Explanation:
Under international regulatory frameworks, such as the Basel Committee guidelines and FATF Recommendations, banks are allowed to rely on third parties (e.g., introducers) to perform portions of the Customer Due Diligence (CDD) process. A primary condition for this reliance is that the third party must have an established business relationship with the customer and have already applied adequate CDD measures. Additionally, the ultimate responsibility for CDD remains with the bank, and the third party must be subject to equivalent levels of regulation and supervision (invalidating Option C). Relying on a third party "regardless of the nature of the relationship" is incorrect, making Option B false. Option D is incorrect because the process must be equivalent and compliant, not necessarily "more comprehensive." Option A is the recognized operational condition for introduced business CDD.
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Q.68 In the realm of financial regulation, banks are required to conduct thorough customer due diligence (CDD) to prevent money laundering and other illicit activities. This process involves verifying the identity of customers and assessing their risk profiles. Given the complexities and resource demands of this task, banks sometimes seek external assistance. Under what circumstances may a bank rely on a third party for customer due diligence (CDD)?
A
When the third party has an established business relationship with the customer.
B
When the third party is a bank or financial institution, regardless of the nature of the relationship with the customer.
C
When the third party is subject to different levels of supervision and regulation than the bank, but is able to demonstrate a strict AML/CFT program.
D
When the bank conducts periodic checks to ensure the third party’s CDD process is more comprehensive than its own.