The 2022 report by the Financial Conduct Authority (FCA) on the examination of financial crime controls at challenger banks highlighted that these banks need to enhance their systems for identifying and verifying customer information. The report underscored the risk associated with the rapid account opening process offered by these banks. The information collected during this process may not be sufficient to identify customers who pose a higher risk, thereby making it challenging for these banks to effectively manage their Anti-Money Laundering (AML) risks. As a result, the regulators have recommended that challenger banks bolster their systems for identifying and verifying customer information to better manage their AML risks and prevent financial crimes.

Choice A is incorrect. The report did not conclude that challenger banks perform better than traditional banks in identifying higher-risk customers. In fact, the FCA's examination found that these digital banks need to improve their systems for identifying and verifying customer information, which includes the identification of higher-risk customers.

Choice C is incorrect. Regardless of whether a bank operates digitally or traditionally, it is required to follow Anti-Money Laundering (AML) regulations. The mode of operation does not exempt any financial institution from adhering to these regulations.

Choice D is incorrect. The FCA's report did not suggest that traditional banks are more susceptible to financial crime than challenger banks. The susceptibility to financial crime depends on the effectiveness of a bank's financial crime controls and not its mode of operation.