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

A bank relies on an introducing agent to perform customer due diligence on new clients. Which statement best reflects who bears ultimate responsibility for customer identification and verification under the Basel guidance?

The bank remains ultimately responsible. Using an introducing agent or other third party for customer due diligence does not transfer accountability, so the bank must satisfy itself that the third party is regulated, applies adequate CDD, and can provide the underlying identification documents without delay.

  1. AThe introducing agent, because it met the customer face to face
  2. BThe customer, who warrants that the information supplied is accurate
  3. CThe bank itself, which remains ultimately responsible even when it relies on a third partyCorrect
  4. DThe local supervisor, which approves all third-party arrangements

Explanation

When a bank relies on a third party for CDD, the ultimate responsibility for identifying and verifying customers stays with the relying bank. It must satisfy itself the third party is regulated, supervised, has adequate CDD measures, and can supply the underlying documents promptly. Responsibility cannot be transferred.

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