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Answer: Require the bank's business units to screen potential employees as part of the first line of defense in managing ML/FT risk.
The correct answer is A. The bank should require its business units to screen potential employees as part of the first line of defense in managing money laundering and financial terrorism (ML/FT) risk. This approach is aligned with best practices as it involves the business units in identifying, assessing, and controlling ML/FT risks. They should have written policies and procedures in place, along with employee training for managing these risks. This proactive measure helps to ensure that the bank's operations are not compromised by individuals who may pose a risk of engaging in illicit activities. Option B is incorrect because monitoring for ML/FT risk should encompass all accounts and transactions, not just those above a certain threshold. This ensures a comprehensive approach to risk management. Option C is also incorrect. Politically exposed persons (PEPs) are actually considered to pose a higher ML/FT risk due to the potential that some of their wealth may have been obtained through corrupt practices. Therefore, they should not be excluded from screening. Lastly, option D is not the most appropriate action. While compliance and legal functions play a crucial role, it is recommended to appoint a chief ML/FT officer to lead the bank's management of ML/FT risk. Ideally, the risk should be managed using a three lines of defense approach, which involves multiple business functions, not just compliance and legal.
Author: LeetQuiz Editorial Team
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In the context of improving the bank's strategies to combat money laundering and financial terrorism (ML/FT) risks, consider the following scenario: The bank's risk committee is currently deliberating on this objective and seeks to align its approach with industry best practices. What would be the most suitable recommendation for the bank to enhance its ML/FT risk management strategies accordingly?
A
Require the bank's business units to screen potential employees as part of the first line of defense in managing ML/FT risk.
B
Establish a threshold transaction value and review all transactions above this threshold for evidence of ML/FT.
C
Exclude politically exposed persons (PEPs) from screening for ML/FT risk due to their much lower ML/FT risk.
D
Give the compliance and legal functions the primary responsibility for managing ML/FT risk.