FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A private bank is onboarding a client who is a senior foreign government official's close associate and will hold a large account funded by offshore transfers. Which action is most consistent with sound ML/FT risk management for this relationship?
The bank should apply enhanced due diligence: establish source of wealth and source of funds, obtain senior management approval, and monitor the account more closely. Politically exposed persons and close associates are higher risk, so standard CDD or sole reliance on an introducer is inadequate.
- AOpen the account under standard CDD and review it only if an alert is generated
- BDecline to document the source of wealth to protect client confidentiality
- CApply enhanced due diligence, including establishing source of wealth and funds, with senior management approval and enhanced ongoing monitoringCorrect
- DRely entirely on the introducer's assurance without independent verification
Explanation
Politically exposed persons and their close associates are higher-risk and call for enhanced due diligence, source of wealth/funds checks, senior management approval and closer monitoring. Standard CDD with alert-only review is insufficient, and relying wholly on an introducer leaves the bank responsible for the outcome.
Did you get it right without looking?
One question tells you little. A timed set on Sound Management of Risks Related to Money Laundering and Financing of Terrorism shows your real accuracy, how long you take and where you lose marks.
More Sound Management of Risks Related to Money Laundering and Financing of Terrorism questions
- A bank wishes to rely on a third-party group affiliate for CDD. Which factor is most relevant when the bank decides whether the reliance is …
- A group compliance function wants to design its information-sharing framework for ML/FT risk. Which design best reflects BCBS expectations f…
- Which of the following is the best example of an ML/FT risk factor that a bank should consider when assessing the inherent risk of its produ…
- Which statement best describes the role of cooperation between home and host supervisors in supervising a cross-border bank's ML/FT risk, as…
- A group compliance officer at a bank receives an unusual-activity alert on a customer at one subsidiary. The same customer holds accounts at…
- A bank's board is reviewing its approach to money laundering and financing of terrorism (ML/FT) risk under the Basel Committee guidelines. W…