C is correct. Internal and external auditors should both play an important role in independently evaluating the bank’s risk controls, in order to ensure that they are effective in managing ML/FT risk, comply with the bank’s policies and procedures for managing this risk, and also comply with regulatory requirements and supervisory guidance. This role is part of the third line of defense in managing ML/FT risk.

A is incorrect. The chief AML/CFT (anti-money laundering/counter-financial terrorism) officer should not have business line responsibilities to prevent potential conflicts of interest with the business lines from occurring. Also, the chief AML/CFT officer is part of the second line of defense, and day-to-day management of these risks within business lines should be performed by the business lines themselves as part of the first line of defense.

B is incorrect. The chief AML/CFT officer should have this responsibility.

D is incorrect. Screening of current and prospective employees should be part of the first line of defense and should therefore be performed by staff and management of the business lines.

Learning Objective: Explain best practices recommended by the Basel committee for the assessment, management, mitigation, and monitoring of money laundering and financing of terrorism (ML/FT) risks.

Reference: "Sound Management of Risks related to Money Laundering and Financing of Terrorism" (Basel Committee on Banking Supervision, January 2014, revised July 2020). (through p.16, para. 83)