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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 transaction monitoring system flags a long-standing retail customer whose account, usually holding small salary credits, suddenly receives several cash deposits just under the reporting threshold across different branches. Which action best reflects ongoing monitoring principles?

The alert should be escalated for investigation, the customer's profile and risk rating updated, and a suspicious transaction report considered if no legitimate explanation emerges. Structuring below thresholds is a red flag, and tipping off the customer or waiting for a periodic review would be inappropriate.

  1. AClose the alert because the customer has a clean history
  2. BEscalate for review, update the customer's profile and risk rating, and consider filing a suspicious transaction report if the activity cannot be explainedCorrect
  3. CImmediately freeze the account and inform the customer that a report is being considered
  4. DWait until the next scheduled periodic review in two years

Explanation

Activity inconsistent with the customer's known profile, such as structuring below thresholds, requires timely investigation and possible reporting. Closing the alert ignores the red flag, and informing the customer risks tipping off. Deferring to a scheduled review is too slow for a trigger event.

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