Learning Objectives: Explain best practices recommended by the Basel committee for the assessment, management, mitigation, and monitoring of money laundering and financing of terrorism (ML/FT) risks. Describe recommended practices for the acceptance, verification, and identification of customers at a bank. Explain practices for managing ML/FT risks in a group-wide and cross-border context.
Questions:
24.1.1. A compliance officer at RevoWise, a fintech company recently granted a UK banking license, is tasked with reviewing the company's compliance framework. This review is particularly focused on the implementation of "Borderless Monitor," RevoWise's proprietary software, within their expanded services that now include multicurrency accounts and business banking. The officer is evaluating whether their compliance practices adhere to the Basel Committee's recommendations on combating money laundering (ML) and financing terrorism (FT).
Which of the following practices at RevoWise does NOT align with the Basel Committee's recommended best practices?
a. The "QuickVerify" system streamlines customer due diligence with a uniform global approach, eliminating duplications by foregoing country-specific adaptations.
b. "Borderless Monitor" flags atypical transactions in high-risk accounts for further review.
c. The chief compliance officer reports directly to the board and executive management.
d. All wire transfers include detailed sender and recipient information, reviewed manually and automatically.
24.1.2. As a compliance manager at St Aubin’s Fiduciaries Ltd. in Jersey, Channel Islands, you are responsible for auditing trust accounts to ensure compliance with strict AML and CFT standards. Your reviews focus on various accounts, from residents managing estate distributions to foreign politically exposed persons (PEPs) establishing complex trusts, particularly considering any high-risk factors or extensive transactions involved.
Which of the following trust accounts likely does NOT require Extra Due Diligence (EDD)?
a. A retired UK army general's trust for international property investments funded by large, diverse sources.
b. A local settlor's trust for regular, small family distributions, verified with local ID and utility bills, recently whose settlor is undergoing a legal dispute over inheritance.
c. A trust for an international businessman with assets in high-risk jurisdictions involving complex ownership structures.
d. A trust with undisclosed beneficial ownership, funds from a secretive jurisdiction.
24.1.3. As a compliance director at Global United Bank, you're overseeing the implementation of the Basel Committee's Three Lines of Defense model in managing ML/FT risks. The bank operates globally, especially in high-risk jurisdictions, and is updating its AML/CFT framework to better meet international standards.
Which observation most likely indicates a breach in the effective application of the Three Lines of Defense model in AML/CFT compliance at Global United Bank?
a. Management has started directly conducting customer due diligence for high-risk clients, bypassing the initial checks by less experienced customer-facing staff.
b. The internal audit division performs quarterly AML/CFT reviews and reports directly to the board’s audit committee.
c. The chief AML officer leads a team that reviews and strengthens controls established by customer-facing units, with direct access to executive management.
d. Branch-level customer service managers keep detailed transaction records and regularly screen for risk indicators, escalating suspicious cases to the risk management team.
Answers here:
Questions:
24.1.1. A compliance officer at RevoWise, a fintech company recently granted a UK banking license, is tasked with reviewing the company's compliance framework. This review is particularly focused on the implementation of "Borderless Monitor," RevoWise's proprietary software, within their expanded services that now include multicurrency accounts and business banking. The officer is evaluating whether their compliance practices adhere to the Basel Committee's recommendations on combating money laundering (ML) and financing terrorism (FT).
Which of the following practices at RevoWise does NOT align with the Basel Committee's recommended best practices?
a. The "QuickVerify" system streamlines customer due diligence with a uniform global approach, eliminating duplications by foregoing country-specific adaptations.
b. "Borderless Monitor" flags atypical transactions in high-risk accounts for further review.
c. The chief compliance officer reports directly to the board and executive management.
d. All wire transfers include detailed sender and recipient information, reviewed manually and automatically.
24.1.2. As a compliance manager at St Aubin’s Fiduciaries Ltd. in Jersey, Channel Islands, you are responsible for auditing trust accounts to ensure compliance with strict AML and CFT standards. Your reviews focus on various accounts, from residents managing estate distributions to foreign politically exposed persons (PEPs) establishing complex trusts, particularly considering any high-risk factors or extensive transactions involved.
Which of the following trust accounts likely does NOT require Extra Due Diligence (EDD)?
a. A retired UK army general's trust for international property investments funded by large, diverse sources.
b. A local settlor's trust for regular, small family distributions, verified with local ID and utility bills, recently whose settlor is undergoing a legal dispute over inheritance.
c. A trust for an international businessman with assets in high-risk jurisdictions involving complex ownership structures.
d. A trust with undisclosed beneficial ownership, funds from a secretive jurisdiction.
24.1.3. As a compliance director at Global United Bank, you're overseeing the implementation of the Basel Committee's Three Lines of Defense model in managing ML/FT risks. The bank operates globally, especially in high-risk jurisdictions, and is updating its AML/CFT framework to better meet international standards.
Which observation most likely indicates a breach in the effective application of the Three Lines of Defense model in AML/CFT compliance at Global United Bank?
a. Management has started directly conducting customer due diligence for high-risk clients, bypassing the initial checks by less experienced customer-facing staff.
b. The internal audit division performs quarterly AML/CFT reviews and reports directly to the board’s audit committee.
c. The chief AML officer leads a team that reviews and strengthens controls established by customer-facing units, with direct access to executive management.
d. Branch-level customer service managers keep detailed transaction records and regularly screen for risk indicators, escalating suspicious cases to the risk management team.
Answers here:
