balance. Please consult Section 8 of this Agreement for additional information on how we calculate the Available Account
`Balance.
`
`“Business Day” means any day in which financial institutions of the United States are open for business, unless otherwise
`specified.
`
`“Cash Equivalents” means (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United
`States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support
`thereof) having maturities of not more than one year from the date of acquisition; (b) time deposits and certificates of deposit of
`any commercial bank having, or which is the principal banking subsidiary of a bank holding comp
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