Exhibit h(2)
AMENDMENT NO. 1 TO THE
TRANSFER AGENCY AND SERVICE AGREEMENT
THIS AMENDMENT is made and entered into as of January 1, 2003, by and between
Homestead Funds, Inc. (the "Fund") and National Financial Data Services, Inc.
(the "Transfer Agent").
WHEREAS, pursuant to the Transfer Agency and Service Agreement dated as of
September 4, 2000 (the "Agreement") between the Fund and the Transfer Agent, the
Transfer Agent performs certain transfer agency and recordkeeping services for
the Fund as described therein;
WHEREAS, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 and the rules and
regulations promulgated thereunder (collectively, the "USA PATRIOT Act") impose
new anti-money laundering requirements on financial institutions, including
mutual funds;
WHEREAS, the Fund has adopted and implemented a written anti-money laundering
program as required by the USA PATRIOT Act;
WHEREAS, the USA PATRIOT Act authorizes a mutual fund to delegate to a service
provider, including its transfer agent, the implementation and operation of
aspects of its anti-money laundering program; and
WHEREAS, the Fund desires to delegate to the Transfer Agent the implementation
and operation of certain aspects of the Fund's anti-money laundering program and
the Transfer Agent desires to accept such delegation.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter contained, the parties hereby agree to amend the
Agreement, pursuant to the terms thereof, by adding the following provisions:
1. Anti-Money Laundering Duties
1.1 The Transfer Agent agrees to perform the duties set forth below with
respect to the ownership of shares in the Fund for which the Transfer
Agent maintains the applicable shareholder information. This list of
duties may be amended from time to time by mutual agreement of the parties
upon the execution by the parties of a subsequent amendment that includes
a revised list of duties.
- Submit all new account and registration maintenance transactions
through the Office of Foreign Assets Control ("OFAC") database and
such other U.S. Government-issued lists or databases of trade
restricted individuals or entities as may be required from time to
time, respond to confirmed matches, and notify the Fund of any match.
- Submit special payee checks through the OFAC database, respond to
confirmed matches, and notify the Fund of any match.
- Review redemption transactions that occur within thirty (30) days
of account establishment or maintenance.
- Review wires sent pursuant to banking instructions other than
those on file with the Transfer Agent.
- Review accounts with small balances followed by large purchases.
- Review accounts with frequent activity within a specified date
range followed by a large redemption.
- On a daily basis, review purchase and redemption activity per tax
identification number ("TIN") within the Funds to determine if
activity for that TIN exceeded the $100,000 threshold on any given
day.
- Compare all new accounts and registration maintenance through the
Known Offenders Database and notify the Fund of any match.
- Monitor and track cash equivalents under $10,000 for a rolling
twelve-month period and file IRS Form 8300 and issue the shareholder
notices required by the IRS, promptly reporting any such filing or
notice to the Fund.
- Determine when a suspicious activity report ("SAR") should be
filed as required by regulations applicable to mutual funds; prepare
and file the SAR; provide the Fund with a copy of the SAR within a
reasonable time after filing; notify the Fund if any further
communication is received from U.S. Department of the Treasury or
other law enforcement agencies regarding any SAR that has been filed.
- Compare account information to any FinCEN request received by the
Fund and provided to the Transfer Agent pursuant to USA PATRIOT Act
Section 314(a). Provide the Fund with documents/information necessary
to respond to requests under USA PATRIOT Act Section 314(a) within
required time frames.
- Pursuant to the current and effective customer identification
program mutually agreed to by the Fund and the Transfer Agent, (i)
verify the identity of any person seeking to open an account with the
Fund, (ii) maintain records of the information used to verify the
person's identity, and (iii) determine whether the person appears on
any lists of known or suspected terrorists or terrorists organizations
provided to the Fund by any government agency.
1.2 The Transfer Agent agrees to submit such periodic written reports to the
Fund regarding the Transfer Agent's performance of the delegated anti-money
laundering duties, as well as the
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overall operation and implementation of those duties, as the Fund may
reasonably request from time to time.
1.3 The Transfer Agent represents and warrants that its Internal Audit
Department will audit the Transfer Agent annually or as required by law
for compliance with the delegated anti-money laundering duties and any
related policies and procedures. The Transfer Agent agrees to permit the
Fund to conduct an annual on-site review of the Transfer Agent's
performance of its anti-money laundering duties.
1.4 The Transfer Agent agrees to generate and keep adequate written records of
certain important determinations and processes (e.g., determining that a
suspicious activity does not warrant an SAR filing, determining that an
OFAC hit is a false positive and the account does not require freezing,
etc) and to permit the Fund to review such records as the Fund may request
from time to time.
2. Consent to Examination
2.1 In connection with the performance by the Transfer Agent of the anti-money
laundering duties described in Section 1, the Transfer Agent understands
and acknowledges that the records relating to the Transfer Agent's
implementation and operation of and compliance with its anti-money
laundering program on behalf of the Fund may be subject, from time to
time, to examination and/or inspection by federal regulators in order that
the regulators may evaluate such compliance. The Transfer Agent hereby
consents to such examination and/or inspection and agrees to cooperate
with such federal examiners in connection with their review. For purposes
of such examination and/or inspection, the Transfer Agent will use its
best efforts to make available, during normal business hours, all required
records and information for review by such examiners.
3. Limitation on Delegation.
3.1 The Fund acknowledges and agrees that in accepting the delegation
hereunder the Transfer Agent is not undertaking and shall not be
responsible for the overall compliance by the Fund with the USA PATRIOT
Act. Additionally, the parties acknowledge and agree that the Transfer
Agent shall only be responsible for performing anti-money laundering
duties with respect to the ownership of shares in the Fund for which the
Transfer Agent maintains the applicable shareholder information.
4. Compensation.
4.1 In consideration for the Transfer Agent's performance of the foregoing
duties, the Fund agrees to pay the Transfer Agent the anti-money
laundering account fee listed on the fee schedule to the Agreement as may
be in effect and mutually agreed to by the parties from time to time. The
terms of the Agreement shall apply with respect to the payment of such fee
in the same manner and to the same extent as any other fees incurred under
the Agreement.
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5. Miscellaneous.
5.1 In all other regards, the terms and provisions of the Agreement shall
continue to apply with full force and effect.
5.2. Each party represents to the other that the execution and delivery of this
Amendment has been duly authorized.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in its name and behalf by its duly authorized representative as of the date
first above written.
WITNESSED BY: NATIONAL FINANCIAL DATA SERVICES, INC.
/s/ Xxxxxx X. Xxxxx By: /s/ Xxxxxx Xxxxxx
----------------------------- ----------------------------------
Name: Xxxxxx X. Xxxxx Name: Xxxxxx Xxxxxx
Title: Paralegal Title: Secretary
WITNESSED BY: HOMESTEAD FUNDS, INC.
/s/ Hope X. Xxxxxx By: /s/ Xxxxx X. Xxxxxx
----------------------------- ----------------------------------
Name: Hope X. Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Secretary, ACO Title: President
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