Explanation:
Under FATF and Basel Committee guidelines, a bank may rely on third-party financial institutions to perform customer due diligence (CDD) provided that the third party is a supervised bank or financial institution subject to equivalent regulation, supervision, and monitoring for AML/CFT compliance. The bank can rely on them regardless of the specific nature of the third party's relationship with the customer, as long as the stringent regulatory and supervisory equivalence criteria are met. The ultimate responsibility for CDD measures always remains with the bank relying on the third party, not the third party itself.
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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.
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