FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A bank relies on another regulated financial institution to perform customer identification for a shared client. According to the Basel guidelines, which statement is correct?
Ultimate responsibility for customer due diligence stays with the bank that relies on the third party. The bank must be able to obtain the identification information promptly and be satisfied the introducer is regulated and has adequate controls; a written agreement does not transfer accountability.
- AThe ultimate responsibility for CDD remains with the bank relying on the third partyCorrect
- BResponsibility transfers fully to the introducing institution once a written agreement exists
- CThe bank need not obtain any customer information from the third party
- DReliance is permitted only when the introducer is in the same group and country
Explanation
A bank may rely on a third party for elements of CDD, but remains ultimately responsible for the outcome. It must be able to obtain the necessary identification information promptly and satisfy itself the introducer is regulated and supervised with adequate measures. Reliance is not limited to the same group or country, though country risk is considered.
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