Skip to content

FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism

A bank in Country A offers correspondent services to a respondent bank in a higher-risk jurisdiction. Under the Basel Committee guidance on sound management of ML/FT risks, which step should the bank take BEFORE establishing the correspondent relationship?

The bank should gather sufficient information on the respondent's business, reputation, supervision and AML/CFT controls and obtain senior management approval before opening the relationship. Deferring due diligence, relying only on a foreign regulator, or letting the sponsoring manager decide does not meet supervisory expectations.

  1. AObtain approval from senior management after gathering sufficient information about the respondent's business, reputation, and AML/CFT controlsCorrect
  2. BRely solely on the respondent bank's home regulator to certify that its controls are adequate
  3. COpen the account on a restricted basis and complete due diligence within the first year
  4. DDelegate the decision to the relationship manager who sponsored the respondent

Explanation

Guidance expects correspondent banks to gather enough information on the respondent's business, reputation, supervision and AML/CFT controls, and to obtain senior management approval before establishing the relationship. Relying only on a foreign regulator or deferring due diligence is inadequate, and approval should not rest with the sponsoring relationship manager.

Did you get it right without looking?

One question tells you little. A timed set on Sound Management of Risks Related to Money Laundering and Financing of Terrorism shows your real accuracy, how long you take and where you lose marks.

Practise Sound Management of Risks Related to Money Laundering and Financing of TerrorismFree diagnostic mock

More Sound Management of Risks Related to Money Laundering and Financing of Terrorism questions