Grant Ships Compliance Policy

Version 0.2

Effective Date: April 19, 2024

Table of Contents

• Table of Contents
• 1. Introduction
• 2. Legal and Ethical Compliance
  • 2.1 General Compliance
  • 2.2 Sanctions and KYC Compliance
• 3. Roles and Responsibilities
  • 3.1 Facilitators
  • 3.2 Ship Operators
  • 3.3 Delegated Arbitrum Voters
  • 3.4 Grant Recipients
• 4. Compliance Checks and Thresholds
  • 4.1 KYT Compliance
  • 4.2 KYC (Know Your Customer) and KYB (Know Your Business) Compliance
• 5. Data Security and Privacy
• 6. Enforcement and Compliance Failure
  • 6.1 Non-Compliance Penalties for Ship Operators
  • 6.2 Reevaluation of Compliance
  • 6.3 Compliance Acknowledgement in Digital Assets (Hats)
  • 7. Policy Review and Amendments
  • 8. Conclusion
• Index

1. Introduction

This Compliance Policy is designed for the Grant Ships project, a decentralized grants game within the Arbitrum ecosystem. It outlines the standards and procedures to be adhered to by all participants, ensuring legal, ethical, and operational integrity, in compliance with KYC (Know Your Customer), KYB (Know Your Business), and KYT (Know Your Transaction) standards.

Beta Test Caveat: Certain parts of this policy do not apply to the beta test process, specifically those concerning elections held by Delegated Arbitrum Voters. This is necessary due to the nature and timing of the beta test, but does not change the intention of the project overall to be held accountable by the Arbitrum Delegate Voters. Even though elections for some positions will not be held during the beta test, the rest of the policy remains in effect.s

2. Legal and Ethical Compliance

2.1 General Compliance

Participants, especially Grant Recipients and Ship Operators, must comply with the laws and regulations of their respective jurisdictions.

2.2 Sanctions and KYC Compliance

No funds from the Grant Ships project may be used or sent to parties on any sanctions list. KYC standards will be upheld to verify identity and prevent fraud. This may be done either by request or due to triggering funding levels as defined in this policy.

3. Roles and Responsibilities

3.1 Facilitators

Facilitators play a crucial role in the governance and operational success of the Grant Ships project. Their responsibilities are multi-faceted and include:

• Compliance Oversight: Facilitators are responsible for monitoring and ensuring that all aspects of the game adhere to this Compliance Policy. They regularly review operations to identify and rectify any potential compliance issues.
• Operational Management: Daily operational management of the game falls under the purview of facilitators. This includes coordinating activities, managing resources, and ensuring smooth execution of game processes.
• Policy Implementation: Facilitators are tasked with implementing the policies and procedures outlined in this document. They provide guidance to participants and ensure that everyone is aware of and adheres to the established rules and standards.
• Conflict Resolution: In cases of disputes or non-compliance, facilitators are responsible for mediating and resolving issues in accordance with the policies and ethical guidelines of the project.
• Community Engagement: Facilitators actively engage with the community to gather feedback, provide support, and foster a collaborative environment. They are instrumental in driving community-led initiatives and ensuring participant satisfaction.

Election Process for Future Facilitators:

• Eligibility and Nominations: Candidates for the facilitator role must meet predefined criteria set by the community. Nominations can be self-submitted or proposed by community members.
• Voting Mechanism: Elections for facilitators are conducted through a transparent and secure on-chain voting process. This ensures fairness and allows every community member to have a voice in the selection.
• Term and Rotation: Elected facilitators will serve for a specified term. At the end of this term, new elections will be held, providing opportunities for fresh perspectives and continuous community representation.
• Accountability and Performance Review: Facilitators are accountable to the community. Regular performance reviews are conducted to assess their effectiveness and adherence to the project's values and objectives.

3.2 Ship Operators

Ship Operators are integral to the Grant Ships project, playing key roles in maintaining the project's alignment with its core principles and objectives. Their responsibilities include:

• Conflicts of Interest: Ship Operators strive to be fair and neutral in their allocation decisions. Operators should abstain from funding projects in which they have a personal, financial or political interest and must consider and evaluate all grant applications from a fair and neutral perspective.
• Assessment of Funding Requests: Ship Operators are tasked with meticulously reviewing funding requests to ensure they are in complete alignment with this compliance policy. This involves evaluating the purpose, scope, and impact of each request to guarantee adherence to ethical and legal standards.
• Verification of Grant Alignment: Ensuring that all grants support the Arbitrum ecosystem and are aligned with the theme of the funding round is a primary responsibility of Ship Operators. They evaluate grant proposals to confirm that they contribute positively to the ecosystem and align with its strategic objectives.
• Due Diligence: Conducting thorough due diligence on grant applicants to assess their credibility and the feasibility of their proposals. This includes reviewing their past performance, reputation within the ecosystem, and the potential impact of their proposed project.
• Transparency and Reporting: Ship Operators are responsible for maintaining transparency in the grant review process. This includes providing clear feedback to applicants and posting updates that outline the rationale for grant approvals or rejections.
• Community Engagement and Feedback: Engaging with the broader community is a critical aspect of a Ship Operator's role. They are expected to gather and incorporate community feedback into the grant review process, ensuring that the decision-making process is inclusive and reflective of the community's views and needs. This will be reinforced by periodic community votes on Ship Operators' performances.
• Policy Advocacy: Ship Operators also play a role in advocating for and educating about the compliance policy and its importance in ensuring the integrity and success of the Grant Ships project. They are ambassadors of the project's values and standards within the community.
• Continuous Learning and Adaptation: Ship Operators are expected to stay informed about the evolving dynamics of the Arbitrum ecosystem and adapt their evaluation criteria and processes accordingly.

3.3 Delegated Arbitrum Voters

Delegated Arbitrum Voters play a unique role within the Grant Ships project. While they have specific obligations and privileges, their interaction with the project's compliance framework is distinct in several ways:

• Exemption from KY(X) Requirements: Delegated Arbitrum Voters are not subject to the KYC (Know Your Customer), KYB (Know Your Business), or KYT (Know Your Transaction) requirements, provided they are not receiving compensation for their role or work within the project. This exemption recognizes the nature of their participation as primarily governance-focused.
• Mandatory Ethical Compliance: Despite the exemption from KY(X) requirements, Delegated Arbitrum Voters are still bound by the ethical guidelines and principles outlined in this document. This includes adhering to standards of integrity, transparency, and responsibility in all interactions with the game and its participants.
• Responsibility in Game Interaction: When engaging with the game, Delegated Arbitrum Voters must abide by the same rules and ethical standards as other participants. This ensures a level playing field and maintains the integrity of the game.
• Consequences for Violations: In the event that a Delegated Arbitrum Voter is found to be in violation of the policy, or is aiding others in such violations, the Grant Ships facilitators reserve the right to take corrective actions. This includes the authority to block the offending member from all game activities and platforms. Such measures are necessary to uphold the principles of the project and protect its ecosystem.

Governance and Oversight:

• Accountability: Delegated Arbitrum Voters are accountable for their actions within the project. They are expected to conduct themselves in a manner that upholds the values and objectives of the Grant Ships project.
• Monitoring and Enforcement: The facilitators will monitor the activities of Delegated Arbitrum Voters to ensure compliance with the policy. Enforcement actions will be taken in a fair and transparent manner, following a thorough investigation of any reported violations.

3.4 Grant Recipients

Grant Recipients are critical stakeholders in the Grant Ships project and are subject to a comprehensive set of requirements to ensure the integrity and effectiveness of the grant process:

• KYC/KYB Compliance: All Grant Recipients are required to comply with the KYC (Know Your Customer) and KYB (Know Your Business) requirements as outlined in this document. This process is essential for verifying identities and preventing fraud, ensuring that funds are awarded to legitimate and credible entities.
• Purposeful Use of Funds: Recipients must use the awarded funds strictly for the intended and explicitly stated purposes as outlined in their grant applications. Misuse or diversion of funds for other purposes is strictly prohibited and will lead to corrective actions.
• Adherence to Sanctions and AML Regulations: Grant Recipients are prohibited from transferring any funds to entities known to be on the OFAC (Office of Foreign Assets Control) sanctions list. They must also adhere to anti-money laundering (AML) guidelines to prevent illicit financial activities.
• Milestone Reporting: Recipients are required to submit detailed milestone reports in an honest and timely manner. These reports should clearly demonstrate the progress and impact of their projects, as well as the allocation and use of the funds.
• Notification of Delays: In the event of any delays or deviations from the proposed timeline or objectives, Grant Recipients must promptly notify the DAO. Transparent communication is vital for maintaining trust and facilitating any necessary adjustments or support.
• Prohibition on Legal Expenses: Funds received from the Grant Ships project are not to be used for legal expenses or similar purposes. They are intended solely for the development and enhancement of projects within the Arbitrum ecosystem.

Compliance and Oversight:

• Regular Audits: Grant Recipients may be subject to periodic audits to ensure compliance with these guidelines and the effective use of the funds.
• Consequences for Non-Compliance: Violations of any of these requirements may result in the suspension of funding, repayment demands, and exclusion from future grant considerations. Severe or repeated violations may lead to further legal actions.

4. Compliance Checks and Thresholds

4.1 KYT Compliance

• Transaction checks for any amount to ensure transactions are not occurring with any officially sanctioned wallets. Grant Ship uses an oracle from Chain Analysis [^1] which takes its data from the United States Office of Forgeign Asset Control [^2] Sanctions List [^3]

4.2 KYC (Know Your Customer) and KYB (Know Your Business) Compliance

The Grant Ships project is committed to upholding the highest standards of identity verification and business legitimacy. This commitment is reflected in our robust KYC and KYB compliance procedures:

• Grant Recipient Verification: All recipients of grants through this program are subject to thorough identity and/or business checks to ensure compliance with regulatory standards and to prevent fraud.
• Facilitator Verification: All individuals acting as facilitators in the game are required to undergo identity and/or business verification processes to maintain the integrity and trustworthiness of the game’s operations.
• Third-Party KYC Provider: To ensure impartiality and data security, the Grant Ships project will utilize a reputable third-party service provider for all KYC and KYB checks. This approach guarantees that sensitive personal data is handled with the utmost confidentiality and professionalism.
• Data Privacy Assurance: It is our policy that no personal or business data collected during the KYC/KYB process will be shared with or accessible to Grant Ships, facilitators or any other Grant Ships affiliations. This separation upholds our commitment to participant privacy and data security.

5. Data Security and Privacy

Participants are responsible for upholding data security and privacy standards, including adherence to relevant data protection laws.

6. Enforcement and Compliance Failure

6.1 Non-Compliance Penalties for Ship Operators

The Grant Ships project employs a structured flags system to address non-compliance issues for Ship Operators. This system is designed to both warn and penalize Ship Operators for infractions in a fair and transparent manner.

Warnings and Yellow Flag System:

• Initial Warning: In cases of minor or first-time infractions that are deemed fixable, facilitators can issue a warning. This serves as a notice to the participant to correct their actions and realign with the policy.
• Yellow Flag: If warnings are not heeded or for repeated minor infractions, a Yellow Flag will be issued. The Yellow Flag serves as a formal notice of policy violation and a call for immediate corrective action.
• Cumulative Impact: Accumulating multiple Yellow Flags may escalate the situation, leading to more severe penalties. This progression is designed to encourage prompt and proactive rectification of issues.

Red Flag System for Serious Violations:

• Issuance of Red Flag: A Red Flag is issued in response to serious violations of the policy. This represents a significant breach of the established guidelines and principles of the Grant Ships project as determined by Game Facilitators and in communication with Arbitrum Delegated Voters.
• Suspension of Activities: Upon receiving a Red Flag, the offending party will be suspended from all Grant Ships activities. This includes a freeze on participating in games, receiving grants, and any other project-related engagements.
• Final Decision and Appeals: The decision to issue a Red Flag is final, pending an appeal process. The affected party may appeal the decision, seeking a review of their case.
• Arbitrum DAO Delegate Vote: In exceptional circumstances, a vote by Arbitrum DAO delegates may be called to overturn a Red Flag decision. This process ensures a democratic and community-oriented approach to major disciplinary actions.

6.2 Reevaluation of Compliance

• Periodic rechecks for ongoing compliance. This will be done at a minimum bi-annually but can be done at other times in addition. At this time any and all recognized policy violations will be reviewed and assessed.

6.3 Compliance Acknowledgement in Digital Assets (Hats)

By holding a "Hat" [^4][^5] and interacting with permissioned aspects of the game, accessible as a result of holding said Hat within the Grant Ships project, you implicitly agree to adhere to this Compliance Policy. The policy is integrated into the metadata of each Hat. The following applies:

• Individual Holders: By holding a Hat, individual members agree to comply with all aspects of this Compliance Policy. A copy of the policy is embedded in the Hat's metadata for reference.
• Group Affiliation: In cases where Hats are held by a group wallet or governed by a smart contract, all group members are bound by the Compliance Policy. The authority exercised by the group is contingent upon adherence to these guidelines.
• Access to Policy: The full text of the Compliance Policy is accessible through the metadata of each Hat. It is the responsibility of each holder, individual or group, to review and understand the policy.
• Agreement to Terms: Possession or association with a Hat signifies acceptance of these terms and the responsibilities they entail.

7. Policy Review and Amendments

The Grant Ships Compliance Policy is subject to a biannual review to ensure its continued relevance and effectiveness in the evolving landscape of the Arbitrum ecosystem. The review process includes several key steps:

• Evaluation and Analysis: Assessing the current policy against new legal requirements, technological advancements, and operational changes within the ecosystem.
• Suggestions for Changes: During the review, any required changes, enhancements, additions, or deletions to the policy will be identified.
• Proposal Development: The suggested modifications will be compiled into a comprehensive proposal, detailing the rationale and expected impact of each change.
• Community Consultation: Prior to finalization, the proposal will be presented to the community for feedback, ensuring transparency and inclusivity in the policy development process.
• Submission to Arbitrum DAO: The final proposal, incorporating community feedback, will be submitted to the governing DAO for ratification.
• Implementation: Upon approval, the changes will be formally integrated into the Compliance Policy and communicated to all participants.
• Documentation: All amendments and their effective dates will be documented for reference and transparency.

This iterative process ensures that the Compliance Policy remains aligned with the objectives of the Grant Ships project and the broader community, adapting as necessary to uphold the highest standards of legal, ethical, and operational integrity.

8. Conclusion

The Grant Ships Compliance Policy stands as a testament to our unwavering commitment to ethical standards, legal adherence, and operational excellence within the dynamic Arbitrum ecosystem. Together, we forge not just a game or a platform, but a community that stands as a model of integrity, innovation, and impact in the decentralized world.

Index

[^1]: Chainalysis. (n.d.). Free Cryptocurrency Sanctions Screening Tools. Retrieved 01 December 2023, from https://www.chainalysis.com/free-cryptocurrency-sanctions-screening-tools/ [^2]: Office of Foreign Assets Control. (n.d.). U.S. Department of the Treasury. Retrieved 01 December 2023, from https://ofac.treasury.gov/ [^3]: Office of Foreign Assets Control. (n.d.). Sanctions Search Tool. U.S. Department of the Treasury. Retrieved 01 December 2023, from https://sanctionssearch.ofac.treas.gov/ [^4]: Hats Protocol. (n.d.). Retrieved 01 December 2023, from https://www.hatsprotocol.xyz/ [^5]: Hats Protocol is a system for DAO-native roles and credentials, enabling the revocable delegation of authority and responsibility through non-transferable, on-chain tokens conforming to the ERC1155 standards. When an address holds a specific Hat token, it grants the holder or holders designated responsibilities and authorities as assigned by the DAO.