Factors Increasing Risk and Due Diligence for Correspondent Bank Customers | ACAMS Exam

CD

The Wolfsberg Anti-Money Laundering Principles for Correspondent Banking are a set of guidelines designed to help banks identify and manage risks associated with correspondent banking relationships. Correspondent banking relationships involve one bank providing services to another bank, typically in a different country, such as facilitating cross-border transactions or providing access to local markets.

To answer this question, we need to consider which factors increase the risk of a correspondent bank customer and require additional due diligence, according to the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking. The two factors that should increase the risk and require additional due diligence are:

1. The customer is located in a non-Financial Action Task Force (FATF) member country and services mostly commercial customers who engage in international trade.

Explanation: The FATF is an intergovernmental organization that sets international standards for combating money laundering and terrorist financing. Countries that are members of the FATF are considered to have higher AML/CFT standards than non-member countries. Therefore, if a correspondent bank customer is located in a non-FATF member country, this would increase the risk and require additional due diligence. Additionally, if the customer services mostly commercial customers who engage in international trade, this would also increase the risk, as such customers are more likely to be involved in cross-border transactions that could be used to launder money or finance terrorism.

2. The customer is located in a FATF member country and provides services to other correspondent banks in neighboring countries.

Explanation: If a correspondent bank customer is located in a FATF member country and provides services to other correspondent banks in neighboring countries, this would increase the risk and require additional due diligence. This is because correspondent banking relationships involving multiple countries and banks can create a higher risk of money laundering and terrorist financing. Additionally, if the customer is located in a FATF member country, this could suggest a higher AML/CFT risk due to the country's own risk profile, which could be compounded by the cross-border nature of the correspondent banking relationship.

Option A is incorrect because it suggests that a customer located in a FATF member country providing services primarily to a local individual customer would increase the risk and require additional due diligence. While providing services to local individual customers could pose a risk, this is not necessarily specific to correspondent banking relationships and would not on its own trigger additional due diligence.

Option B is incorrect because it suggests that the bank's head of information security being a politically exposed person would increase the risk and require additional due diligence. While politically exposed persons are generally considered higher risk, this is not directly related to correspondent banking relationships and would not on its own trigger additional due diligence.

Option C is correct because it suggests that a customer located in a FATF member country providing services to other correspondent banks in neighboring countries would increase the risk and require additional due diligence, as explained above.

Therefore, the correct answers are C and D.