FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism
A supervisor conducting consolidated oversight of a cross-border bank finds that the group's ML/FT risk assessment was built only from each subsidiary's local view, with no aggregated analysis. A client with accounts in three subsidiaries moves funds among them in structured amounts, each below local thresholds. Which weakness best explains why the pattern went undetected, and what is the best remedy?
The pattern went undetected because monitoring was siloed with no group-wide view of the customer. The remedy is consolidated customer and transaction monitoring with information sharing across entities, within legal limits, so structured movements across subsidiaries can be identified and reported.
- ALack of a group-wide view of customers and transactions; remedy is consolidated monitoring and information sharing within legal limitsCorrect
- BExcessive customer due diligence; remedy is reducing KYC refresh frequency
- COver-reliance on the home supervisor; remedy is removing supervisory contact
- DToo many suspicious transaction reports; remedy is raising thresholds further
Explanation
Structuring across entities is invisible to siloed monitoring. Consolidated customer and transaction information at group level, with appropriate safeguards, lets the group identify the pattern. Raising thresholds or cutting KYC would worsen detection.
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