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CS Professional · IFSCA - Regulations, Listing and Compliances · Book-keeping, Accounting, Taxation and Financial Crime Compliance Services and TAS

Meera Shah, compliance officer of an IFSC bank unit, is risk-categorising customers. A client is a politically exposed person from a high-risk jurisdiction with complex ownership layers. Which treatment is consistent with a risk-based approach?

Enhanced due diligence is appropriate. A politically exposed person from a high-risk jurisdiction with layered ownership is a higher-risk customer, so the unit should verify source of funds, obtain senior management approval, identify beneficial owners and monitor the relationship more closely.

  1. AApply simplified due diligence to save cost
  2. BApply enhanced due diligence, including source of funds and senior management approval, with closer ongoing monitoringCorrect
  3. CApply the same standard checks as for all customers
  4. DSkip beneficial ownership identification because ownership is complex

Explanation

A risk-based approach calls for enhanced due diligence for higher-risk customers such as PEPs with opaque structures, including source of funds, senior approval and heightened monitoring. Simplified or standard checks understate risk, and beneficial ownership must still be identified.

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