FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A bank's group compliance officer requests customer account and transaction data from a foreign branch to perform group-level ML/FT risk assessment. The branch refuses, citing host-country data protection and secrecy laws that prohibit the transfer. According to the BCBS guidelines, what is the most appropriate response by the bank?
The bank should inform its home supervisor and apply additional mitigating measures, potentially including closing the host-country operation. Group policy cannot override local law, but excluding the branch from group risk oversight would leave an unmanaged ML/FT blind spot.
- AAsk the branch to transmit the data anyway, since group policy overrides local law
- BClose the branch's accounts for the customers concerned and report them to the home supervisor as suspicious
- CInform the home supervisor, and take additional measures to manage the risk, which may include closing the operations in the host country if necessaryCorrect
- DRely on the branch's own assessment and exclude it from group-level risk reporting
Explanation
Group policy cannot override local law. The guidelines say that where host law prevents proper implementation of group standards, the bank should inform the home supervisor and apply additional safeguards, up to closing operations if risks cannot be managed. Ignoring the branch leaves a blind spot.
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