Skip to content

ACCA Applied Knowledge · Business and Technology · Regulation and financial crime

Which of the following is most likely to be treated as a red flag requiring enhanced due diligence on a client?

A politically exposed person whose funds come from a high-risk jurisdiction is the red flag. Such clients carry higher corruption and laundering risk, so enhanced due diligence is needed, including establishing the source of wealth and funds and carrying out closer ongoing monitoring.

  1. AA client based locally who pays invoices by bank transfer within 30 days
  2. BA client that is a politically exposed person (PEP) with funds coming from a high-risk jurisdictionCorrect
  3. CA client who asks for a copy of the engagement letter
  4. DA client who has used the firm for ten years with consistent activity

Explanation

Politically exposed persons and links to high-risk jurisdictions are higher-risk factors that call for enhanced due diligence, such as establishing the source of wealth and more intense ongoing monitoring. The other options describe normal, low-risk behaviour.

Did you get it right without looking?

One question tells you little. A timed set on Regulation and financial crime shows your real accuracy, how long you take and where you lose marks.

Practise Regulation and financial crimeFree diagnostic mock

More Regulation and financial crime questions