FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A bank onboards a company whose ownership runs through three layers of holding entities in different jurisdictions. Which step is most consistent with customer due diligence expectations?
The bank should identify and take reasonable measures to verify the natural persons who ultimately own or control the company, and understand the ownership structure. Stopping at the immediate parent or relying on self-declarations leaves the beneficial owners unverified, which defeats the purpose of due diligence.
- AVerify the identity of the immediate parent company only, since it is the legal shareholder
- BIdentify and take reasonable measures to verify the natural persons who ultimately own or control the company, and understand the ownership structureCorrect
- CAccept the structure without further checks if the company has a bank account elsewhere
- DRely on the customer's signed statement that no beneficial owners exist
Explanation
CDD requires identifying the beneficial owner, meaning the natural persons who ultimately own or control the customer, and understanding the structure. Stopping at the immediate parent leaves the real owners unknown. Another bank's account or a self-declaration is not adequate verification.
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