Regarding the activities of Freedom Finance JSC

Regarding the activities of Freedom Finance JSC

According to the dissemination in the media of information about the activities of Freedom Holding Corp. The Agency of the Republic of Kazakhstan for the regulation and development of the financial market (hereinafter referred to as the Agency) reports the following.

1. Freedom Holding Corp. is the sole shareholder of Freedom Finance JSC (the Broker), which in turn owns Freedom Finance Bank JSC (the Bank), LIC Freedom Finance Life JSC, IC Freedom Finance Insurance JSC (Insurance organization) and has the status of a banking conglomerate and an insurance holding.

As of July 1, 2023, the Broker's assets amounted to 316.6 billion tenge, equity capital 132.9 billion tenge. The equity capital adequacy ratio is K1 = 9.03 (with a standard of at least 1). Quick liquidity ratios are K2-1 = 1.3, K2-2 = 1.3, K2-3 = 1.3 and K2-4 = 1.3 (with a standard of at least 1, 0.9, 0.8 and 0.5, respectively).

Thus, the Broker complies with all established prudential standards and is financially stable.

The broker is an active participant in the securities market, which accounts for 41% of the assets of all brokers (1st place), 16% of the volume and 30% of the number of deals on KASE. In this connection, the activity of the Broker is under increased supervision by the Agency.

At the same time, the safety of clients' assets, incl. retail investors of all brokers in the securities market is provided by separate accounting of brokers' own assets from the assets of its clients, as well as by keeping assets in custodian banks and (or) Central Securities Depository JSC (the Central Securities Depository).

Thus, the safety of the assets of the Broker's clients is also ensured by the current requirements of the legislation of the Republic of Kazakhstan.

2. In accordance with the legislation of the Republic of Kazakhstan on combating the legalization of proceeds from crime, the financing of terrorism (hereinafter referred to as AML), financial organizations, incl. Broker, Bank and Insurance companies are subjects of financial monitoring.

In 2022, the Agency conducted inspections in relation to the Broker and the Bank on the issue of opening accounts for residents of the Russian Federation and compliance with sanctions requirements. Based on the results of the Agency’s audit, it was established that the Broker and the Bank did not open accounts for the persons included in the sanctions list, and that the compliance procedures and legal requirements were fully complied with.

In addition, in order to prevent the use of financial services and the financial system of the Republic of Kazakhstan to circumvent US, EU and UK sanctions, requirements for compliance and risk management procedures have been tightened, as well as KYC (Know Your Customer) procedures in financial institutions have been strengthened through more thorough verification of cross-border transactions. At the same time, in order to identify customer transactions for payment for sanctioned goods or dual-use goods, financial institutions carry out the following procedures:

- mandatory approval of the possibility of establishing business relations with non-resident legal entities, or legal entities whose founders/beneficial owners are non-residents;

- online analysis of participants in operations according to sanctions lists;

- analysis of the contract in terms of imported / exported goods and services, taking into account the established sanctions restrictions and delivery territories, when registering the contract with the bank.

Also, if sanctioned persons are identified in the lists of existing clients of financial institutions, the operations and assets of such clients are blocked, and in the absence of assets, business relations with such clients are terminated.

Regarding the participation of JSC "Bank Freedom Finance" in the withdrawal of assets Alfa-Bank JSC informs that on April 6, 2022, OFAC decided to include the Russian JSC "Alfa-Bank" and all its subsidiaries, including Kazakhstan's subsidiary JSC "Alfa-Bank". The deadline for completion of all ongoing transactions was set to May 6, 2023.

Thus, the Agency received permission from OFAC for the sale and purchase of Kazakh Alfa-Bank in favor of Bank CenterCredit JSC (BCC) and on May 6, 2022, Alfa-Bank was acquired by BCC. In this regard, transfers of customer funds from Kazakhstani Alfa-Bank to other Kazakhstani banks, including Freedom Finance Bank JSC, were made under OFAC's permission.

3. The Agency on a permanent basis analyzes and monitors transactions concluded on the organized and unorganized securities market for manipulation. If suspicious transactions are detected, information about them is submitted for consideration by the Expert Committee under the Agency, which includes representatives of KASE, the Association of Financiers of Kazakhstan, the National Bank and the Central Depository. Based on the results of the work of the Expert Committee in the first half of 2023, individual transactions with government securities and bonds of Kazakhstan Sustainability Fund JSC in the securities market were recognized as concluded for the purpose of manipulation, incl. the list included transactions of the Freedom Finance group.

For these violations, the Agency drew up protocols on administrative offenses against the relevant persons and imposed fines.

4. Regarding Freedom Securities Trading Inc. (former FFIN Brokerage Services Inc) Agency inform that this company is registered in the territory of the state of Belize, is not part of the Freedom Holding Corp group. and is not a licensee of the Agency. Regulator Freedom Securities Trading Inc. is the International Financial Services Commission of Belize.

All issues specified in the Hindenburg Research study will be additionally considered by the Agency and, if necessary, appropriate measures will be taken within the competence of the Agency.

 

Department of External Communications

+7 (727) 237 1089, press@finreg.kz