Bypass Situations for Enhanced Due Diligence

A

Enhanced due diligence (EDD) is a more comprehensive and intensive review process used to evaluate and monitor high-risk customers, transactions, or business relationships. The EDD process requires an understanding of the customer's background and business activities, as well as the potential risks associated with the relationship.

The question asks which situation allows for the bypassing of EDD. Let's examine each answer choice:

A. On-boarding a branch or majority-owned subsidiary of an EU or US FI located in a high-risk third country that fully complies with group-wide policies and procedures.

This answer choice describes on-boarding a branch or subsidiary of a financial institution (FI) located in a high-risk third country. However, the FI is majority-owned by an EU or US entity and is in compliance with group-wide policies and procedures. In this case, the parent company has already implemented and enforced adequate AML/CFT policies and procedures, which can mitigate the risks associated with on-boarding the subsidiary. Therefore, this answer choice allows for the bypassing of EDD.

B. On-boarding a subsidiary in a high-risk country with a complex ownership structure of a long-standing and reputable customer based in the EU or US.

This answer choice describes on-boarding a subsidiary in a high-risk country with a complex ownership structure. The subsidiary belongs to a long-standing and reputable customer based in the EU or US. However, this answer choice does not mention whether the customer's AML/CFT policies and procedures comply with international standards. Therefore, this situation does not allow for the bypassing of EDD.

C. On-boarding a casino headquartered in the EU or US that is part of an international hotel chain, provides less than 50% of overall revenue, and that fully complies with group-wide policies and procedures.

This answer choice describes on-boarding a casino that is part of an international hotel chain, headquartered in the EU or US, and providing less than 50% of overall revenue. The casino complies with group-wide policies and procedures. In this case, the parent company has already implemented and enforced adequate AML/CFT policies and procedures, which can mitigate the risks associated with on-boarding the casino. Therefore, this answer choice allows for the bypassing of EDD.

D. On-boarding a reputable Politically Exposed Person (PEP) from the EU onto the wealth management arm of a US financial institution (FI).

This answer choice describes on-boarding a reputable Politically Exposed Person (PEP) from the EU onto the wealth management arm of a US financial institution (FI). PEPs are considered high-risk customers due to their potential for bribery, corruption, or other financial crimes. Therefore, this situation does not allow for the bypassing of EDD.

In conclusion, the correct answer is A and C as these answer choices allow for the bypassing of EDD. Answer choice B requires further due diligence, and answer choice D does not allow for the bypassing of EDD.