mlc-aml-policy

Anti-Money Laundering Policy

INTRODUCTION
Morning Line Club Inc., a Delaware corporation (the “Company”, “MLC”, “we,” “us,” or “our”) is aware of the importance of the anti-money laundering (“AML”) and counter terrorism financing (“CTF”). We have prepared this policy (this “Policy”) outlining its maintenance, dissemination, and implementation of MLC’s procedures for the prevention of money laundering and terrorism financing, effective as of August 16, 2024. The Policy describes the scope of our policies, sets forth our principles, and provides an overview of the major functions and responsibilities within MLC’s compliance framework. All amendments, if any, approved by MLC with respect to this Policy, shall be duly recorded and endorsed by the corresponding minutes of MLC, if any.

MLC’s primary activity is to operate an asset-backed trading platform, particularly in the horse racing industry, that provides a robust, long-lasting, and value-adding ecosystem between the community, the horses, and the company. MLC is not a platform for trading bitcoin or any other cryptocurrencies. MLC allows community members to trade their Racing Shares and Breeding Shares, which are fungible tokens, to earn financial rewards and in real life (“IRL”) experiences through the MLC marketplace. MLC endeavors to transform an industry rich in history and tradition using blockchain technology and to create a user experience that has never been seen before in the horse racing community. There is nothing virtual about MLC’s proposition – this is real racing, real money, and real experiences.
SCOPE
All senior executives, employees and representatives rendering services to the Company shall meet the obligations set out in this Policy to prevent and hinder money laundering and the financing of terrorism.
PRINCIPLES
MLC is committed to providing a sound compliance culture and abiding by all applicable laws and regulations. MLC endeavors to promote legal, transparent business activities and to maintain a strong reputation within the horse racing industry and with its community and the broader regulatory community. To promote a robust ecosystem and to reduce reputational risks, we have implemented an AML/CTF program to reasonably prevent money laundering and terrorist financing through a risk based multi-layer control system. Furthermore, we have implemented a trade and economic sanction screening to ensure that MLC does not engage in any activities with persons on the Office of Foreign Asset Control (“OFAC”) Specially Designated National (SDN) lists or other international and national sanction regimes, as well as persons from the OFAC sanctions countries.

STANDARDS
Our standards are focused on reasonably preventing money laundering and terrorist financing through our control systems. Our strong customer due diligence and onboarding of community members happens when Participants wish to purchase Participant Entry Fees. The approach includes stringent identification program, including verifying the identity of the customers via government-issued identification documents to further know our customers. We also identify and verify the natural persons consistent to international standards from Financial Action Task Force (“FATF”) and the United States’ Bank Secrecy Act and the European Union’s AML Directive. See below for further details of our program:

Ensure Sound Onboarding (Customer Due Diligence (“CDD”), Know Your Customer (“KYC”), and Customer Identification Programs (“CIP”)‍

The first layer requires more of a traditional CIP process. MLC’s standard is to reasonably obtain the identity of our customer/member by requesting certain information or data points of the customer as well as requiring certain documentation to verify the data points provided. As a result, MLC has outlined the data points required as well as verification documents required in the table below:
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Data/Information Requested	Verification Requested
First Name	Passport, driver’s license, or national ID.
Last Name
Phone Number (including country code)
Address
Date of Birth
Tax Information - SSN / Government Identification
Net worth

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The second layer requires risk grading of our customers based on a risk-based approach to assess which Participants are of higher risks consistent to customer due diligence principles.
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1. Elevated-Risk Customers exhibit any of the following:
  1. Located in geographies that are in the top ten (10) percentile based on the Basel AML Index ranking. The Basel AML Index overall scores reflect a country’s risk level in money laundering and terrorist financing based on its adherence to AML/CTF standards and other risk categories such as financial regulations, public transparency, corruption and rule of law. As of August 16, 2024, the top ten (10) percentile consists, in highest risk order: Haiti, The Democratic Republic of the Congo, Myanmar, Mozambique, Cayman Islands, Madagascar, Mali, Mauritania, Senegal, Uganda, and Cambodia (11 out of 110).
    Located in the FATF under increased monitoring, also known as the “grey list”. As of August 16, 2023, the jurisdictions with strategic deficiencies are: Albania, Barbados, Burkina Faso, Cambodia, Cayman Islands, Gibraltar, Haiti, Jamaica, Jordan, Mali, Morocco, Myanmar, Nicaragua, Pakistan, Panama, the Philippines, Senegal, South Sudan, Syria, Türkiye, Uganda, United Arab Emirates, and Yemen.
  2. Average-Risk Customers are located in geographies that are in the bottom 90th percentile based on the Basel AML Index.

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Preservation of Documents, Recordkeeping, and Retention
MLC maintains all documentation regarding our Participants as well as their activities for five (5) years as a matter of sound practice and our own discretion. MLC recognizes that, while five (5) years also reflects the FinCEN’s guidelines, MLC will preserve records for a longer timeframe (but never for shorter than five (5) years) based on applicable jurisdictions mandates and jurisdictions.

In any case, the record keeping system of the Company shall ensure the proper management and availability of the documentation, both for internal control purposes and for responding to the requests of authorities in a timely manner.
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Conduct Ongoing Monitoring
MLC conducts ongoing monitoring to manage customers/members on the platform on a risk-based system. While the general purpose of monitoring is to ensure that controls are properly working, monitoring is also to assist in identifying suspicious activity as discussed in the next section. The table below highlights the monitoring framework criteria with factors and frequency. Period reviews shall also be carried out on sample basis to ensure the accuracy of the collected information.

Item Reviewed	Sorted By	Frequency
1. Transactions from customers from OFAC sanctioned countries: Cuba, Iran, North Korea, Venezuela, Russia (to ensure that it remains zero)	Total US dollar-equivalent transaction volume and count, and with Participant name/account number/country	Weekly
2. Elevated-risk grade customers	Total US dollar-equivalent transaction volume and count, and with Participant name/account number/country	Monthly
3. Top 5 customers (by volume)	Total US dollar-equivalent transaction volume and count, and with Participant name/account number/country	Monthly
4. Top 5 customers (by count)	Total count number and with Participant name/account number/country	Monthly
5. Top 5 customers (by volume increase compared to prior month)	Percentage increase and this month’s US dollar-equivalent	Monthly
6. Top 5 customers (by count percentage increase compared to prior month).	Total US dollar-equivalent transaction volume and count (and listed by Participant name)	Monthly
7. Top 5 countries (by volume)	Total US-dollar equivalent transaction volume and country (and listed by Country)	Monthly
8. Top 20 transactions by size (dollar volume) for the 2-week period	For each of the 20 transactions, the US dollar-equivalent (amount), Participant name, and date	Every two weeks
9. Elevated-risk grade customers	Sanction screening	Once a year
10. Average-risk grade customers	Sanction screening	Every three (3) years or more

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Special Examination of Suspicious Transactions
MLC shall examine, as part of its respective scopes of action, any transaction that, by its nature, may appear to be linked to money laundering or the financing of terrorism, including any complex or unusual transaction which (i) does not have an apparent economic or lawful purpose or (ii) which shows signs of simulation or fraud. MLC will keep record of the minutes and documentation supporting its decisions.
Abstention Duties
MLC shall abstain from executing any transaction on behalf of any Participant that, pursuant to this Policy, is considered to be susceptible to having a particular tie to money laundering and the financing of terrorism.
External Reporting & Information Sharing (SAR/STR, CTR, Law Enforcement Subpoena/Requests)
Although MLC services are not regulated, MLC plans to discretionarily file Suspicious Activity Reports (“SARs”, also known as “Suspicious Transaction Reports”) with the local centralized authority for SARs, called the Financial Crimes Enforcement Network (FinCEN). MLC shall cooperate with any competent authority request/subpoena or in accordance with any applicable law or regulation.
Training and Internal Reporting
MLC will ensure that appropriate staff is trained or work with a third-party company that is properly trained and certified to handle the necessary internal reporting.

Responsibilities and Designation
All employees shall cooperate, work and provide MLC with unrestricted access to any business records, systems, or locations to which access is requested for purposes of executing their duties. Key personnel responsibilities are also outlined below:

Role	Responsibilities
Board of Directors	Promoting and implementing a strong culture of compliance; Approving this Policy; Reviewing compliance reports at least annually; including the state of compliance and testing and monitoring reports; Reviewing escalated issues; Identifying and assessing emerging compliance issues; and
Chief Executive Officer	Promoting and implementing a strong culture of compliance; Reviewing and, where necessary, acting on reports from Compliance team; Reviewing, approving and overseeing company-wide compliance initiatives; Ensuring MLC has sufficient compliance resources, including personnel and systems; Reviewing the scope and results of regulatory examinations or correspondence relating to the Company’s compliance program, participating in examinations and regulatory meetings as needed and addressing any key issues resulting from such examinations or letters; Holding business lines accountable for resolution of corrective actions; and Resolving escalated compliance issues and policy exceptions, referring to the Board as necessary.
All Employees	Having knowledge of their responsibilities under, and remaining in compliance with this Policy; Identifying compliance weaknesses within their areas of responsibility, and promptly alerting senior staff and MLC