A financial institution has expanded its scope of services so that it is attracting the business of politically exposed persons (PEPs) who had previously never been part of the customer base.
Which two courses of action should the compliance officer include in the institution's procedures for considering PEPs as customers? (Choose two.)
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A. B. C. D.AB
The correct answers to the question are A and C.
A. Conduct enhanced ongoing monitoring of the business relationship:
When a financial institution attracts PEPs who had previously never been part of the customer base, the institution should conduct enhanced ongoing monitoring of the business relationship to identify any suspicious activities that may indicate money laundering or terrorist financing. Enhanced due diligence measures should also be applied to monitor and assess the customer's activities to detect any red flags or unusual transactions. This helps the institution to mitigate the higher risk of money laundering and terrorist financing that is associated with PEPs.
B. Expedite due diligence when a PEP is pre-approved by a member of senior management:
Expedited due diligence for PEPs who have been pre-approved by a member of senior management may be appropriate in some cases, but it is not a recommended course of action in general. Expedited due diligence can be useful in situations where the PEP is low risk and the institution has determined that it is not necessary to conduct enhanced due diligence. However, pre-approval by senior management alone is not a sufficient basis for expediting the due diligence process.
C. Obtain appropriate senior management approval for establishing a business relationship with a PEP from a high-risk country:
Financial institutions should obtain appropriate senior management approval for establishing a business relationship with a PEP from a high-risk country. A high-risk country is one that has been identified as having a higher risk of money laundering and terrorist financing. The senior management should assess the risks associated with the PEP's business relationship and determine whether the institution has the capacity to manage these risks. Senior management approval should also be documented in the institution's records.
D. Take adequate measures to establish the source of wealth and source of funds involved in the business relationship or occasional transaction:
When establishing a business relationship with a PEP, financial institutions should take adequate measures to establish the source of wealth and source of funds involved in the business relationship or occasional transaction. This includes conducting thorough due diligence, identifying any unusual or suspicious activities, and assessing the risks associated with the PEP's business relationship. Financial institutions should also verify the PEP's source of wealth and source of funds to ensure that they are legitimate and not linked to money laundering or terrorist financing activities. However, this is not one of the recommended courses of action for considering PEPs as customers.