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

Which statement about ongoing due diligence of existing customers is most consistent with the Basel Committee's guidance?

Banks should keep customer information up to date and review it on a risk-sensitive basis, with trigger events prompting earlier refreshes. Due diligence is continuous rather than a one-off at onboarding, all customers are monitored to some degree, and business lines share responsibility with compliance.

  1. ACustomer information needs to be collected only at account opening
  2. BOnly customers classified as high risk require any monitoring
  3. CMonitoring is the responsibility of the compliance function alone, with no role for business lines
  4. DBanks should keep customer records up to date and review them on a risk-sensitive basis, with trigger events prompting earlier updatesCorrect

Explanation

Ongoing due diligence requires current customer information, with review frequency tied to risk and triggers such as unusual transactions or changes in ownership. Collecting data only at onboarding is inadequate. All customers need some monitoring, and business lines hold the first-line responsibility.

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