A bank maintains a number of United States (U.S.) dollar correspondent accounts for foreign financial institutions. Upon a routine review of a U.S. dollar correspondent account owned by Foreign Bank A, a number of transactions appear to have been originated by Foreign Bank B outside the expected activity for this account. These transactions appear suspicious and a suspicious transaction report was filed by the compliance officer.
Which step should the compliance officer take?
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A. B. C. D.C
The correct answer to this question is C: Notify Foreign Bank A of the discovery and seek documentation supporting Foreign Bank A was collusive and a willing partner with Foreign Bank B in the activity.
Explanation: A correspondent account is an account that one financial institution maintains with another financial institution to facilitate transactions in a foreign currency. The foreign financial institution is the customer of the correspondent bank, and the correspondent bank is responsible for monitoring the account for suspicious activity.
In this scenario, the compliance officer has discovered suspicious transactions in a correspondent account owned by Foreign Bank A. Upon further review, it appears that these transactions were originated by Foreign Bank B, which is outside the expected activity for this account.
The compliance officer should notify Foreign Bank A of the suspicious activity and seek documentation to support that it was collusive and a willing partner with Foreign Bank B in the activity. This approach would allow the compliance officer to investigate the situation further and gather additional information to determine if Foreign Bank A is involved in any illicit activity.
Option A, filing a report with the appropriate tax authorities, may not be the appropriate course of action in this scenario as tax authorities may not have the necessary jurisdiction or authority to investigate and address the suspicious activity.
Option B, notifying senior management of the money laundering risks by allowing Foreign Bank A to maintain its U.S. dollar correspondent account, does not address the suspicious activity and could result in the bank being exposed to additional risks.
Option D, notifying other U.S. financial institutions who maintain U.S. dollar correspondent accounts for Foreign Bank A and Foreign Bank B, may not be appropriate in this scenario as it may not provide the necessary information to investigate the suspicious activity or address the risks involved.