Money laundering can cause which consequences for a FI? (Choose two.)
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A. B. C. D. E.DE
Money laundering can have several consequences for financial institutions (FIs), including regulatory and reputational risks, financial losses, and legal liabilities. Among the listed answer choices, the two consequences that are most commonly associated with money laundering are:
A. Reduction or loss of profitable business: When an FI is found to be involved in money laundering activities, it can result in a loss of customer confidence and trust. As a result, customers may choose to take their business elsewhere, leading to a reduction or loss of profitable business. This can be especially damaging if the FI is heavily reliant on a few large clients or a particular market segment.
E. Increases in investigation costs and fines: Money laundering investigations can be costly and time-consuming for FIs, as they may be required to conduct internal investigations, report suspicious transactions, and cooperate with law enforcement agencies. In addition, FIs may be subject to fines and penalties for failing to comply with anti-money laundering (AML) regulations. These fines can be substantial, and may result in significant financial losses for the institution.
B, C, and D are not directly related to money laundering consequences for FIs. Increases in correspondent banking facilities may be a consequence of business growth or expansion, but they are not necessarily linked to money laundering. Reduction in the number of employees may be a consequence of cost-cutting measures or restructuring, but it is not directly related to money laundering. Increases in corporate taxes may be a consequence of changes in tax laws or regulations, but they are not a direct result of money laundering.
In summary, money laundering can cause a reduction or loss of profitable business and increases in investigation costs and fines for FIs.