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.