While conducting a review of a medium-risk customer, an analyst noted that a newly added authorized signatory is a foreign politically exposed person (PEP). Which is the appropriate next step for…

Question

Options

• AReview beneficial ownership to finalize the risk category of the customer.
• BRemove the PEP as the authorized signatory.
• CRe-categorize the customer as high-risk.
• DCategorize the authorized PEP signatory as high-risk.

• A
  71% (27)
• B
  5% (2)
• C
  5% (2)
• D
  18% (7)

Explanation

According to the FATF Guidance on Politically Exposed Persons1, financial institutions should assess the money laundering and terrorist financing risks associated with a business relationship or transaction with a PEP, their family members and close associates, on a case-by-case basis. This includes obtaining information on the source of wealth and source of funds of the customer and the beneficial owner, as well as conducting enhanced ongoing monitoring of the business relationship. Therefore, the appropriate next step for the analyst is to review the beneficial ownership of the customer to determine if the PEP or any other person poses a higher risk, and to apply additional measures accordingly. Removing the PEP as the authorized signatory, re- categorizing the customer as high-risk, or categorizing the authorized PEP signatory as high-risk are not necessarily required or sufficient steps, as they do not take into account the specific circumstances and risk factors of the customer and the PEP.

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