According to experts, what is the most effective way to prevent money laundering through financial institutions?

Question

Options

• AEnsuring that transaction monitoring systems can identify terrorist financing
• BCollecting information on beneficial owners and foreign customers
• CInstituting a policy prohibiting the acceptance of funds intended for terrorist financing
• DImplementing a sound customer due diligence program

• A
  4% (1)
• B
  7% (2)
• C
  15% (4)
• D
  74% (20)

Explanation

Implementing a sound customer due diligence (CDD) program is the most effective way to prevent money laundering through financial institutions, according to experts. CDD is the process of identifying and verifying the identity of customers and assessing their risk profile, source of funds, and expected activity. CDD helps financial institutions to detect and prevent money laundering by enabling them to know their customers, monitor their transactions, and report any suspicious or unusual behavior. CDD is also a key requirement of the international standards and best practices for anti-money laundering and combating the financing of terrorism (AML/CFT), such as the Financial Action Task Force (FATF) Recommendations and the Basel Committee on Banking Supervision (BCBS) Guidelines.

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