When should a financial institution (FI) exit a relationship? (Choose two.)
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A. B. C. D. E.CE
https://www.fdic.gov/regulations/laws/rules/8000-1600.htmlAccording to the Financial Action Task Force (FATF), financial institutions (FIs) should terminate a business relationship when they determine that they cannot manage the money laundering (ML) or terrorist financing (TF) risks effectively. The decision to terminate a relationship should not be based on discriminatory reasons or solely on the customer's race, religion, or country of origin. Therefore, the two appropriate answers to the question are D and E.
D. The suspicious conduct of the account holder: If an FI suspects that the customer is involved in ML/TF or any other criminal activity, they should conduct an investigation. If the investigation confirms the suspicions, the FI should terminate the relationship immediately. The FI must file a Suspicious Activity Report (SAR) if they have reason to believe that the transaction(s) involved illegal activities.
E. The FI's stated policies and procedures for closing an account: FIs should have robust and clear policies and procedures that govern when and how to close a relationship. These policies should be risk-based and should consider all relevant factors, such as the customer's risk profile, the nature of their business, and the ML/TF risks associated with the relationship. If the relationship no longer fits the FI's risk profile, the FI should exit the relationship.
A. The reputational risk to the FI posed by closing the account is not an appropriate reason for exiting a relationship. Although FIs should consider reputational risk as a factor in their decision-making, they should not allow it to influence their decision to terminate a relationship if there is a valid reason to do so.
B. The request from law enforcement to close the account is not an appropriate reason for terminating a relationship. FIs should cooperate with law enforcement and regulatory authorities but should not allow external pressure to influence their decision-making processes.
C. The FI's requirements for opening an account are not a valid reason for exiting a relationship. FIs should ensure that they comply with their customer due diligence (CDD) and know your customer (KYC) requirements before opening a relationship. However, if the customer's risk profile changes, or if the relationship no longer fits the FI's risk profile, the FI should exit the relationship.