ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering
Kestrel & Co, an audit firm, is accepting a new audit client, Bluewave Trading Ltd. The engagement partner asks the MLRO what must happen before the firm begins work. Which action best reflects customer due diligence expected under typical anti-money laundering regulations and the firm's procedures?
The firm must identify and verify the client and its beneficial owners using reliable, independent documents or data before the relationship begins. Delaying checks until suspicion arises, or accepting the client's own assertions, does not satisfy customer due diligence, and beneficial owners cannot be ignored.
- AIdentify the client and verify its identity, and identify the beneficial owners, using reliable independent documents or data before the relationship startsCorrect
- BBegin the audit and complete identity checks only if the first-year audit reveals suspicious transactions
- CRely entirely on the client's own statement of its ownership because the audit is a statutory appointment
- DObtain identity evidence for the directors only, since shareholders are not relevant to money laundering risk
Explanation
Customer due diligence requires identifying and verifying the client and its beneficial owners, using reliable independent sources, before or at the start of the relationship. Waiting for suspicious findings or relying on the client's own word does not meet this requirement. Ignoring shareholders overlooks beneficial ownership, which is central to CDD.
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