Risk Approach in Customer Due Diligence Investigations

Play an AI-generated podcast conversation about this lesson

What is another term used to refer to the Principle Based Approach in Customer Due Diligence investigations?

Rule Based Approach (correct)

Regulation Focused Approach

Risk Based Approach

Customer Relationship Approach

Which of the following best describes the focus of the rule-based approach in Know Your Customer processes?

Emphasizes compliance with regulations and laws (correct)

Focuses on understanding the customer and their risks

Relies solely on manual verification processes

Prioritizes speed over accuracy in verification

Why might the rule-based approach in Customer Due Diligence investigations provide a limited view of the customer?

It relies on manual verification processes

It uses advanced machine learning algorithms for verification

It focuses on understanding customer risks

It emphasizes compliance with regulations over customer understanding (correct)

What aspect does the risk-based approach in Customer Due Diligence investigations primarily focus on?

Nature of the customer's business activities and risks associated Signup and view all the answers

How does the rule-based approach differ from the risk-based approach in Customer Due Diligence investigations?

Rule-based focuses on customer risks, while risk-based focuses on laws compliance Signup and view all the answers

In Customer Due Diligence investigations, what does the Risk Appetite refer to?

The willingness of a company to take financial risks Signup and view all the answers

What is the primary driver for determining the frequency of customer re-evaluation in a risk-based approach?

The risk classification assigned during onboarding Signup and view all the answers

What is the purpose of a risk-based approach in managing customer relationships?

To enable institutions to better understand and manage the risks of their customer relationships Signup and view all the answers

What is the difference between the risk-based approach and the rule-based approach?

Both approaches require professional judgement, but the risk-based approach allows a final assessment Signup and view all the answers

What is the primary reason for initiating the offboarding process with a customer?

The customer is unwilling or unable to provide the required information Signup and view all the answers

What is the purpose of an 'Event Driven Review' in customer re-evaluation?

To re-evaluate customers when there are changes in their situation, such as a name change or negative publicity Signup and view all the answers

What is the consequence of mistakenly classifying a customer with a genuinely neutral risk as medium?

The customer will be subjected to unnecessary additional checks, consuming time and resources Signup and view all the answers

What is the role of senior management in a risk-based approach?

To decide on the risk tolerance or appetite for the institution Signup and view all the answers

What is the primary difference between a customer with a neutral risk and a customer with a medium risk?

A customer with a neutral risk is reviewed less frequently than a customer with a medium risk Signup and view all the answers

What is the purpose of Customer Due Diligence (CDD) investigations in a risk-based approach?

To ensure that the institution meets its legal obligations Signup and view all the answers

What is the primary challenge for banks in completely severing a relationship with a customer?

The right of every citizen in the Netherlands to access banking services Signup and view all the answers

Risk Approach in Customer Due Diligence Investigations

Choose a study mode

Podcast

Questions and Answers