Which are essential elements of a KYC program identified by the Basel Committee on Banking Supervision? (Choose two.)
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A. B. C. D. E.CE
The essential elements of a Know Your Customer (KYC) program identified by the Basel Committee on Banking Supervision include:
C. Risk management: Risk management is a crucial component of a KYC program. It involves assessing and understanding the risks associated with potential money laundering and terrorist financing activities that a financial institution may encounter. This includes evaluating the risk profiles of customers, products, services, and geographic locations. The risk management element of a KYC program ensures that appropriate measures are in place to identify, monitor, and mitigate these risks effectively.
E. Customer acceptance policy: A customer acceptance policy is another essential element of a KYC program. It establishes the criteria and procedures for accepting or rejecting customers. The policy outlines the information and documentation required from customers during the onboarding process, as well as the due diligence measures that need to be performed. A well-defined customer acceptance policy ensures that financial institutions have a clear framework for assessing the suitability and integrity of their customers, reducing the risk of facilitating illicit activities.
Although all the options mentioned in the question (A, B, D) are important in the overall governance and compliance framework of a financial institution, they are not specifically identified as essential elements of a KYC program by the Basel Committee on Banking Supervision.
A. Risk appetite: While risk appetite refers to an organization's willingness to accept risk in pursuit of its objectives, it is not a direct element of a KYC program. However, the risk appetite of a financial institution may influence the development and implementation of its KYC policies and procedures.
B. Code of conduct: A code of conduct establishes ethical standards and guidelines for employees of a financial institution. While a code of conduct is important for ensuring integrity and ethical behavior, it is not specifically identified as an essential element of a KYC program by the Basel Committee on Banking Supervision.
D. Internal control: Internal control refers to the system of policies, processes, and procedures implemented by an organization to ensure that its operations are effective, efficient, and compliant with applicable laws and regulations. While internal control is crucial for overall risk management and compliance, it is not specifically identified as an essential element of a KYC program by the Basel Committee on Banking Supervision.
Therefore, based on the options provided, the essential elements of a KYC program identified by the Basel Committee on Banking Supervision are risk management (C) and customer acceptance policy (E).