The bank's Compliance Officer is tasked with designing standards based on Basel's KYC principles. Which essential elements should be included in the program?
(Choose two.)
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A. B. C. D. E.CE
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As the Compliance Officer of a bank, designing standards based on Basel's KYC (Know Your Customer) principles is an important task. The KYC principles are a set of guidelines that help financial institutions to identify and verify the identity of their customers, and assess the risks associated with doing business with them. By complying with these principles, banks can reduce their exposure to money laundering, terrorist financing, and other financial crimes.
The two essential elements that should be included in the program are:
B. Conducting a money laundering risk assessment: A money laundering risk assessment is a key component of any effective AML (Anti-Money Laundering) program. It involves identifying and assessing the risks of money laundering and terrorist financing that are associated with a bank's customers, products, services, and geographic locations. By conducting a risk assessment, the bank can identify high-risk areas and take appropriate measures to mitigate the risks. The risk assessment should be conducted periodically to ensure that it remains up-to-date.
C. Documenting a customer acceptance policy: A customer acceptance policy is a set of guidelines that helps the bank to determine whether to accept a customer or not. The policy should include procedures for verifying the customer's identity, assessing their risk profile, and conducting ongoing monitoring. By documenting the policy, the bank can ensure that it is consistent and transparent, and that it is being followed by all employees. The policy should be reviewed periodically to ensure that it remains up-to-date.
The other options are also important components of an effective AML program, but they are not essential elements of the KYC principles. Here is a brief explanation of each option:
A. Appointing an independent audit function: An independent audit function is responsible for reviewing the bank's AML program to ensure that it is effective and compliant with applicable laws and regulations. While this is an important component of an effective AML program, it is not specifically required by the KYC principles.
D. Establishing on-going monitoring of high-risk accounts: Ongoing monitoring of high-risk accounts is important to detect suspicious activity and to ensure that the customer's risk profile remains up-to-date. While this is an important component of an effective AML program, it is not specifically required by the KYC principles.
E. Reporting suspicious activity: Reporting suspicious activity is a key component of an effective AML program. It involves identifying and reporting suspicious transactions to the relevant authorities. While this is an important component of an effective AML program, it is not specifically required by the KYC principles.