A bank located in New York has identified suspicious transactions at a correspondent bank in China. For one of the international customers, the correspondent bank is not following agreed upon protocols.
Which factor indicates that the bank should terminate the relationship?
Click on the arrows to vote for the correct answer
A. B. C. D.C
In this scenario, a bank located in New York has identified suspicious transactions at a correspondent bank in China. The correspondent bank is not following the agreed-upon protocols for one of the international customers. The question asks which factor indicates that the bank should terminate the relationship. Let's analyze each answer option to determine the correct choice:
A. The correspondent bank has opened branches in a country on the Office of Foreign Assets Control (OFAC) list. This answer option suggests that the correspondent bank has established branches in a country that is subject to economic sanctions imposed by the Office of Foreign Assets Control. If this is the case, it indicates a significant compliance violation and potential exposure to money laundering risks. Operating in a sanctioned country would raise concerns about the correspondent bank's commitment to compliance and could lead to the termination of the relationship. Therefore, option A is a strong indication for terminating the relationship.
B. The compliance officer at the correspondent bank is currently being investigated due to bribery allegations. This answer option states that the compliance officer at the correspondent bank is under investigation for bribery allegations. If a compliance officer, who is responsible for ensuring adherence to anti-money laundering (AML) and anti-bribery policies, is involved in such misconduct, it raises serious concerns about the correspondent bank's compliance culture and effectiveness. While it is a significant issue, it is more specific to the individual compliance officer rather than the correspondent bank as a whole. Therefore, option B, while concerning, may not be the strongest factor indicating the termination of the relationship.
C. The correspondent bank has recently exceeded acceptable limits in the primary bank's recently developed risk model. This answer option suggests that the correspondent bank has exceeded acceptable limits in the primary bank's risk model, which indicates a higher level of risk than what was initially agreed upon. If the correspondent bank consistently surpasses acceptable risk thresholds, it could signify a failure to manage risk effectively or a lack of adherence to the agreed-upon risk parameters. While this may be a cause for concern, it does not directly imply a breach of AML policies or severe compliance violations. Therefore, option C might not be as strong an indication for termination compared to option A.
D. The primary institution has requested transactional details from the correspondent bank to aid in their investigation. This answer option suggests that the primary institution (the bank in New York) has requested transactional details from the correspondent bank to assist in their investigation. This indicates that the primary institution is actively seeking information to address the suspicious transactions and possibly mitigate any potential risks. While it shows a proactive approach by the primary institution, it does not necessarily indicate that the correspondent bank should be terminated. In fact, sharing information for investigations is a common practice in combating money laundering. Therefore, option D alone may not be sufficient to warrant the termination of the relationship.
Based on the detailed analysis above, option A, where the correspondent bank has opened branches in a country on the OFAC list, is the strongest factor indicating that the bank should terminate the relationship. This violation demonstrates a significant breach of compliance and potential exposure to money laundering risks, making it a compelling reason for termination.