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CAMS · Question #576

A bank in an offshore jurisdiction approaches an institution about opening a new correspondent banking relationship. Prior to opening the account, the new account representative obtains copies of…

The correct answer is C. 2 and 3 only. The Basel Committee on Banking Supervision's Customer Due Diligence for Banks Paper recommends that banks should verify the bank has a physical presence in the country where it is incorporated and confirm the bank is subject to regulatory supervision with adequate anti-money…

AML/CFT Compliance Programs

Question

A bank in an offshore jurisdiction approaches an institution about opening a new correspondent banking relationship. Prior to opening the account, the new account representative obtains copies of the offshore bank's anti-money laundering policies and procedures, and all appropriate legal documentation for the bank; ascertains no third parties will be able to access the accounts; and determines the owners of the bank, the bank's primary business activities, and the business address of the bank. Which of the following steps does the Basel Committee on Banking Supervision's Customer Due Diligence for Banks Paper recommend the banker take prior to opening Oils correspondent account? 1. Conduct a site visit and meet all the principals and beneficial owners in person. 2. Verify the bank has a physical presence in the country where it is incorporated. 3. Confirm the bank is subject to regulatory supervision with adequate anti-money laundering laws. 4. Obtain and maintain a complete listing of the correspondent bank's customers, including politically exposed persons.

Options

  • A1 and 2 only
  • B1 and 4 only
  • C2 and 3 only
  • D3 and 4 only

How the community answered

(38 responses)
  • A
    13% (5)
  • B
    8% (3)
  • C
    74% (28)
  • D
    5% (2)

Explanation

The Basel Committee on Banking Supervision's Customer Due Diligence for Banks Paper recommends that banks should verify the bank has a physical presence in the country where it is incorporated and confirm the bank is subject to regulatory supervision with adequate anti-money laundering laws before opening a correspondent account. These steps are intended to prevent the establishment of relationships with shell banks, which are banks that have no physical presence in any country and are not affiliated with a regulated financial group. Shell banks pose a high risk of money laundering and terrorist financing, as they can be used to hide the identity and source of funds, evade regulatory oversight, and facilitate illicit transactions. Therefore, banks should conduct enhanced due diligence on correspondent banks that operate in offshore jurisdictions, where the regulatory standards and transparency may be lower or insufficient.

Topics

#correspondent banking#customer due diligence#Basel Committee#CDD gaps

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