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ANTI-MONEY LAUNDERING
(AML)  POLICY

For Dragonfly Diamond s.r.o

1. Introduction

Dragonfly Diamond s.r.o. is committed to preventing money laundering (ML), terrorist financing (TF), and other financial crimes. As a Virtual Asset Service Provider (VASP) conducting peer-to-peer (P2P) transactions on well-known Crypto platforms, we recognize the unique risks associated with digital assets and have implemented this AML Policy to ensure compliance with all applicable Czech regulations, including the Markets in Crypto-Assets Regulation (MiCA) and the Regulation on information accompanying transfers of funds and certain crypto­ assets (TFR).

2. Regulatory Framework

Dragonfly Diamond s.r.o. operates in compliance with the following regulations:

  • EU Markets in Crypto-Assets Regulation (MiCA): Regulation (EU) 2023/1114, effective from 30 December 2024.
  • EU Regulation on Transfers of Funds and Certain Crypto-Assets (TFR): Regulation (EU) 2023/1113, effective from 30 December 2024
  • Czech AM L Act (Act 253/2008 ): As amended to incorporate VASPs as obliged entities under Section 2(1)(b)(15).
  • Czech National Bank (CNB): Licensing and supervisory requirements under MiCA.
  • Financial Analytical Office (FAU): Authorization requirements for non-MiCA crypto-asset services.

3. Licensing and Authorization Requirements

From 30 December 2024, Dragonfly Diamond s.r.o. will:

  • Apply for a MiCA License: If providing services covered by MiCA (e.g., custody, trading, or exchange of crypto-assets), we will apply for a license from the Czech National Bank (CNB).
  • Obtain FAU Authorization: For services not covered by MiCA (e.g., unique or non-fungible crypto­ assets), we will obtain authorization from the Financial Analytical Office (FAU).
  • Transition Period: Until 31July 2025, we will continue operating under existing national laws while pursuing the necessary licenses and authorizations.

4. Purpose

The purpose of this AML Policy is to establish clear guidelines and procedures for preventing, detecting, and reporting activities that may involve money laundering or terrorist financing. It applies to all employees, directors, contractors, and third-party service providers acting on behalf of Dragonfly Diamond s.r.o., particularly in light of the updated VASP regulations.

5. Risk Assessment

Dragonfly Diamond s.r.o. adopts a risk-based approach (RBA) to identify, assess, and mitigate AML/CFT risks.

The risk assessment covers:

  • Customer Risk: High-risk customers include politically exposed persons (PEPs), non-residents, and customers from high-risk jurisdictions.
  • Geographical Risk: Transactions involving countries with weak AML/CFT regimes or high levels of corruption.
  • Product/Service Risk: P2P transactions, high-value trades, and anonymous transactions.
  • Delivery Channel Risk: Online platforms, third-party intermediaries, and cross-border transactions.

6. Customer Due Diligence (CDD)

Customer Due Diligence ensures that all clients are thoroughly vetted before engaging in transactions.

6.1 Standard CDD Measures:

  • Verification of identity using government-issued documents (e.g., passport, ID card).
  • Collection of additional information, including residential address, date of birth, and nationality.
  • For companies, verification of legal name, registered address, identification data, and ultimate beneficial owner (UBO) details.

6.2 Enhanced Due Diligence (EDD):

For high-risk clients, EDD measures include:

  • Additional documentation requests.
  • Ongoing monitoring of transactions.
  • Approval from senior management prior to onboarding.
6.3    Simplified Due Diligence (SDD)

To apply reduced measures for low-risk customers (e.g., regulated  financial institutions).

  • Verify basic identification information.
  • Conduct periodic reviews to ensure risk level remains low.
6.4    Third-Party KYC Partner:

Dragonfly Diamond s.r.o. partners with SumSub, a leading provider of KYC/AML solutions, to conduct thorough identity verification. SumSub’s advanced technology ensures compliance with global standards and reduces the risk of fraudulent activities.

7. Transaction Monitoring

Continuous monitoring of client transactions is essential to detect suspicious activities.

7.1 Objectives of Transaction Monitoring:

  • Identify transactions inconsistent with client profiles or expected behavior.
  • Detect potential money laundering or terrorist financing activities.
  • Ensure transactions align with the nature of the business relationship. 

7.2 Suspicious Activity Reporting (SAR)

  • Employees must report suspicious activities to the MLRO immediately.
  • The MLRO will investigate and, if necessary, file a Suspicious Activity Report (SAR) with the Financial Analytical Office (FAU).
  • All reports and investigations will be documented and kept confidential.

7.3 Travel Rule Compliance:

  • Under Regulation (EU) 2023/1113, Dragonfly Diamond r.o. will ensure compliance with the Travel Rule, requiring the transmission of originator and beneficiary information for all transfers of funds and certain crypto-assets.

8. Record Keeping

Accurate record keeping is crucial for ensuring transparency and enabling efficient audits.

Dragonfly Diamond s.r.o. maintains records of all client interactions, transactions, and COD processes for at least five years after the termination of the business relationship. Records include:

  • Identification documents
  • Transaction histories
  • Correspondence with clients
  • Reports filed with authorities

These records are securely stored and easily accessible for audit purposes.

9. Employee Training

Regular AML training is mandatory for all employees and contractors. Training sessions cover:

  • The importance of AML/CFT compliance.
  • How to identify red flags and suspicious activities.
  • Procedures for escalating concerns to the Compliance Officer.

Training materials will be updated to include the new regulatory framework for VASPs, including MiCA, Regulation TFR, and the Travel Rule.

 10. Penalties for Non-Compliance

Failure to comply with AML/CFT obligations, including licensing requirements, may result in penalties, including fines, suspension of operations, or revocatior of licenses. All employees and clients are required to adhere strictly to this policy.

11. Roles and Responsibilities

 11.1     Reporting Officer

The certified MLRO, Mehak Tariq, is responsible for overseeing AML/CFT compliance across the organization. Duties include:

  • Ensuring adherence to this AML Policy and new VASP regulations.
  • Reviewing flagged transactions and filing SARs when necessary.
  • Conducting regular audits and updates to the policy.
11.2      Employees

All employees are obligated to report any suspicious activities to the Compliance Officer immediately.

Failure to do so may result in disciplinary action.

12. Internal Controls and Audits

  • Conduct internal audits to assess the effectiveness of the AML program.
  • Address any identified weaknesses or gaps promptly.

13. Policy Review

This AML Policy will be reviewed annually or whenever there are significant changes in regulatory requirements, including updates to the MiCA Regulation, Regulation TFR, and other applicable laws. The policy will also be revised to reflect the outcome of our licensing applications with the CNB or FAU.

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