Is Screening Customers Enough to Ensure Compliance?

B

The correct answer to the question is A. No, screening should occur promptly after list updates.

To understand why this answer is correct, let's break down the options and their implications:

A. No, screening should occur promptly after list updates: This answer acknowledges that screening customers at onboarding and quarterly thereafter is a necessary step but emphasizes the importance of promptly conducting screenings after list updates. Economic sanctions lists are subject to frequent updates, with new individuals or entities being added or removed. Therefore, to ensure compliance, financial institutions must promptly screen their customers against the most up-to-date lists to identify any newly sanctioned individuals or entities. Delaying the screening process after list updates could pose a compliance risk.

B. Yes, this is recommended by the international guidance: This answer is incorrect because international guidance does not solely recommend screening customers at onboarding and quarterly thereafter. While periodic screenings are indeed a recommended practice, it is not sufficient to ensure compliance on its own.

C. No, it is necessary to screen and perform enhanced due diligence on new relationships: This answer focuses on the need to perform enhanced due diligence on new relationships, which is an additional step beyond simple screening. Enhanced due diligence involves gathering more in-depth information about the customer, assessing the risk associated with the relationship, and applying a higher level of scrutiny. While this is an important measure, the question specifically asks about ensuring compliance with economic sanctions, not comprehensive due diligence. Therefore, this answer is not the most accurate in the given context.

D. Yes, screening all existing customer relationships ensures the institution is not dealing with a sanctioned individual or entity: This answer is incorrect because it overlooks the need for prompt screenings after list updates. While screening existing customer relationships is important, it does not account for the possibility of new sanctions being imposed or updates to the existing lists. Without promptly screening after list updates, the institution may miss identifying newly sanctioned individuals or entities, leading to potential compliance breaches.

In summary, the most accurate answer is A. No, screening should occur promptly after list updates. While the other options address important aspects of compliance, they either do not fully address the question's requirements or fail to consider the necessity of prompt screenings after list updates to ensure compliance with economic sanctions.