FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A correspondent bank offers payable-through accounts, allowing the respondent's customers to transact directly through the account. Which control is most important to mitigate the specific money laundering risk this creates?
The correspondent should confirm that the respondent has performed customer due diligence on customers with direct access and can supply identification data on request. The core risk is unknown underlying users, which balance minimums or currency limits do not address.
- ALimiting the account to domestic currency only
- BConfirming the respondent has performed CDD on those direct-access customers and can provide the data on requestCorrect
- CRequiring the respondent to hold a minimum balance
- DReporting the account to the respondent's customers annually
Explanation
Payable-through accounts let the respondent's customers transact with no direct relationship with the correspondent, so the key risk is unknown underlying customers. The correspondent must be satisfied that the respondent has verified the identity of those customers, applies ongoing CDD and can supply the information. Balance or currency limits do not address who is using the account.
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