AML & CTF Policy

Context

This document outlines the Anti-Money Laundering (AML) framework for DAXCHAIN OÜ, administered by senior management and the Board of Directors.

Scope of the Document

The AML and Counter-Terrorist Financing (CTF) Policy establishes the firm-wide framework by which Daxchain complies with applicable AML/CTF laws and regulations. The policy aims to conduct business in compliance with applicable laws while creating a strong compliance culture. Daxchain recognises that virtual currencies present unique AML/CTF challenges and has adopted a risk-based approach to mitigate money laundering and terrorist financing risks. All policy exceptions require approval from the Chief Compliance Officer or CEO.

Regulatory Framework

Daxchain complies with Estonian laws and regulations, including:

• Money Laundering and Terrorist Financing Prevention Act (passed 26.10.2017, revised 10.03.2020)
• International Sanctions Act (passed 12.05.2010)
• EU Directive 2015/849 on prevention of financial system misuse
• FATF/GAFI 40+9 recommendations
• FATF Report on Virtual Assets red flag indicators

Key Terms and Definitions

Sanctions are non-military measures decided by the EU, UN, or other international organisations to maintain peace, prevent conflicts, support democracy, uphold human rights, and achieve foreign policy objectives. Imposed by the EU and US Office of Foreign Assets Control (OFAC).

Money laundering involves converting or transferring property derived from criminal activity to conceal its illicit origin, acquiring or possessing such property knowing its criminal source, or disguising the true nature, source, or ownership of criminally derived property.

Politically Exposed Person (PEP) refers to individuals entrusted with prominent public functions including heads of state, ministers, parliamentarians, judges, military officers, and international organisation directors.

Terrorism financing is the process by which terrorists finance activities, distinguished from money laundering by its focus on intended use rather than source of funds.

Tipping off means alerting customers to money laundering suspicions or disclosing confidential AML actions — strictly prohibited.

Policy Objectives

The AML/CTF Policy seeks to protect Daxchain from misuse by money launderers and terrorists. Specifically, it aims to:

• Define roles and responsibilities for AML/CTF compliance
• Create an AML/CTF risk assessment process
• Outline internal control processes
• Establish a Know Your Customer (KYC) framework with risk-based customer identification and verification
• Create transaction monitoring and suspicious activity reporting programs
• Establish sanctions screening controls against official public financial sanctions lists
• Ensure compliance with AML/CTF requirements and recordkeeping obligations
• Provide employee training programs
• Require periodic independent testing
• Maintain regular Board and management reporting

Governance, Organisational Structure and Authority

The Board appoints the Chief Compliance Officer, who reports directly to the CEO with Board access as needed. The Money Laundering Reporting Officer (MLRO) receives internal disclosures concerning money laundering suspicions and ensures timely disclosure of Suspicious Activity Reports (SARs) to the Estonian FIU.

The Chief Compliance Officer maintains sufficient staffing to implement the AML Policy effectively. The CEO and Board remain responsible for ensuring adequate resources and program effectiveness. The Chief Compliance Officer operates independently with authority to conduct cross-departmental compliance reviews and implement corrective actions.

Internal Control Monitoring

The Chief Compliance Officer develops monitoring processes to identify systematic errors and control deficiencies, including:

• KYC program
• Transaction monitoring
• SAR decisioning and filing
• Sanctions and PEP screening

Reporting

The Chief Compliance Officer reports no less than annually to the Board and quarterly to the CEO and senior management, providing annual reports on AML compliance status and significant emerging issues.

Customer Acceptance (Know Your Customer "KYC" Program)

This policy covers all new Daxchain customers, including corporations and legal entities. Customer acceptance requires compliance with articles 19–41 of the Money Laundering and Terrorist Financing Prevention Act.

A Due Diligence process collects documents and information on applicants. Applicant names are screened against lists of persons or entities suspected of criminal connections. Enhanced due diligence may include collecting additional information, obtaining substantiating documentation, and performing additional verifications.

When name screening reveals a politically exposed person, enhanced due diligence is triggered and acceptance requires approval from the Chief Compliance Officer or CEO. If an existing customer becomes a PEP, enhanced due diligence is conducted and formal acceptance of continued relationship is required from the Chief Compliance Officer or CEO.

Denial of Account Opening and Closing of Active Accounts

Daxchain will not open accounts for customers who:

• Live in or are citizens of Iran or North Korea
• Are shell banks under applicable law
• Do not provide required information or adequately cooperate with due diligence
• Are subject to international, EU, Estonian, or US sanctions
• Are known to be closely linked to money laundering or criminal activity
• Present any other unacceptable AML risks

The Chief Compliance Officer closes accounts of existing customers where any identified factors pose AML risks.

Transaction Monitoring and Suspicious Activity Reporting

Ongoing due diligence includes monitoring business relationships and scrutinising transactions to ensure consistency with customer knowledge, business, and risk profile, including source of funds verification and maintenance of current documentation.

Daxchain's transaction monitoring includes:

• Review of transactional activity
• Manual review of incoming and outgoing wire transactions
• Requirement that employees, contractors, and vendors report unusual or suspicious activity to the Chief Compliance Officer

The Chief Compliance Officer oversees timely investigation review and documentation, determining whether Daxchain must seek transaction processing consent, report suspects to the Estonian FIU, close accounts, or file SARs.

Per article 49 of the Money Laundering and Terrorist Financing Prevention Act, the Chief Compliance Officer files SARs with the Estonian FIU when identifying activities suggesting criminal proceeds use, terrorist financing, or related offences.

The Chief Compliance Officer ensures Daxchain:

• Documents SAR decisions
• Seeks Estonian FIU consent for unprocessed suspicious transactions
• Files or amends SARs within prescribed timeframes
• Creates and retains appropriate activity records
• Complies with all regulatory SAR filings

Other Aspects

Chief Compliance Officer / Compliance Officer: Responsible for designing, implementing, and monitoring the policy and all AML/CTF aspects, with direct reporting to the Board.

Training and awareness of employees: The Chief Compliance Officer is responsible for training all Daxchain employees on AML/KYC/CTF and PEP policies and procedures including detection, monitoring, and reporting. Training records are maintained.

Retention of records: Daxchain holds all collected elements. Customer-related data and information are kept and stored per articles 46, 47, and 48 of the Money Laundering and Terrorist Financing Prevention Act.

Keeping information up to date: Per articles 19–41 of the Money Laundering and Terrorist Financing Prevention Act, ongoing due diligence includes verifying and updating customer documents, data, and information within appropriate timeframes based on risk assessment.

Control of the AML/CTF Policy: Per article 14 of the Money Laundering and Terrorist Financing Prevention Act, AML/CTF policy control is an integral part of Daxchain's internal audit function.

AML & CTF Policy effective 4th January 2021.