LAST UPDATED 4 APRIL2025

RISK-BASED ASSESSMENT FRAMEWORK FOR PRECIOUS & HIGH-VALUE METAL TRADING

This risk-based assessment framework for Bale Capital Pty Ltd (“the Company), particularly for trading in precious and high-value metals from suppliers, involves identifying and evaluating the potential risks associated with suppliers and financial transactions.

This framework aims to grade suppliers as Low, Medium, or High risk, considering various factors such as geographic location, regulatory environment, transparency of transactions, and the nature of the business relationship. Additionally, the framework includes monitoring guidelines for unusual and potentially suspicious activities related to funds transfers, monetary instruments, or third-party payments. The goal is to mitigate risks associated with money laundering, terrorist financing, and other financial crimes.

1. Introduction

This framework establishes guidelines for assessing and managing the risks associated with trading precious metals with various suppliers. It is designed to ensure compliance with anti-money laundering (AML) and combatting the financing of terrorism (CFT) regulations and to safeguard Bale Capital Pty Ltd from financial and reputational damage.

2. Supplier Risk Assessment

Each supplier will be assessed and categorized into one of three risk categories: Low, Medium, or High. This assessment will be based on several criteria:

1. Geographic Location: Suppliers operating in or sourcing from countries with high levels of corruption, inadequate AML/CFT regulations, or known to be high-risk for precious metal smuggling will be considered higher risk.
2. Regulatory Compliance: Suppliers’ adherence to local and international AML/CFT regulations, including record-keeping, reporting suspicious activities, and customer due diligence.
3. Transparency: The willingness and ability of suppliers to provide transparent transaction records, including the origin of the precious metals, beneficial ownership, and details of previous transactions.
4. Nature of Business Relationship: The length and history of the business relationship with the supplier, including past compliance records and any red flags raised during the course of the relationship.

3. Risk Categories and Controls

1. Low Risk: Suppliers with a transparent business operation, located in low-risk countries, with a long-standing and compliant relationship with Bale Capital Pty Ltd. Enhanced due diligence is not typically required, but standard AML/CFT checks should be conducted regularly.
2. Medium Risk: Suppliers with some risk factors, such as being located in countries with moderate risk or having less transparency in their operations. Enhanced due diligence, including more frequent monitoring and additional information gathering, will be required.
3. High Risk: Suppliers with significant risk factors, such as operation in high-risk jurisdictions, lack of regulatory compliance, or insufficient transparency. These suppliers require the highest level of due diligence, ongoing monitoring, and potentially third-party audits to verify compliance with AML/CFT standards.

4. Monitoring for Unusual and Potentially Suspicious Activities

1. Transaction Patterns: Regular review of transactions for patterns that deviate from the expected business activity, such as unusually large transactions, frequent transactions over a short period, or transactions structured to avoid reporting thresholds.
2. Funds Transfers: Scrutinise all funds transfers for compliance with company policies and AML/CFT regulations. Pay particular attention to transfers from high-risk jurisdictions or to/from entities not related to the transaction.
3. Monetary Instruments: Be vigilant about the use of monetary instruments (e.g., bank drafts, money orders, traveller’s cheques, gift cards) that may be used to obscure the origin or destination of funds.
4. Third-Party Payments: Examine third-party payments carefully, especially if the third party has no apparent connection to the supplier or the transaction. Require additional documentation to establish the legitimacy of such payments.

5. Reporting and Response Procedures

1. Suspicious Activity Reports (SARs): Implement procedures for reporting suspicious activities internally and, where applicable, to relevant authorities in compliance with AML/CFT regulations.
2. Record-Keeping: Maintain comprehensive records of all risk assessments, due diligence efforts, and monitoring activities for a minimum period as required by law or regulation, typically five to ten years.

6. Training and Awareness

Ensure all staff involved in precious metal trading and financial transactions are trained on AML/CFT compliance, risk assessment procedures, and the importance of monitoring and reporting unusual activities.

7. Review and Update

Regularly review and update the risk-based assessment framework to reflect changes in regulations, market conditions, or the operational environment. This should include feedback from audits and compliance reviews.

This risk-based assessment framework is designed to guide the Company in managing the risks associated with precious metal trading, ensuring compliance with legal and regulatory requirements, and maintaining high standards of ethical conduct. It’s vital for the framework to be flexible and adaptive to the evolving nature of financial crimes and regulatory landscapes.