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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 wishes to rely on a third-party group affiliate for CDD. Which factor is most relevant when the bank decides whether the reliance is acceptable?

The key factor is whether the affiliate applies CDD and record-keeping standards consistent with the bank's requirements, is subject to effective supervision, and can supply the customer information promptly. Size, fees or past suspicious transaction reporting do not show that the reliance is adequate.

  1. AThe affiliate's size and number of branches
  2. BWhether the affiliate applies CDD and record-keeping standards consistent with the bank's requirements and is subject to effective supervision, and whether the bank can obtain the data immediatelyCorrect
  3. CWhether the affiliate offers lower fees for the CDD service
  4. DWhether the affiliate has previously filed suspicious transaction reports

Explanation

Reliance depends on the third party applying CDD and record-keeping consistent with requirements, being supervised, and the relying bank being able to obtain the CDD information without delay. Size, cost or past reporting history do not establish adequacy.

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