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FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

After a rogue-trading incident, a bank requires all front-office traders to take at least ten consecutive business days of leave each year, during which their access is suspended and positions are reviewed by others. What is the primary purpose of this control?

The primary purpose is to detect fraud that relies on the perpetrator's continuous presence. While the trader is away and access is suspended, concealed positions or manipulated records may surface when others review them. Wellbeing benefits are secondary and the control does not change capital or limits.

  1. ATo detect fraud that depends on the continuous presence of the perpetratorCorrect
  2. BTo reduce employee burnout and attrition
  3. CTo lower the bank's regulatory capital requirement
  4. DTo enforce position limits automatically

Explanation

Mandatory leave interrupts ongoing concealment, such as rolling fictitious trades or manipulating records, so irregularities can surface when someone else takes over. Wellbeing may be a side benefit but is not the control objective. It does not directly change capital or enforce limits.

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