Answer-first summary for fast verification
Answer: Internal and external auditors should evaluate the bank's risk controls to ensure that they are effective in managing ML/FT risk as well as compliant with regulations.
The correct answer is C. Internal and external auditors should both play an important role in independently evaluating the bank's risk controls, in order to ensure that they are effective in managing ML/FT risk, comply with the bank's policies and procedures for managing this risk, and also comply with regulatory requirements and supervisory guidance. This role is part of the third line of defense in managing ML/FT risk. Option A is incorrect because the chief AML/CFT officer should not have business line responsibilities to prevent potential conflicts of interest with the business lines from occurring. Also, the chief AML/CFT officer is part of the second line of defense, and day-to-day management of these risks within business lines should be performed by the business lines themselves as part of the first line of defense. Option B is incorrect because the chief AML/CFT officer should have the responsibility to serve as the primary point of contact with regulatory supervisors and financial intelligence units on any issues related to ML/FT risk. Option D is incorrect because screening of current and prospective employees should be part of the first line of defense, and should therefore be performed by staff and management of the business lines.
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
No comments yet.
As the Chief Risk Officer (CRO) of a regional bank, you have observed that several competing banks have faced regulatory fines for insufficient management of risks linked to money laundering and terrorism financing (ML/FT). Concerned about the potential repercussions for your bank, you aim to strengthen the bank's risk management framework concerning ML/FT. Taking into consideration the Basel Committee's guidelines on managing ML/FT risks, you are exploring the implementation of industry best practices within various business functions, ensuring robust controls across all three lines of defense. What would be the most appropriate recommendation for the CRO to propose in order to effectively address ML/FT risks?
A
The chief officer in charge of ML/FT risk should be responsible for monitoring and managing these risks within each of the business lines on a daily basis.
B
The CRO should serve as the primary point of contact with regulatory supervisors and financial intelligence units on any issues related to ML/FT risk.
C
Internal and external auditors should evaluate the bank's risk controls to ensure that they are effective in managing ML/FT risk as well as compliant with regulations.
D
The corporate operational risk function should screen current and prospective employees as part of the second line of defense in managing ML/FT risk.