Internal Control and Financial Monitoring

In accordance with the requirements of the Law of Ukraine “On Capital Markets and Organized Commodity Markets,” Ukrainian Resource Exchange LLC has integrated key control functions into its processes: risk management, compliance, and internal audit.

Compliance management is the foundation of the Company’s legal and ethical security. This function ensures ongoing monitoring and analysis of legislative changes, as well as full compliance of every aspect of the Company’s operations with Ukrainian laws and standards of business ethics.

The main objectives of this program are:

• Legal Compliance: Regular monitoring of laws and adjustments to internal procedures, which helps minimize any legal risks in the operations of URB LLC.
• Promotion of Corporate Ethics: Development and implementation of internal policies and codes that foster a culture of high accountability, integrity, and transparency among all Company employees.
• Prevention of conflicts of interest: the operation of effective tools for the timely identification, avoidance, and resolution of conflicts of interest, which promotes adherence to the principles of transparent and fair competition.

Risk management is an integral part of the Company’s corporate governance and is based on the principle of minimizing critical risks.

Risk management involves developing a risk management strategy, which includes:

• Comprehensive control: systematic identification, assessment, and mitigation of risks to safeguard the Company’s financial stability, business reputation, and compliance.
• Preventive response: implementation of early warning tools to ensure timely protection of the Company’s operations.
• Adherence to risk appetite: making informed decisions to avoid risks that exceed established limits.

Internal audit provides an independent and objective assessment of the Company’s operations. Its primary objective is to evaluate the effectiveness of risk management and compliance, as well as to ensure that operational processes comply with legal requirements and the Company’s internal policies.

Key areas of internal audit activity:

• Risk Management and Compliance: Regular monitoring and testing of safeguards to promptly identify and mitigate potential risks.
• Transparency of Financial Reporting: Verifying the accuracy and reliability of financial metrics to build trust among investors, partners, and regulators.
• Operational Process Efficiency: Assessing the compliance of operational processes with internal control standards, as well as verifying that Company employees adhere to established procedures and legal requirements.
• Incident Response: Conducting investigations in the event of risky situations and developing recommendations to prevent them in the future.
• Development of corporate culture: assessing employee engagement in risk management, and monitoring compliance with ethical standards and compliance principles.

Pursuant to the Law of Ukraine “On Preventing and Combating the Legalization (Laundering) of Proceeds from Crime, the Financing of Terrorism, and the Financing of the Proliferation of Weapons of Mass Destruction,” and taking into account the requirements of the Regulations on the Conduct of Financial Monitoring by Primary Financial Monitoring Entities, whose activities are subject to state regulation and supervision by the National Securities and Stock Market Commission, approved by NSSMC Decision No. 176 dated March 11, 2021, Ukrainian Resource Exchange LLC, as a primary financial monitoring entity (hereinafter—PFME), implements a set of measures for customer due diligence (CDD) based on the “Know Your Customer” (KYC) principle.

CDD due diligence measures include:

• identification and verification of the customer (or their authorized representative);
• identification of the ultimate beneficial owner (UBO), determination of the counterparty’s ownership structure, and verification of the UBO’s identity;
• ascertaining the purpose and nature of future business relationships or financial transactions;
• ongoing monitoring of the consistency of the client’s financial transactions with their actual financial condition, the nature of their activities, and the sources of funds;
• regular updating (refreshing) of the data, information, and documents received about the client.

The purpose of the verification is to verify the customer (or their representative) and assess associated risks prior to providing services, thereby ensuring the security and transparency of the transaction and preventing illegal activities related to:

• money laundering,
• terrorist financing,
• fraud and market manipulation,
• insider trading;
• transactions involving sanctioned individuals or unauthorized transactions with PEPs.

If a client fails to provide the documents or information required to comply with legal requirements, the Exchange is obligated to refuse to establish a business relationship or conduct transactions.