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Explanation:
The correct answer is A.
The Basel Committee on Banking Supervision emphasizes that banks should implement ML/FT risk management frameworks that are consistent with the Core Principles for Effective Banking Supervision. Regularly updating protocols based on these core principles ensures that the bank's strategies align with global regulatory expectations and appropriately address evolving ML/FT threats.
B is incorrect. Effective ML/FT risk management requires a holistic approach that incorporates both internal transaction data and external sources of information, such as national risk assessments, FATF guidelines, and international reports, to accurately assess country and geographic risks.
C is incorrect. The Basel guidelines recommend a risk-based approach, which means mitigation strategies should be tailored to the specific level of risk presented by different customers, products, services, and geographies, rather than applying a singular uniform strategy across all operations.
D is incorrect. Managing ML/FT risks must be integrated into the bank's overall enterprise risk management framework. It requires active cross-collaboration among different business units, compliance, and internal audit (such as the Three Lines of Defense model), rather than operating in an isolated silo.
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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.