🔐 KYC, AML, KYB, & ACCREDITED INVESTOR VERIFICATION PROCEDURES

OTCM Protocol Compliance Operations Manual

✅ SEC CATEGORY 1 COMPLIANT | Issuer-Sponsored Tokenized Securities pursuant to SEC Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Joint Statement dated January 28, 2026

I. EXECUTIVE SUMMARY

📋 Document Purpose

This document establishes the comprehensive compliance procedures for OTCM Protocol's verification and screening requirements under SEC Category 1 framework, federal securities laws, and anti-money laundering regulations.

🔐 Verification Framework Overview

Verification Type	Applicability	Regulatory Basis
🪪 KYC (Know Your Customer)	All platform users	Bank Secrecy Act, FinCEN
🏢 KYB (Know Your Business)	Entity investors & issuers	BSA, SEC regulations
💵 AML (Anti-Money Laundering)	All transactions	Bank Secrecy Act, USA PATRIOT Act
🎖️ Accredited Investor	ST22 purchasers only	SEC Rule 501, Regulation D 506(c)
🚫 OFAC Screening	All users & transactions	U.S. Treasury OFAC regulations

🎯 Compliance Objectives

Objective	Description
⚖️ Regulatory Compliance	Meet all federal and state compliance requirements
🛡️ Investor Protection	Ensure only qualified investors access ST22 securities
🚫 Crime Prevention	Prevent money laundering, terrorist financing, sanctions evasion
📋 Record Keeping	Maintain complete audit trail for regulatory review
🔗 Transfer Hook Integration	Enable real-time compliance verification on every transaction

II. KNOW YOUR CUSTOMER (KYC) PROCEDURES

A. 🪪 Individual Customer Identification Program (CIP)

Required Information Collection

All individual users must provide the following information before accessing platform services:

Data Element	Requirement	Verification Method
📝 Full Legal Name	Required	Government ID match
📅 Date of Birth	Required	Government ID match
🏠 Residential Address	Required	Document verification
🔢 SSN/TIN	Required (US) / Passport (Non-US)	Database verification
📧 Email Address	Required	Email confirmation
📱 Phone Number	Required	SMS verification
🌍 Country of Citizenship	Required	Government ID
🏳️ Country of Residence	Required	Address verification

Identity Verification Tiers

Tier	Access Level	Requirements	Verification
Tier 1: Basic	Platform browsing only	Email, phone	Automated
Tier 2: Standard	OTCM Utility Token only	Tier 1 + ID document	Automated + manual review
Tier 3: Enhanced	ST22 Securities access	Tier 2 + accreditation	Manual verification required

Acceptable Identity Documents

Primary Documents (One Required)

Document Type	Requirements	Validity
🪪 Government-Issued Photo ID	Current, unexpired	Must be valid
🛂 Passport	Machine-readable zone	Must be valid
🚗 Driver's License	State/government issued	Must be valid
🪪 National ID Card	Government issued with photo	Must be valid

Secondary Documents (One Required for Enhanced)

Document Type	Requirements	Age Limit
📄 Utility Bill	Shows name and address	< 90 days
🏦 Bank Statement	Shows name and address	< 90 days
📋 Government Correspondence	Tax document, official letter	< 12 months
🏠 Mortgage Statement	Shows name and property address	< 90 days

Verification Process Flow

┌─────────────────┐
│  User Registration  │
└────────┬────────┘
         │
         ▼
┌─────────────────┐
│  Collect Basic Info  │
│  (Name, DOB, Email)  │
└────────┬────────┘
         │
         ▼
┌─────────────────┐
│  Document Upload    │
│  (ID + Selfie)      │
└────────┬────────┘
         │
         ▼
┌─────────────────┐
│  Automated Check    │
│  • Document validity│
│  • Face match       │
│  • Liveness check   │
└────────┬────────┘
         │
    ┌────┴────┐
    │         │
   Pass      Fail
    │         │
    ▼         ▼
┌───────┐  ┌───────┐
│ OFAC  │  │Manual │
│Screen │  │Review │
└───┬───┘  └───┬───┘
    │          │
    ▼          ▼
┌─────────────────┐
│  Final Decision    │
│  Approve/Reject    │
└─────────────────┘

Document Verification Standards

Check	Standard	Action on Failure
📷 Image Quality	Minimum 300 DPI, all text readable	Request re-upload
✅ Document Authenticity	Security features verified	Manual review
👤 Face Match	>95% confidence score	Manual review
🎭 Liveness Detection	Anti-spoofing verification	Reject or video verification
📅 Expiration Check	Document must be current	Reject, request valid document
🔍 Tampering Detection	No signs of alteration	Reject, flag for review

B. 🔄 Ongoing KYC Monitoring

Periodic Review Schedule

Risk Level	Review Frequency	Trigger Events
🟢 Low Risk	Every 24 months	Address change, large transaction
🟡 Medium Risk	Every 12 months	Unusual activity, country change
🔴 High Risk	Every 6 months	Watchlist proximity, PEP status

Risk Level

Review Frequency

Trigger Events

🟢

Low Risk

Every 24 months

Address change, large transaction

🟡

Medium Risk

Every 12 months

Unusual activity, country change

🔴

High Risk

Every 6 months

Watchlist proximity, PEP status

Continuous Monitoring Triggers

Trigger	Action Required
📍 Address Change	Re-verify with new proof of address
🌍 Country Change	Full re-verification + jurisdiction check
📊 Unusual Transaction Pattern	Enhanced due diligence review
🚨 Watchlist Match	Immediate account freeze + investigation
📅 Document Expiration	Request updated documentation
💰 Large Transaction	Enhanced verification for transactions >$10,000

III. KNOW YOUR BUSINESS (KYB) PROCEDURES

A. 🏢 Entity Verification Requirements

Entity Types and Requirements

Entity Type	Required Documents	Beneficial Owner Threshold
🏢 Corporation	Articles of Incorporation, Certificate of Good Standing	25%+ ownership
🤝 LLC	Operating Agreement, Articles of Organization	25%+ ownership
🏦 Trust	Trust Agreement, Trustee identification	All trustees
💼 Partnership	Partnership Agreement, GP identification	25%+ ownership
🏛️ Fund/Investment Vehicle	Formation documents, Manager identification	25%+ ownership or control

Required Entity Documentation

Formation Documents

Document	Purpose	Verification
📜 Articles of Incorporation/Organization	Verify legal formation	Secretary of State records
✅ Certificate of Good Standing	Verify current status	< 90 days old
📋 Operating Agreement/Bylaws	Verify governance structure	Manual review
🔢 EIN/Tax ID Documentation	Verify tax status	IRS verification

Ownership Documents

Document	Purpose	Requirement
📊 Ownership Chart	Identify beneficial owners	All levels until individuals identified
📋 Shareholder Registry	Verify ownership percentages	Current as of verification date
🏛️ Board Resolution	Authorize account opening	Signed by authorized officers
✍️ Authorized Signers List	Identify who can transact	With specimen signatures

Beneficial Owner Identification

Definition (FinCEN CDD Rule)

Category	Definition
👤 Ownership Prong	Each individual who owns 25% or more of the entity
🎛️ Control Prong	One individual with significant responsibility to control the entity

Required Information for Each Beneficial Owner

Data Element	Requirement
📝 Full Legal Name	Required
📅 Date of Birth	Required
🏠 Residential Address	Required
🔢 SSN/TIN or Passport	Required
📊 Ownership Percentage	Required
🎛️ Control Role	If applicable

Entity Verification Process

┌─────────────────────┐
│  Entity Application    │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Document Collection   │
│  • Formation docs      │
│  • Ownership docs      │
│  • Authorization       │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Entity Verification   │
│  • State records check │
│  • EIN verification    │
│  • Good standing       │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Beneficial Owner ID   │
│  • Identify all 25%+   │
│  • Identify controller │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Individual KYC        │
│  (Each beneficial owner)│
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  OFAC Screening        │
│  • Entity name         │
│  • All beneficial owners│
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Final Approval        │
└─────────────────────┘

B. 🏭 Issuer KYB Requirements (Enhanced)

Issuers seeking to tokenize securities on OTCM Protocol must complete enhanced KYB verification:

Issuer-Specific Requirements

Requirement	Description	Verification
📜 Corporate Formation	Full formation documents	Secretary of State
📊 Cap Table	Complete ownership structure	Manual review
👥 Officer/Director List	All C-suite and board members	Individual KYC each
💼 Business Description	Nature of business operations	Due diligence review
📋 Financial Statements	Recent financial information	CPA review if available
⚖️ Litigation History	Pending or recent litigation	Legal database search
🏛️ Regulatory Status	Any regulatory actions	FINRA/SEC/State check
📈 15c2-11 Status	OTC Markets status	OTC Markets verification

Issuer Due Diligence Checklist

Category	Items	Status
Corporate	Articles, Bylaws, Good Standing, EIN	☐
Ownership	Cap table, Beneficial owners (all levels), Control persons	☐
Management	Officer bios, Director bios, KYC on each	☐
Financial	Recent financials, Material liabilities, Pending litigation	☐
Regulatory	SEC filings history, State registrations, FINRA/regulatory actions	☐
Operational	Business description, Material contracts, Key customers	☐
Series M Specific	Board resolution, Certificate of Designation draft	☐

IV. ANTI-MONEY LAUNDERING (AML) PROCEDURES

A. 💵 AML Program Overview

Program Components (BSA Requirements)

Component	Description	Responsible Party
📋 Written Policies	Documented AML procedures	Compliance Officer
👤 Compliance Officer	Designated BSA/AML officer	Named individual
🎓 Training Program	Staff training on AML	Compliance Department
🔍 Independent Testing	Annual independent audit	External auditor
📊 Monitoring System	Transaction monitoring	Automated + manual

BSA/AML Compliance Officer

Responsibility	Description
📋 Program Oversight	Overall AML program management
📊 SAR Filing	Suspicious Activity Report decisions
🎓 Training	Ensure staff training completion
🔍 Testing Oversight	Coordinate independent testing
📞 Regulatory Liaison	Point of contact for FinCEN, examiners
📝 Policy Updates	Keep policies current with regulations

Designated Compliance Officer: [Name]
Contact: compliance@otcm.io

B. 📊 Transaction Monitoring

Monitoring Parameters

Parameter	Threshold	Action
💰 Large Transaction	>$10,000	Enhanced review
🔄 Structuring Pattern	Multiple transactions near $10,000	SAR consideration
📈 Unusual Volume	>300% of normal activity	Enhanced review
🌍 High-Risk Jurisdiction	FATF grey/blacklist countries	Enhanced due diligence
⚡ Rapid Movement	In-out within 24 hours	Enhanced review
🔗 Chain Transactions	Multiple rapid transfers	Pattern analysis

Red Flag Indicators

Identity Red Flags

Red Flag	Risk Level	Action
🎭 Inconsistent Information	High	Verification hold
📋 Reluctance to Provide Info	High	Account suspension
🔄 Frequent Info Changes	Medium	Enhanced monitoring
📍 High-Risk Country Connection	High	Enhanced due diligence
👥 Multiple Accounts	Medium	Investigation

Transaction Red Flags

Red Flag	Risk Level	Action
💰 Structuring	High	SAR filing
🔄 Layering	High	SAR filing
⚡ Rapid In-Out	High	Enhanced review
📊 No Economic Purpose	High	Investigation
🌍 High-Risk Jurisdiction	High	Enhanced due diligence
💱 Currency Conversion Patterns	Medium	Enhanced monitoring

Behavioral Red Flags

Red Flag	Risk Level	Action
🤐 Unusually Secretive	Medium	Enhanced monitoring
📞 Third-Party Instructions	High	Verification required
💼 Inconsistent with Profile	High	Investigation
🚨 Urgency Without Explanation	Medium	Enhanced review

C. 📝 Suspicious Activity Reporting (SAR)

SAR Filing Requirements

Requirement	Standard
💰 Dollar Threshold	$5,000+ involving suspicious activity
⏰ Filing Deadline	30 days from detection (60 days if no suspect identified)
📋 Form	FinCEN Form 111 (BSA E-Filing)
🔒 Confidentiality	SAR existence cannot be disclosed to subject

SAR Decision Matrix

Suspicious Activity Type	Amount	Filing Required
🎭 Identity Fraud	Any	Yes
💰 Structuring	Any pattern	Yes
🧹 Money Laundering	$5,000+	Yes
🏴 Terrorist Financing	Any	Yes, expedited
📊 Market Manipulation	$5,000+	Yes
🤥 Misrepresentation	$5,000+	Yes

SAR Filing Process

┌─────────────────────┐
│  Suspicious Activity   │
│  Detected              │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Initial Assessment    │
│  (Within 24 hours)     │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Investigation         │
│  • Transaction review  │
│  • Customer history    │
│  • Pattern analysis    │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Compliance Review     │
│  (SAR decision)        │
└──────────┬──────────┘
           │
      ┌────┴────┐
      │         │
    File      No File
      │         │
      ▼         ▼
┌─────────┐  ┌─────────┐
│FinCEN  │  │Document │
│Filing  │  │Decision │
└────┬────┘  └─────────┘
     │
     ▼
┌─────────────────────┐
│  Ongoing Monitoring    │
│  (90 days minimum)     │
└─────────────────────┘

D. 💵 Currency Transaction Reporting (CTR)

CTR Requirements

Requirement	Standard
💰 Threshold	Cash transactions >$10,000
⏰ Filing Deadline	15 days from transaction
📋 Form	FinCEN Form 112
🔗 Aggregation	Multiple transactions same day same person

Note: Most OTCM Protocol transactions are crypto-based, not cash. CTR requirements apply when fiat currency is involved in onboarding/offboarding.

E. 📋 Record Retention Requirements

AML Records Retention

Record Type	Retention Period	Format
🪪 Customer Identification	5 years after account closure	Electronic
💰 Transaction Records	5 years	Electronic
📝 SAR Filings	5 years	Electronic
💵 CTR Filings	5 years	Electronic
📧 Correspondence	5 years	Electronic
🎓 Training Records	5 years	Electronic
🔍 Audit Reports	5 years	Electronic

V. ACCREDITED INVESTOR VERIFICATION

A. 🎖️ Regulatory Framework

Applicable Regulations

Regulation	Requirement
📜 SEC Rule 501	Defines accredited investor categories
📋 Regulation D 506(c)	Requires verification for general solicitation offerings
⚖️ JOBS Act	Expanded accredited investor definition
🏛️ SEC 2020 Amendments	Added professional certifications

Why Verification Is Required

Factor	Explanation
📜 Regulation D 506(c)	ST22 offerings use general solicitation (public marketing)
⚖️ Issuer Liability	Issuers must take "reasonable steps" to verify
🛡️ Investor Protection	Ensures investors can bear investment risk
🏛️ SEC Enforcement	Non-compliance risks securities violations

⚠️ Critical: ST22 Tokenized Securities are offered under Regulation D Rule 506(c), which requires verification of accredited investor status—self-certification alone is NOT sufficient.

B. 📋 Accredited Investor Categories

Individual Investors (Natural Persons)

Category	Qualification Criteria	Verification Method
💰 Income Test	$200,000+ individual income in each of past 2 years, with reasonable expectation of same in current year	Tax returns, W-2s, pay stubs
👫 Joint Income Test	$300,000+ joint income with spouse in each of past 2 years	Joint tax returns
🏦 Net Worth Test	$1,000,000+ net worth (excluding primary residence)	Asset statements, liability disclosure
📜 Professional Certification	Series 7, 65, or 82 license in good standing	FINRA BrokerCheck
🏢 Knowledgeable Employee	Executive officer, director, GP, or knowledgeable employee of fund issuer	Employment verification

Entity Investors

Category	Qualification Criteria	Verification Method
🏦 Institutional Investors	Banks, insurance companies, registered investment companies, BDCs, SBICs	Registration verification
💼 Broker-Dealers	SEC-registered broker-dealers	FINRA registration
📊 Investment Advisers	SEC or state-registered RIAs	SEC/State registration
🏛️ Entity Assets	Entity with $5,000,000+ in assets not formed to acquire securities	Financial statements
👥 All Accredited Owners	Entity where all equity owners are accredited investors	Verify each owner
💰 Family Office	Family office with $5,000,000+ AUM and sophisticated investor	Documentation + assessment
🏢 Family Client	Family client of qualifying family office	Family office verification

C. ✅ Verification Methods

Income Verification

Method	Documents Required	Verification Steps
📄 Tax Returns	IRS Form 1040 (2 years)	Review AGI or taxable income lines
📋 W-2 Forms	W-2s from past 2 years	Verify employer, income amounts
💵 Pay Stubs	Recent pay stubs + written confirmation	Calculate annualized income
📝 CPA Letter	Written verification from licensed CPA	Verify CPA credentials
💼 Attorney Letter	Written verification from licensed attorney	Verify bar membership
🏦 Broker Letter	Written verification from broker-dealer, RIA, or bank	Verify firm registration

Income Verification Process

┌─────────────────────┐
│  Income Verification   │
│  Selected              │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Document Upload       │
│  • Tax returns OR      │
│  • W-2s + pay stubs OR │
│  • Third-party letter  │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Verification Review   │
│  • Calculate income    │
│  • Verify authenticity │
│  • Check 2-year history│
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Reasonable Expectation│
│  Assessment            │
│  (Current year income) │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Approval/Rejection    │
└─────────────────────┘

Net Worth Verification

Method	Documents Required	Verification Steps
🏦 Bank Statements	Recent statements (< 90 days)	Sum liquid assets
📈 Brokerage Statements	Recent statements (< 90 days)	Sum investment assets
🏠 Real Estate Appraisals	Licensed appraisal (< 12 months)	Exclude primary residence value
💰 Retirement Accounts	401(k), IRA statements	Include in asset total
📋 Liability Disclosure	Written disclosure of liabilities	Subtract from assets
📝 Third-Party Letter	CPA, attorney, broker letter	Verify credentials

Net Worth Calculation

Assets (Include)	Liabilities (Subtract)
✅ Cash and bank accounts	➖ Mortgages (except primary residence)
✅ Brokerage accounts	➖ Auto loans
✅ Retirement accounts	➖ Student loans
✅ Real estate (except primary residence)	➖ Credit card debt
✅ Business interests	➖ Personal loans
✅ Other investments	➖ Other liabilities
❌ Primary residence (EXCLUDE)	❌ Primary residence mortgage (EXCLUDE)*

*Primary residence mortgage is excluded UNLESS it exceeds home value or was increased in past 60 days.

Professional Certification Verification

Certification	Verification Source	Process
📜 Series 7	FINRA BrokerCheck	Automated lookup
📜 Series 65	FINRA BrokerCheck	Automated lookup
📜 Series 82	FINRA BrokerCheck	Automated lookup

Certification

Verification Source

Process

📜

Series 7

FINRA BrokerCheck

Automated lookup

📜

Series 65

FINRA BrokerCheck

Automated lookup

📜

Series 82

FINRA BrokerCheck

Automated lookup

Verification Process

Investor provides name and CRD number
System queries FINRA BrokerCheck API
Verify license is current and in good standing
Confirm no disciplinary actions affecting status
Approve if license verified

Entity Verification

Entity Type	Verification Method
🏦 Bank	Federal/State charter verification
📊 RIA	SEC IARD or state registration
💼 Broker-Dealer	FINRA BrokerCheck
🏢 $5M+ Entity	Audited financial statements or third-party verification
👥 All Accredited Owners	Individual verification of each equity owner

D. 📋 Verification Documentation Requirements

Document Retention

Document Type	Retention Period	Format
🪪 Identity Documents	5 years after account closure	Secure electronic
💰 Income Documentation	5 years	Secure electronic
🏦 Net Worth Documentation	5 years	Secure electronic
📜 Third-Party Letters	5 years	Secure electronic
✅ Verification Decision	5 years	Secure electronic
📧 Correspondence	5 years	Secure electronic

Verification Record Contents

Each accredited investor file must contain:

Element	Requirement
✅ Verification Method Used	Document which category and method
📋 Documents Reviewed	List all documents reviewed
📅 Verification Date	Date verification completed
👤 Reviewer Identity	Who performed verification
📝 Decision Rationale	Basis for approval/rejection
🔄 Re-verification Date	When next verification due

E. 🔄 Re-verification Requirements

Re-verification Schedule

Transaction Type	Re-verification Requirement
🆕 New Purchase	Verify if >90 days since last verification
💰 Large Purchase	>$250,000 in single transaction requires current verification
📅 Annual	Annual re-verification for active investors
🔄 Material Change	Re-verify if investor reports material change

Material Changes Requiring Re-verification

Change Type	Action
💼 Employment Change	Re-verify if income-based qualification
🏠 Address Change	Update records, no re-verification unless jurisdiction change
💰 Financial Change	Re-verify if investor reports significant financial change
📜 License Expiration	Re-verify if certification-based qualification

VI. OFAC SANCTIONS SCREENING

A. 🚫 Screening Requirements

Screening Obligations

Requirement	Implementation
🆕 Onboarding	Screen all new users against OFAC lists
🔄 Ongoing	Screen against updated lists (daily updates)
💰 Transactional	Screen counterparties on every transaction
🔗 Transfer Hook Integration	Real-time OFAC check on every ST22 transfer

OFAC Lists Screened

List	Abbreviation	Update Frequency
🚫 Specially Designated Nationals	SDN	Daily
📋 Consolidated Sanctions List	Non-SDN	Daily
🌍 Sectoral Sanctions	SSI	As updated
🏛️ Foreign Sanctions Evaders	FSE	As updated
🎭 Palestinian Legislative Council	NS-PLC	As updated

Screening Data Points

Data Point	Screening Method
📝 Full Name	Exact and fuzzy matching
📅 Date of Birth	Exact matching
🌍 Country	Country-based sanctions
🏠 Address	Address matching
🔢 ID Numbers	Passport, national ID matching
🏢 Entity Name	Entity and alias matching
👛 Wallet Address	Blockchain address screening

B. ⚠️ Hit Handling Procedures

Match Classification

Match Type	Confidence	Action
🔴 Exact Match	>95%	Immediate block, compliance review
🟡 Potential Match	75-95%	Hold, manual review required
🟢 False Positive	<75%	Document and clear

Match Type

Confidence

Action

🔴

Exact Match

>95%

Immediate block, compliance review

🟡

Potential Match

75-95%

Hold, manual review required

🟢

False Positive

<75%

Document and clear

Hit Resolution Process

┌─────────────────────┐
│  OFAC Screening        │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Match Detected        │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Automatic Block       │
│  (Transaction/Account) │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  Compliance Review     │
│  • Verify match data   │
│  • Additional docs     │
│  • OFAC SDN details    │
└──────────┬──────────┘
           │
      ┌────┴────┐
      │         │
   True      False
   Match     Positive
      │         │
      ▼         ▼
┌─────────┐  ┌─────────┐
│Permanent│  │Clear &  │
│Block +  │  │Document │
│Report   │  │         │
└─────────┘  └─────────┘

True Match Procedures

Step	Action	Timeline
1	Immediate Block	Automatic
2	Freeze Assets	Within 1 hour
3	Notify Compliance Officer	Within 1 hour
4	OFAC Report	Within 10 business days
5	Maintain Block	Until OFAC guidance

C. 🌍 Prohibited Jurisdictions

Comprehensively Sanctioned Countries

Country	Program	Restriction Level
🇰🇵 North Korea	North Korea Sanctions	Complete prohibition
🇮🇷 Iran	Iran Sanctions	Complete prohibition
🇸🇾 Syria	Syria Sanctions	Complete prohibition
🇨🇺 Cuba	Cuba Sanctions	Complete prohibition
🇷🇺 Crimea Region	Ukraine Sanctions	Complete prohibition

Restricted Jurisdictions (Enhanced Due Diligence)

Region	Restriction	Action
🇷🇺 Russia	Sectoral sanctions	Case-by-case review
🇧🇾 Belarus	Targeted sanctions	Enhanced screening
🇻🇪 Venezuela	Sectoral sanctions	Enhanced screening
🇲🇲 Myanmar	Targeted sanctions	Enhanced screening

VII. TRANSFER HOOK INTEGRATION

A. 🔗 Real-Time Compliance Verification

Compliance Checks on Every Transaction

Check	Verification	Action on Failure
🪪 KYC Status	Verify sender/receiver KYC complete	Block transaction
🎖️ Accreditation	Verify ST22 buyer is accredited	Block transaction
🚫 OFAC	Screen both parties against sanctions	Block transaction
📊 Wallet Limits	Verify receiver won't exceed 4.99%	Block transaction
🏦 Custody	Verify 1:1 backing exists	Block transaction
⏰ Vesting	Verify sender's tokens are vested	Block transaction

Transfer Hook Compliance Flow

┌─────────────────────┐
│  Transfer Initiated    │
└──────────┬──────────┘
           │
           ▼
┌─────────────────────┐
│  KYC Verification      │
│  • Sender verified?    │
│  • Receiver verified?  │
└──────────┬──────────┘
           │
     Pass? ├─── No ──→ BLOCK
           │
           ▼
┌─────────────────────┐
│  Accreditation Check   │
│  (ST22 only)           │
│  • Buyer accredited?   │
└──────────┬──────────┘
           │
     Pass? ├─── No ──→ BLOCK
           │
           ▼
┌─────────────────────┐
│  OFAC Screening        │
│  • Sender screened     │
│  • Receiver screened   │
└──────────┬──────────┘
           │
     Pass? ├─── No ──→ BLOCK
           │
           ▼
┌─────────────────────┐
│  Wallet Limit Check    │
│  • Will receiver       │
│    exceed 4.99%?       │
└──────────┬──────────┘
           │
     Pass? ├─── No ──→ BLOCK
           │
           ▼
┌─────────────────────┐
│  Custody Verification  │
│  • 1:1 backing exists? │
└──────────┬──────────┘
           │
     Pass? ├─── No ──→ BLOCK
           │
           ▼
┌─────────────────────┐
│  TRANSACTION           │
│  APPROVED              │
└─────────────────────┘

B. 📊 Compliance Status Codes

Status Codes Stored On-Chain

Code	Status	Trading Allowed
`0x00`	Not verified	❌ No
`0x01`	KYC pending	❌ No
`0x02`	KYC complete, not accredited	OTCM only
`0x03`	KYC complete, accredited	✅ ST22 + OTCM
`0x04`	KYC expired	❌ No
`0x05`	OFAC blocked	❌ No
`0x06`	Account suspended	❌ No
`0x07`	Account closed	❌ No

VIII. TRAINING REQUIREMENTS

A. 🎓 Staff Training Program

Required Training by Role

Role	Training Modules	Frequency
👤 All Staff	AML Awareness, OFAC Basics	Annual
🔍 KYC Analysts	CIP, Document Verification, EDD	Annual + updates
🎖️ Accreditation Analysts	Rule 501, 506(c), Verification Methods	Annual + updates
💵 Transaction Monitoring	Red Flags, SAR Filing, Investigation	Annual + updates
👨‍💼 Compliance Officers	Full program, regulatory updates	Quarterly

Training Documentation

Element	Requirement
📋 Attendance Records	Document all attendees
✅ Completion Verification	Test or acknowledgment
📅 Date Records	Training dates documented
📝 Materials Retention	Keep training materials
🔄 Update Training	When regulations change

IX. AUDIT AND TESTING

A. 🔍 Independent Testing Requirements

Annual Independent Audit

Component	Testing Scope
🪪 KYC/CIP	Sample customer files for completeness
🎖️ Accreditation	Sample verification files
🚫 OFAC	Screening effectiveness testing
📊 Transaction Monitoring	Alert generation and disposition
📝 SAR Process	Filing timeliness and quality
📋 Record Keeping	Retention compliance
🎓 Training	Training program effectiveness

Testing Schedule

Test Type	Frequency	Performed By
🔍 Independent Audit	Annual	External auditor
📊 Internal Testing	Quarterly	Compliance team
🚫 OFAC Testing	Monthly	Automated + manual
🔗 Transfer Hook Testing	Continuous	Automated

X. RECORD RETENTION SUMMARY

📋 Retention Requirements by Category

Record Type	Retention Period	Regulatory Basis
🪪 KYC Records	5 years after account closure	BSA
🏢 KYB Records	5 years after relationship ends	BSA
💵 Transaction Records	7 years	Securities laws
🎖️ Accreditation Records	5 years	SEC Rule 506(c)
🚫 OFAC Screening	5 years	OFAC
📝 SAR Filings	5 years	BSA
💵 CTR Filings	5 years	BSA
📧 Correspondence	5 years	BSA
🎓 Training Records	5 years	BSA
🔍 Audit Reports	5 years	BSA

XI. CONTACT INFORMATION

📞 Compliance Contacts

Contact	Email	Responsibility
🛡️ Compliance Officer	compliance@otcm.io	Overall compliance program
🪪 KYC Team	kyc@otcm.io	Customer verification
🎖️ Accreditation Team	accreditation@otcm.io	Accredited investor verification
💵 AML Team	aml@otcm.io	Transaction monitoring, SAR
⚖️ Legal Department	legal@otcm.io	Legal questions

📋 Document Information

Field	Value
📄 Document Version	1.0
📅 Effective Date	January 2026
📍 Jurisdiction	Federal (United States)
🏛️ Regulatory Framework	BSA, FinCEN, SEC, OFAC
🔄 Review Frequency	Annual (or upon regulatory change)

⚠️ Disclaimers

Disclaimer	Description
📋 Internal Use	This document is for internal compliance operations
🔄 Subject to Change	Procedures may be updated as regulations change
👨‍⚖️ Not Legal Advice	Consult counsel for specific legal questions
⚖️ Regulatory Compliance	Designed to meet but not exceed regulatory requirements

This document establishes compliance procedures for KYC, AML, KYB, and Accredited Investor verification pursuant to SEC Category 1 framework, Bank Secrecy Act, and OFAC requirements.

🛡️ Privacy Policy

📋 Terms and Conditions

⚠️ INVESTMENT RISK DISCLOSURE

🔐 KYC, AML, KYB, & ACCREDITED INVESTOR VERIFICATION PROCEDURES

IMPORTANT NOTICE

🍪 Cookie Notice

💼 CORPORATE CODE OF CONDUCT

⚖️ SEC REGULATORY FRAMEWORK ANALYSIS

🛡️ SEC CATEGORY 1 COMPLIANCE FRAMEWORK

🔐 KYC, AML, KYB, & ACCREDITED INVESTOR VERIFICATION PROCEDURES

OTCM Protocol Compliance Operations Manual

I. EXECUTIVE SUMMARY

📋 Document Purpose

🔐 Verification Framework Overview

🎯 Compliance Objectives

II. KNOW YOUR CUSTOMER (KYC) PROCEDURES

A. 🪪 Individual Customer Identification Program (CIP)

Required Information Collection

Identity Verification Tiers

Acceptable Identity Documents

Primary Documents (One Required)

Secondary Documents (One Required for Enhanced)

Verification Process Flow

Document Verification Standards

B. 🔄 Ongoing KYC Monitoring

Periodic Review Schedule

Continuous Monitoring Triggers

III. KNOW YOUR BUSINESS (KYB) PROCEDURES

A. 🏢 Entity Verification Requirements

Entity Types and Requirements

Required Entity Documentation

Formation Documents

Ownership Documents

Beneficial Owner Identification

Definition (FinCEN CDD Rule)

Required Information for Each Beneficial Owner

Entity Verification Process

B. 🏭 Issuer KYB Requirements (Enhanced)

Issuer-Specific Requirements

Issuer Due Diligence Checklist

IV. ANTI-MONEY LAUNDERING (AML) PROCEDURES

A. 💵 AML Program Overview

Program Components (BSA Requirements)

BSA/AML Compliance Officer

B. 📊 Transaction Monitoring

Monitoring Parameters

Red Flag Indicators

Identity Red Flags

Transaction Red Flags

Behavioral Red Flags

C. 📝 Suspicious Activity Reporting (SAR)

SAR Filing Requirements

SAR Decision Matrix

SAR Filing Process

D. 💵 Currency Transaction Reporting (CTR)

CTR Requirements

E. 📋 Record Retention Requirements

AML Records Retention

V. ACCREDITED INVESTOR VERIFICATION

A. 🎖️ Regulatory Framework

Applicable Regulations

Why Verification Is Required

B. 📋 Accredited Investor Categories

Individual Investors (Natural Persons)

Entity Investors

C. ✅ Verification Methods

Income Verification

Income Verification Process

Net Worth Verification

Net Worth Calculation

Professional Certification Verification

Verification Process

Entity Verification

D. 📋 Verification Documentation Requirements

Document Retention

Verification Record Contents

E. 🔄 Re-verification Requirements

Re-verification Schedule

Material Changes Requiring Re-verification

VI. OFAC SANCTIONS SCREENING