A customer opens a corporate account with a broker-dealer on behalf of several beneficial owners, with a stated long-term investment goal. The customer deposits $25.5 million into the account and three days later transfers $5 million to an overseas bank. Shortly thereafter, the customer begins making numerous purchases of pesos. The compliance officer receives a query regarding the movement of funds. Within a month of account opening, the customer depletes the account.
Which two red flags should prompt the firm's compliance officer to take action? (Choose two.)
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A. B. C. D.CD
Based on the information provided, there are several red flags that should prompt the firm's compliance officer to take action. The two most significant red flags are:
A. The new account deposit is $25.5 million: This is a significant amount of money to deposit into a new account, especially considering that the account was opened on behalf of several beneficial owners with a stated long-term investment goal. Such a large deposit could suggest that the funds may be coming from an illicit source, such as proceeds from criminal activity. As such, the compliance officer should conduct enhanced due diligence on the account to ensure that the funds are legitimate and to identify any potential sources of illicit activity.
D. The customer's stated investment goal is not reflective of account activity: The fact that the customer has depleted the account within a month of opening it suggests that their stated investment goal was not reflective of their actual intentions. The customer's activity, including the transfer of funds overseas and the purchase of pesos, may indicate an attempt to move funds out of the country or to engage in currency speculation. As such, the compliance officer should investigate the customer's activity to ensure that it is consistent with their stated investment goal and to identify any potential suspicious activity.
B. A corporate account is opened on behalf of several beneficial owners: This is also a potential red flag, as it may be an attempt to obscure the true ownership of the account and the source of the funds. However, without further information, it is difficult to determine whether this is indicative of suspicious activity.
C. The compliance officer receives a query regarding the movement of funds: While this is an important piece of information, it is not necessarily a red flag in and of itself. The compliance officer should investigate the query to determine the nature of the concerns and whether they are indicative of suspicious activity.
In summary, based on the information provided, the two red flags that should prompt the firm's compliance officer to take action are the significant deposit of $25.5 million into a new account and the customer's activity not being consistent with their stated investment goal. However, further investigation is required to determine whether the other potential red flags are indicative of suspicious activity.