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Answer: The bank must conduct enhanced due diligence (EDD) on the customer
## Explanation This question addresses customer due diligence requirements under anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. **Key Points:** - Jack Ryan is identified as a **high-risk customer** - He previously banked at a reputable institution - Quadstreet International Bank has a compliant customer acceptance policy **Correct Approach:** - When a customer is classified as high-risk, standard due diligence is insufficient - **Enhanced Due Diligence (EDD)** is required for high-risk customers regardless of their previous banking relationships - The fact that the previous bank is reputable does not eliminate the need for EDD on the new high-risk customer - EDD typically includes: - More detailed background checks - Source of wealth verification - Ongoing transaction monitoring - Senior management approval **Why Other Options Are Incorrect:** - **A & D**: Incorrect because high-risk status requires EDD, not basic due diligence - **B**: Incorrect because high-risk customers can be accepted with proper EDD - **E**: Incorrect because EDD is required on the customer, not necessarily on the previous bank - **F**: Incorrect because EDD should focus on the customer, not the previous bank **Regulatory Context:** Financial institutions must apply risk-based approaches, with EDD mandatory for high-risk customers under FATF recommendations and most national AML/CFT regulations.
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Q-31. A person named Jack Ryan has applied to open a new account at Quadstreet International Bank. The bank has a modern, well-established, and compliant customer acceptance policy. Immediately the bank is able to determine two facts: Jack is a high-risk customer, but he previously had an account at another large bank. Further, Quadstreet does conduct business with Jack's previous bank and considers it to be reputable. With respect to money laundering and terrorism financing (ML/FT), which of
A
The bank can accept the customer without any further due diligence because the previous bank is reputable
B
The bank must refuse the customer because he is high-risk
C
The bank must conduct enhanced due diligence (EDD) on the customer
D
The bank can accept the customer with only basic due diligence because the previous bank is reputable
E
The bank must conduct enhanced due diligence (EDD) on the customer and also on the previous bank
F
The bank can accept the customer but must conduct enhanced due diligence (EDD) on the previous bank