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Questions and Answers
The section inquiring about anti-money laundering and terrorist financing policies does not cover customer acceptance policies.
False
Risk Management focuses on how the bank identifies, assesses, and manages risks related to money laundering only.
False
Training and Awareness does not address the content or target groups of the training programs in the bank.
False
Continuous Monitoring and Update does not take into consideration market developments or emerging threats when revising procedures.
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Responsibility and Contact Information section does not provide details on who is accountable for AML compliance within the organization.
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A current date and an official signature are not required to confirm the validity and commitment to compliance.
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Financial institutions are not required to conduct Know Your Customer investigations on correspondent banks to comply with anti-money laundering laws and regulations.
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The FATF thirteenth recommendation requires correspondent institutions to understand the target markets and customer segments served by their respondent institutions as part of their risk assessment.
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Understanding the business profile of the respondent institution does not require the correspondent institution to consider relevant risk factors, such as the respondent institution's products, services, and customer base.
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The FATF published a guide to correspondent banking in October 2016, which provides guidance on conducting due diligence on correspondent banks.
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The FATF's 40 recommendations do not outline any expectations for financial institutions regarding anti-money laundering compliance.
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Financial institutions are only required to conduct Know Your Customer investigations on their individual customers and companies, but not on correspondent banks.
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Correspondent banks must continuously monitor transactions in their correspondent accounts to ensure compliance with sanctions and detect any unusual activities.
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The Correspondent Banking Due Diligence Questionnaire (CBDDQ) is a standardized form developed solely by the Wolfsberg Group.
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If a correspondent bank identifies an unusual transaction, it should have internal processes to investigate further, which may involve requesting additional information about the partner bank's customer.
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The primary purpose of the CBDDQ is to facilitate the establishment of new correspondent banking relationships.
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Correspondent banks are required to continuously monitor all transactions in their correspondent accounts in real-time, regardless of the risk level.
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The CBDDQ includes a section that asks questions about detailed company information, such as legal name, address, country of operation, key contacts, and company structure.
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Correspondent banks are not required to adjust their risk assessment or request additional information from the partner bank if any changes occur at the partner bank.
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The method of monitoring correspondent banking relationships depends solely on the risks involved, and not on the nature of the services provided.
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Correspondent banks must perform checks on their partner banks more frequently if the partner bank poses a higher risk.
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The CBDDQ is a mandatory form that all financial institutions are required to complete when establishing or maintaining correspondent banking relationships.
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Study Notes
Correspondent Banking Due Diligence
- Financial institutions must conduct Know Your Customer (KYC) investigations into correspondent banks to comply with anti-money laundering (AML) laws and regulations.
- The Financial Action Task Force (FATF) published a guide to correspondent banking in 2016, which outlines the expected standards for financial institutions.
- FATF's 13th recommendation requires correspondent banks to understand the nature of the responding institution's business operations, including target markets and customer segments, as part of their risk assessment.
Risk Assessment and Monitoring
- Correspondent banks must continuously monitor transactions in their correspondent accounts to ensure compliance with sanctions and detect unusual activities.
- The frequency and method of monitoring depend on the risk posed by the partner bank.
- Higher-risk relationships may require real-time transaction monitoring to detect and report suspicious activities.
- Targeted monitoring may be necessary if there are multiple suspicious activities or payments that do not correspond to the stated purpose of the account.
Correspondent Banking Due Diligence Questionnaire (CBDDQ)
- The CBDDQ is a standardized tool developed by the Wolfsberg Group and the Bankers Association for Finance and Trade (BAFT) to facilitate due diligence in correspondent banking relationships.
- The questionnaire provides a framework for collecting and providing essential information about AML and counter-terrorist financing policies and practices.
- The CBDDQ helps assess the risk of doing business with another bank and can be downloaded for free from the Wolfsberg Group website.
CBDDQ Content
- The questionnaire covers detailed company information, including legal name, address, country of operation, key contacts, and company structure.
- It also asks about:
- Anti-money laundering and terrorist financing policies and procedures
- Customer acceptance policies, risk assessment processes, and monitoring and reporting procedures
- Regulatory compliance and management's involvement in maintaining compliance
- Risk management methods and periodic review of risk assessments
- Training and awareness programs for staff
- Independent audits and reviews of AML and terrorist financing programs
- Continuous monitoring and updates of AML and terrorist financing procedures
- Responsibility and contact information for AML compliance
- Date and signature from an authorized representative
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Description
This quiz covers the importance of conducting Know Your Customer investigations into correspondent banks to comply with anti-money laundering laws and regulations, as highlighted in the FATF's guide published in October 2016. Get an overview of the basics of correspondent banking and its significance in the financial sector.
