An institution has made the decision to exit a client relationship due to anti-money laundering concerns. Prior to starting the close out process, the institution receives a written request from a law enforcement agency to keep the account open. The client is the subject of an ongoing investigation and law enforcement wants the institution to continue to monitor the account and report any suspicious activity.
What is a primary consideration the institution should keep in mind when deciding whether to agree to this request?
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A. B. C. D.D
When an institution has made the decision to exit a client relationship due to anti-money laundering (AML) concerns, it means that the institution has identified a potential risk of money laundering or terrorist financing associated with the client's account. The institution has determined that it cannot continue to manage this risk effectively and has decided to end the relationship.
However, in some cases, a law enforcement agency may request that the institution keep the account open, particularly if the client is the subject of an ongoing investigation. Law enforcement may want the institution to continue to monitor the account and report any suspicious activity that may be detected.
In such a scenario, the institution needs to carefully consider the request before agreeing to keep the account open. One primary consideration that the institution should keep in mind is whether it can continue to meet its regulatory obligations with the account open. This means that the institution must ensure that it can continue to effectively monitor and manage the AML risks associated with the account.
If the institution cannot meet its regulatory obligations with the account open, it may be in violation of AML laws and regulations, which could result in regulatory sanctions and reputational damage. Therefore, the institution should assess whether it has the necessary resources, technology, and expertise to continue to monitor the account effectively.
The anticipated cost of complying with the law enforcement request is also a consideration, but it should not be the primary consideration. While the institution may incur additional costs to keep the account open and monitor it for suspicious activity, the cost should be weighed against the potential risk of non-compliance.
Similarly, the number of suspicious transaction reports previously filed on the client is relevant but not determinative. The fact that the institution has a solid record in complying with law enforcement requests is also important, but it should not be the sole factor in the institution's decision-making.
In summary, when deciding whether to agree to a law enforcement request to keep an account open despite AML concerns, an institution should carefully consider its ability to meet its regulatory obligations, the potential cost of compliance, the history of the client's transactions, and its compliance record.