ACCA Applied Knowledge · Business and Technology · Regulation and financial crime
A firm takes on a new client that is a company owned through a chain of offshore holding entities, and one of the ultimate owners is a senior government official in another country. Which approach is most consistent with a risk-based approach to customer due diligence?
The firm should apply enhanced due diligence. Layered offshore ownership and a politically exposed person are high-risk indicators, so the firm must identify and verify the beneficial owners, establish source of wealth and funds, obtain senior approval and monitor the relationship more closely. Simplified checks or client assurances alone are inadequate.
- AApply enhanced due diligence, including identifying the beneficial owners and the source of wealth and fundsCorrect
- BApply simplified due diligence because the client is a registered company
- CAccept the client and perform due diligence only if a transaction exceeds a set value
- DRely on the client's own written assurance about its ownership
Explanation
Complex ownership structures and a politically exposed person are higher-risk factors, requiring enhanced due diligence such as verifying beneficial owners, source of wealth and funds, and senior management approval plus ongoing monitoring. Simplified due diligence is reserved for low-risk situations, and a self-declaration alone is not adequate verification.
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