Explanation:
The correct answer is A.
Detailed Explanation:
A is correct: The Basel Committee's guidelines on ML/FT (Money Laundering and Financing of Terrorism) emphasize that banks should incorporate the Core Principles for Effective Banking Supervision into their risk management protocols. Regularly updating protocols based on these principles ensures that ML/FT risk management is robust, comprehensive, and continuously aligned with global supervisory standards.
B is incorrect: Effective ML/FT risk assessment requires combining internal transaction data with external intelligence (such as international risk assessments, country reports, and sanctions lists) to comprehensively identify and evaluate risks. Relying solely on internal data leaves the bank vulnerable to broader systemic and global threats.
C is incorrect: ML/FT risks are dynamic and vary significantly depending on factors such as geography, customer types, products, and delivery channels. The Basel guidelines mandate a risk-based approach, which inherently requires diverse, proportionate, and tailored mitigation strategies rather than a singular, one-size-fits-all approach.
D is incorrect: Effective ML/FT risk management requires an enterprise-wide approach with strong communication and cross-collaboration across various business lines and control functions. Siloing these tasks prevents a holistic view of the risks and compromises the bank's defensive posture.
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Q.5453 Global Trust Bank is a rapidly growing financial institution with an expanding international clientele. To ensure its continued growth and maintain its reputation, the bank's senior management has stressed the importance of strict adherence to global best practices in managing risks. As part of this strategy, they are revising their guidelines on combating money laundering and financing of terrorism (ML/FT). Ms. Carter, the bank's Head of Risk and Compliance, is overseeing the revision process and has sought input from her team on how best to align their strategies with the Basel committee's recommendations. Which of the following strategies, based on the Basel committee's best practices, would best enhance Global Trust Bank's approach to ML/FT risk management?
A
Regularly update bank protocols based on core principles for effective banking supervision.
B
Limit the bank's reliance on external sources, focusing on internal transaction data for ML/FT risk assessment.
C
Develop a singular mitigation strategy for all ML/FT risks, ensuring uniformity across all operations.
D
Designate the ML/FT risk management tasks to a specific department without cross-collaboration with other bank units.