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FRM Part II · FRM Exam Part II · Sound Management of Risks Related to Money Laundering and Financing of Terrorism

Which of the following is the best example of an ML/FT risk factor that a bank should consider when assessing the inherent risk of its product and service offerings?

Products that allow anonymous or high-value transactions, fast movement of funds, or non-face-to-face use carry higher inherent ML/FT risk because they ease concealment of illicit funds. Staff numbers, dividend payout and website design are unrelated to how criminals exploit products.

  1. AThe bank's number of branch employees
  2. BProducts that allow high-value or anonymous transactions, rapid movement of funds, or non-face-to-face useCorrect
  3. CThe bank's historic dividend payout ratio
  4. DThe colour scheme of the bank's online portal

Explanation

Inherent ML/FT risk is driven by features such as anonymity, high value, speed of fund movement and non-face-to-face delivery, which facilitate concealment of illicit funds. Staff numbers, dividend policy and portal design are not ML/FT risk drivers.

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