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FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

A bank's fraud response plan is tested through a scenario in which a third-party payment processor is compromised and fraudulent transfers occur across several jurisdictions. Which finding most clearly shows a weakness in the bank's regulatory-consequence readiness?

The key weakness is the absence of pre-mapped notification deadlines for each affected regulator, leaving reporting decisions improvised. Multi-jurisdiction incidents carry differing reporting duties, so missed deadlines can create penalties. Fast detection, thorough logging and strong processor contract clauses are strengths, not readiness gaps.

  1. AFraud analytics flagged the unusual transfers within minutes
  2. BLegal and compliance have no pre-mapped notification deadlines for each affected regulator, so reporting decisions were improvisedCorrect
  3. CThe incident log recorded timestamps for every action
  4. DThe processor's contract contained audit and incident-notification clauses

Explanation

Cross-border incidents trigger different reporting duties and timelines. Without a pre-mapped notification matrix the bank risks missing deadlines and facing penalties. The other options are strengths: fast detection, good record keeping and strong contractual protections.

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