Which key factor would result in the decision for a financial institution (FI) to exit a client relationship?
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A. B. C. D.A
Sure, I'd be happy to provide a detailed explanation of the answer choices.
A. After assessing all risk factors the level of residual client risk exceeds the FI's risk appetite.
This answer choice suggests that a financial institution (FI) may decide to exit a client relationship if, after assessing all risk factors, the level of residual client risk exceeds the FI's risk appetite. In other words, if a client poses too much risk to the FI, the FI may decide to end the relationship. This could be due to a number of factors, such as the client engaging in suspicious activity or having a history of non-compliance with anti-money laundering (AML) regulations. The FI may determine that the risk posed by the client is too high for them to continue doing business with them.
B. The client is a registered charity known to remit funds to high risk geographies where there is limited due diligence information available.
This answer choice suggests that a financial institution (FI) may decide to exit a client relationship if the client is a registered charity known to remit funds to high risk geographies where there is limited due diligence information available. Charities can be used as a front for money laundering, and if the charity is sending funds to high risk geographies, the risk of money laundering or terrorist financing is increased. If there is limited due diligence information available on the recipient of the funds, the FI may determine that it is too risky to continue doing business with the charity and may decide to end the relationship.
C. Closing the client accounts will help reduce the number of transaction monitoring alerts.
This answer choice suggests that a financial institution (FI) may decide to exit a client relationship in order to reduce the number of transaction monitoring alerts. While it is important for FIs to monitor transactions for suspicious activity, if a particular client is generating a large number of alerts that are ultimately determined to be false positives, the FI may decide that it is not worth the time and resources to continue monitoring that client's transactions. However, this is not a sufficient reason in and of itself for an FI to exit a client relationship.
D. Client transactions generate ongoing transaction monitoring alerts that did not result in any SAR/STR filings.
This answer choice suggests that a financial institution (FI) may decide to exit a client relationship if the client's transactions generate ongoing transaction monitoring alerts that did not result in any suspicious activity reports (SARs) or suspicious transaction reports (STRs) being filed. If a client is consistently generating alerts but those alerts do not result in any reports being filed, it may indicate that the FI's transaction monitoring system is not effective in detecting suspicious activity related to that client. The FI may determine that it is too risky to continue doing business with the client and may decide to end the relationship.
In summary, answer choice A is the best answer as it is the most comprehensive and takes into account all risk factors. Answer choices B, C, and D may also be reasons for an FI to exit a client relationship, but they are not as comprehensive or indicative of overall risk posed by the client.