What is a key risk associated with Correspondent Accounts according to the Basel Customer Due Diligence paper?

Question

Options

• AIt is not used on a daily basis
• BThe service fees are insufficient to cover the cost of managing the account
• CThe respondent bank's customer acceptance and know your customer policies are ineffective
• DThe volume and value of transactions passing through the account may not be in line with the

• A
  3% (1)
• B
  7% (2)
• C
  79% (23)
• D
  10% (3)

Explanation

Banks should gather sufficient information about their respondent banks to understand fully the nature of the respondent's business. Factors to consider include: information about the respondent bank's management, major business activities, where they are located and its money- laundering prevention and detection efforts; the purpose of the account; the identity of any third party entities that will use the correspondent banking services; and the condition of bank regulation and supervision in the respondent's country. Banks should only establish correspondent relationships with foreign banks that are effectively supervised by the relevant authorities. For their part, respondent banks should have effective customer acceptance and KYC

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