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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's AML policy allows it to rely on an introducer to perform customer due diligence (CDD) on new clients. Under the Basel Committee guidelines on sound management of ML/FT risks, which statement about this arrangement is correct?

Ultimate responsibility for customer due diligence stays with the bank that relies on the introducer. Contracts or the introducer's regulated status do not transfer it, and the bank must still obtain the necessary information and carry out ongoing monitoring of the customers.

  1. AUltimate responsibility for CDD remains with the bank relying on the third partyCorrect
  2. BResponsibility for CDD transfers to the introducer once a written agreement is signed
  3. CThe bank is exempt from ongoing monitoring of the introduced customers
  4. DThe bank need not obtain the CDD information if the introducer is regulated

Explanation

When a bank relies on a third party for CDD, the ultimate responsibility for identification and verification stays with the relying bank. A written agreement or the introducer's regulated status does not shift that responsibility. Ongoing monitoring also remains the bank's duty.

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