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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.
**Correct Answer: A** **Explanation:** - **A is correct** because as part of the first line of defense, business units must identify, assess, and control ML/FT risks, have written policies and procedures as well as employee training for managing ML/FT risk, and screen potential employees. - **B is incorrect** because monitoring for ML/FT risk should cover all accounts and transactions, not just those above a certain threshold. - **C is incorrect** because politically exposed persons (PEPs) pose higher ML/FT risk given the possibility that some wealth may have been obtained through corruption. - **D is incorrect** because a chief ML/FT officer should be appointed to lead the bank's management of ML/FT risk, and ideally ML/FT risk should be managed using a three lines of defense approach involving multiple business functions. **Learning Objective:** Explain best practices recommended for the assessment, management, mitigation and monitoring of money laundering and financial terrorism (ML/FT) risks. **Reference:** Mark Carey "Management of Risks Associated with Money Laundering and Financing of Terrorism," GARP Risk Institute, February 2019.
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The board of directors at a large bank wants to improve the bank's practices for managing money laundering and financial terrorism (ML/FT) risk. The risk committee of the bank meets to discuss ways to achieve this objective that conform to best practices. Which of the following actions would be most appropriate for the bank to recommend?
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.
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