CAMS · Question #872
A financial institution is conducting an enterprise-wide risk assessment (EWRA) and has identified a high inherent risk of money laundering associated with its private banking division due to the…
The correct answer is B. The residual risk would be significantly reduced due to the effectiveness of the controls in place. Strong CDD, EDD, and advanced transaction monitoring can significantly reduce residual risk in high- risk areas like private banking. While no control fully eliminates risk, effective implementation and ongoing oversight can bring the residual risk down to an acceptable level…
Question
A financial institution is conducting an enterprise-wide risk assessment (EWRA) and has identified a high inherent risk of money laundering associated with its private banking division due to the clientele's high net worth and complex financial structures. However, the institution has implemented robust customer due diligence (CDD) and enhanced due diligence (EDD) procedures, along with sophisticated transaction monitoring systems. How would these controls impact the assessment of residual risk?
Options
- AThe residual risk would be eliminated entirely because the controls are sufficient to mitigate all
- BThe residual risk would be significantly reduced due to the effectiveness of the controls in place
- CThe residual risk would remain high due to the inherent nature of the private banking business
- DThe residual risk would be moderately reduced, but further controls may be necessary to achieve
How the community answered
(27 responses)- A7% (2)
- B74% (20)
- C15% (4)
- D4% (1)
Explanation
Strong CDD, EDD, and advanced transaction monitoring can significantly reduce residual risk in high- risk areas like private banking. While no control fully eliminates risk, effective implementation and ongoing oversight can bring the residual risk down to an acceptable level from its initially high inherent risk.
Topics
Community Discussion
No community discussion yet for this question.