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BCCP practice questions

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Question 1Governance, Risk, and Compliance Program Structure

Which document most directly defines the authority of an organization's compliance function and its reporting lines?

  1. The annual financial audit report
  2. The marketing style guide
  3. The compliance program charter Correct answer.
  4. The vendor onboarding checklist

Explanation

A compliance program charter formally establishes the function's mandate, scope, authority, and reporting relationships to senior management and the board. It is the foundational governance document that other procedures implement.

Question 2Governance, Risk, and Compliance Program Structure

In a three-lines model, which group provides independent assurance over the effectiveness of risk controls?

  1. The compliance training team
  2. The first-line business units
  3. The procurement department
  4. Internal audit Correct answer.

Explanation

The three-lines model assigns independent assurance to internal audit, which evaluates controls without owning the risks. First-line units own and manage risk, while the second line provides oversight and challenge.

Question 3Governance, Risk, and Compliance Program Structure

A compliance officer reports to the general counsel, who also oversees the business units being monitored. Which governance weakness does this present?

  1. Independence of the compliance function is compromised Correct answer.
  2. Training delivery will be delayed
  3. The compliance budget is likely too small
  4. Vendor due diligence will be skipped

Explanation

When compliance reports through a leader responsible for the activities being monitored, objectivity and independence are impaired. Regulators expect compliance to have a reporting line that permits escalation without conflict of interest.

Question 4Governance, Risk, and Compliance Program Structure

Which body typically holds ultimate accountability for the organization's compliance program?

  1. The facilities management group
  2. The external audit firm
  3. The front-line sales team
  4. The board of directors Correct answer.

Explanation

Ultimate accountability for the compliance program rests with the board of directors, which oversees management's implementation. Management executes the program day to day but does not replace board oversight.

Question 5Governance, Risk, and Compliance Program Structure

A risk assessment ranks a payment-fraud scenario as high likelihood and high impact. What is the most appropriate governance response?

  1. Rely solely on employee awareness posters
  2. Remove the scenario from the risk register
  3. Defer action until the next annual review
  4. Prioritize enhanced controls and monitoring for that scenario Correct answer.

Explanation

Risk-based programs allocate resources proportionate to assessed likelihood and impact, so high-rated scenarios receive enhanced controls and monitoring first. Deprioritizing or deleting the risk leaves exposure unmanaged.

Question 6Governance, Risk, and Compliance Program Structure

Which statement best describes the purpose of a risk appetite statement?

  1. It lists every control the organization has implemented
  2. It summarizes prior regulatory penalties
  3. It expresses how much risk the organization is willing to accept in pursuit of objectives Correct answer.
  4. It records the names of compliance staff

Explanation

A risk appetite statement articulates the type and level of risk the organization accepts while pursuing its goals, guiding decisions and tolerances. It is a governance tool for direction setting, not an inventory of controls or personnel.

Question 7Governance, Risk, and Compliance Program Structure

A compliance team wants a written statement of the behaviors expected of all employees, endorsed by senior leadership. Which artifact fits best?

  1. A software license inventory
  2. A capital expenditure policy
  3. A code of conduct Correct answer.
  4. A disaster recovery plan

Explanation

A code of conduct sets out expected behaviors and ethical standards for the workforce and is typically endorsed at the top of the organization. It anchors training, attestation, and disciplinary processes.

Question 8Governance, Risk, and Compliance Program Structure

Which element is essential for a compliance policy to be operationally effective?

  1. A lengthy legal preamble
  2. A single printed copy in the lobby
  3. Clear ownership and defined review cycle Correct answer.
  4. An unlisted distribution list

Explanation

Effective policies identify an accountable owner and a scheduled review cycle so content stays current and enforceable. Without ownership and review, policies drift out of date and go unenforced.

Question 9Governance, Risk, and Compliance Program Structure

What is the primary purpose of a compliance risk register?

  1. To store employee performance reviews
  2. To record identified risks with ratings, owners, and mitigation status Correct answer.
  3. To track office supply orders
  4. To document customer complaints only

Explanation

A risk register is the central log capturing identified risks, their assessed ratings, assigned owners, and mitigation progress. It supports prioritization, monitoring, and reporting to governance bodies.

Question 10Governance, Risk, and Compliance Program Structure

A regulator asks who approved a new high-risk product before launch. Which governance record answers this?

  1. The office lease agreement
  2. The social media content calendar
  3. The employee holiday schedule
  4. The new product approval committee minutes Correct answer.

Explanation

Formal committee minutes document the decision, attendees, and rationale for approving high-risk products. Such records evidence that governance gates were followed before launch.

Question 11Governance, Risk, and Compliance Program Structure

Which metric best indicates whether a compliance training program is functioning as intended?

  1. The number of slides in the training deck
  2. The color scheme of the learning portal
  3. The length of the trainer's biography
  4. Completion rates combined with assessment pass rates Correct answer.

Explanation

Completion and assessment pass rates together show whether staff finished training and demonstrated understanding. Presentation details do not measure learning outcomes or program effectiveness.

Question 12Governance, Risk, and Compliance Program Structure

A whistleblower hotline is best governed by which arrangement?

  1. Requiring employees to sign their names publicly
  2. Independent intake with confidentiality and non-retaliation protections Correct answer.
  3. Reporting directly to the accused manager
  4. Posting complaints on a shared bulletin board

Explanation

Effective speak-up channels use independent intake, protect confidentiality, and prohibit retaliation so reporters feel safe. Routing concerns to the accused or publicizing identities discourages reporting.

Question 13Governance, Risk, and Compliance Program Structure

Which activity belongs to the second line of defense?

  1. Providing independent audit opinions
  2. Managing the organization's payroll runs
  3. Executing daily sales transactions
  4. Setting compliance standards and challenging business risk decisions Correct answer.

Explanation

The second line sets standards, monitors, and challenges first-line risk-taking on behalf of management. Transaction execution and payroll are first-line operations, while audit opinions come from the third line.

Question 14Governance, Risk, and Compliance Program Structure

An organization expands into a new country with unfamiliar bribery laws. What should governance do first?

  1. Delay all activity until the next fiscal year
  2. Rely on local staff to self-certify compliance
  3. Assume existing policies transfer unchanged
  4. Conduct a jurisdiction-specific risk assessment and map applicable requirements Correct answer.

Explanation

Entering a new jurisdiction requires assessing the specific legal and risk landscape and mapping applicable requirements before operations scale. Assuming transferability or deferring analysis leaves unmanaged exposure.

Question 15Governance, Risk, and Compliance Program Structure

Which control most directly supports segregation of duties in a finance process?

  1. Separating payment initiation from payment approval Correct answer.
  2. Combining approval and reconciliation in one role
  3. Removing approval thresholds for large payments
  4. Allowing the same person to create and pay vendors

Explanation

Segregation of duties separates incompatible tasks such as initiating and approving payments so no single person controls a transaction end to end. Combining these roles concentrates fraud risk in one individual.

Question 16Governance, Risk, and Compliance Program Structure

A compliance program lacks documented testing of its controls. Which governance gap does this represent?

  1. Insufficient monitoring and assurance evidence Correct answer.
  2. Overinvestment in training
  3. Surplus of independent audit
  4. Excessive board engagement

Explanation

Without documented control testing, the organization cannot demonstrate that controls operate effectively, leaving a monitoring and assurance gap. Governance requires evidence of ongoing testing and remediation.

Question 17Governance, Risk, and Compliance Program Structure

What is the most appropriate role for the board's risk committee regarding the compliance program?

  1. Performing daily control testing
  2. Approving individual employee expense claims
  3. Writing individual transaction procedures
  4. Overseeing risk posture and receiving periodic compliance reporting Correct answer.

Explanation

Board committees provide oversight by reviewing risk posture and receiving regular compliance reports, enabling informed challenge of management. They do not perform operational tasks such as writing procedures or testing transactions.

Question 18Governance, Risk, and Compliance Program Structure

Which factor most influences the frequency of compliance risk assessments?

  1. The pace of change in the business and regulatory environment Correct answer.
  2. The number of parking spaces at headquarters
  3. The tenure of the receptionist
  4. The preferred font of policy documents

Explanation

Assessment frequency should reflect how quickly risks and regulations change; fast-moving environments warrant more frequent reassessment. Irrelevant operational details do not affect risk cadence.

Question 19Governance, Risk, and Compliance Program Structure

A third party performs services on the organization's behalf. Which governance practice best manages the associated compliance risk?

  1. Avoiding written agreements to save time
  2. Delegating all oversight to the vendor
  3. Risk-based due diligence with contractual compliance obligations Correct answer.
  4. Selecting vendors solely on lowest price

Explanation

Third-party risk is managed through risk-based due diligence before engagement and contractual terms that impose compliance obligations and audit rights. Price-only selection or informal arrangements leaves the organization exposed.

Question 20Governance, Risk, and Compliance Program Structure

Which statement best captures the principle of tone at the top?

  1. Ethical culture depends mainly on entry-level staff
  2. Compliance is solely the compliance department's job
  3. Written policies alone create ethical culture
  4. Leaders visibly model and enforce ethical behavior throughout the organization Correct answer.

Explanation

Tone at the top means leaders demonstrate and reinforce ethical conduct through decisions, incentives, and enforcement. Culture is shaped by leadership behavior, not by policies in isolation or a single department.

Question 21Governance, Risk, and Compliance Program Structure

A compliance issue recurs despite repeated training. What governance action is most appropriate?

  1. Close the issue without further action
  2. Reduce monitoring to save resources
  3. Investigate root causes and adjust controls or incentives Correct answer.
  4. Repeat the identical training module unchanged

Explanation

Recurring issues signal that training alone is insufficient, so root-cause analysis should drive changes to controls, processes, or incentives. Repeating identical training or reducing monitoring fails to address the underlying cause.

Question 22Governance, Risk, and Compliance Program Structure

Which document typically records the organization's commitment to comply with applicable laws and its core ethical values?

  1. The compliance policy framework Correct answer.
  2. The meeting room booking sheet
  3. The IT asset disposal log
  4. The travel expense form

Explanation

The compliance policy framework articulates the organization's commitment to legal and ethical standards and organizes related policies. Transactional forms and logs serve administrative purposes only.

Question 23Governance, Risk, and Compliance Program Structure

An organization wants assurance that its compliance program is effective. Which approach is most rigorous?

  1. A count of policies published last year
  2. Independent evaluation against a recognized framework with remediation tracking Correct answer.
  3. An informal poll of senior managers
  4. A review of the program's mission statement

Explanation

Rigorous assurance uses independent evaluation against recognized standards and tracks remediation of identified gaps. Informal polls, mission statements, or policy counts do not test whether controls actually work.

Question 24Governance, Risk, and Compliance Program Structure

What is the main governance purpose of a conflicts-of-interest disclosure process?

  1. To replace the code of conduct entirely
  2. To identify and manage situations where personal interests could impair objectivity Correct answer.
  3. To eliminate the need for internal audit
  4. To increase the number of forms on file

Explanation

Conflicts-of-interest disclosures surface situations where personal interests may compromise objectivity so management can mitigate or recuse. The process supports ethical decision-making rather than merely generating paperwork.

Question 25Governance, Risk, and Compliance Program Structure

Which arrangement best supports escalation of a serious compliance matter to the board?

  1. A defined escalation path with timeframes and direct board access Correct answer.
  2. Routing all matters through routine line management only
  3. Waiting for the annual audit cycle
  4. Requiring unanimous staff approval before escalation

Explanation

Serious matters require a clear escalation path with defined timeframes and the ability to reach the board directly when needed. Routine channels or annual cycles can delay urgent reporting and allow harm to grow.

Question 26Governance, Risk, and Compliance Program Structure

Which structural feature most clearly establishes that a compliance function can operate independently of the business units it monitors?

  1. The compliance function is staffed by employees who also hold operational sales targets
  2. The compliance function shares a budget controlled by the operations department
  3. The compliance function reports to the business unit leaders whose activities it reviews
  4. The compliance function has a direct reporting line to senior governance bodies such as the board or its committee Correct answer.

Explanation

Independence is established when the compliance function's reporting line and escalation path run to a governing body rather than to the managers whose activities are being monitored. Direct access to the board or a board committee allows compliance to raise concerns without operational interference. Budget and staffing control by the business undermines that independence.

Question 27Governance, Risk, and Compliance Program Structure

An organization is designing its compliance program and must decide how the three lines model allocates responsibilities. Which allocation is consistent with the model?

  1. The third line manages risk in operations, while the first line provides independent assurance
  2. The first line owns and manages risk in day-to-day operations, while the second line provides oversight and challenge Correct answer.
  3. The second line owns operational risk decisions, while the first line audits the results
  4. The first line provides independent assurance, while the third line owns operational risk

Explanation

The three lines model places risk ownership with operational management in the first line, with the second line providing frameworks, oversight, and challenge. Internal audit as the third line gives independent assurance. Reversing these roles destroys the separation between managing risk and assuring over it.

Question 28Governance, Risk, and Compliance Program Structure

A compliance officer wants to demonstrate that the program's governance structure is documented and approved at the right level. Which artifact most directly serves this purpose?

  1. A chart showing the compliance team's organizational placement, approved by the head of compliance
  2. A training calendar showing when compliance awareness sessions are delivered
  3. A written compliance charter defining mandate, authority, and reporting lines, approved by the board or a board committee Correct answer.
  4. A list of compliance staff and their professional certifications

Explanation

A compliance charter formally defines the function's mandate, authority, scope, and reporting lines and is typically approved at board or committee level. That approval demonstrates governance-level endorsement of the structure. An organizational chart or staff list shows placement but not formal authority or accountability.

Question 29Governance, Risk, and Compliance Program Structure

A board committee asks how the compliance program's performance will be reported to it over the coming year. Which arrangement best answers this governance need?

  1. An annual summary prepared by internal audit covering only confirmed control failures
  2. A defined management information pack with agreed metrics, thresholds, and a fixed reporting cadence Correct answer.
  3. A quarterly email from the compliance head summarizing recent regulatory news
  4. Ad hoc updates requested by the committee whenever members become concerned

Explanation

Effective governance requires a defined reporting package with agreed metrics, escalation thresholds, and a regular cadence so the board can oversee the program proactively. Ad hoc or narrative-only updates leave oversight reactive and inconsistent. Audit summaries cover assurance, not ongoing program performance.

Question 30Governance, Risk, and Compliance Program Structure

Which factor most directly determines whether a compliance program's governance structure is proportionate?

  1. The nature, scale, and complexity of the organization's activities and the risks arising from them Correct answer.
  2. The number of years the organization has operated in its home market
  3. The size of the compliance budget relative to the marketing budget
  4. The number of regulators that have ever contacted the organization

Explanation

Proportionality in program design is driven by the nature, scale, and complexity of the organization's activities and the resulting risk profile. A larger or more complex risk footprint justifies more elaborate governance and controls. Budget ratios or historical contacts are not reliable design drivers.

Question 31Governance, Risk, and Compliance Program Structure

An organization's compliance program has grown across several business lines, and accountabilities have become blurred. Which governance action best restores clear accountability?

  1. Delegate compliance decisions to external counsel to remove internal ambiguity
  2. Increase the frequency of all-hands compliance training across business lines
  3. Assign a named owner and defined responsibilities for each compliance activity in a responsibility matrix Correct answer.
  4. Consolidate all compliance decisions into a single committee without documented terms of reference

Explanation

A responsibility matrix assigns named owners and defined duties for each compliance activity, making accountability explicit and auditable. Training raises awareness but does not allocate responsibility. Centralizing decisions without documented terms or outsourcing them leaves accountability unclear.

Question 32Governance, Risk, and Compliance Program Structure

Which statement best describes the role of a compliance policy framework within program governance?

  1. It lists the external auditors engaged to review financial statements
  2. It sets out the hierarchy of policies and standards that translate the organization's obligations into required conduct Correct answer.
  3. It replaces the need for a risk assessment because it states the rules employees must follow
  4. It records the results of control testing performed during the year

Explanation

A policy framework establishes the hierarchy linking high-level policy to detailed standards and procedures that operationalize legal and ethical obligations. It provides structure and consistency rather than replacing risk assessment or assurance. Control testing results and auditor engagement are separate records.

Question 33Governance, Risk, and Compliance Program Structure

A compliance function has no documented escalation path for serious issues. Which governance weakness does this create most directly?

  1. A gap in the organization's ability to route critical matters to decision-makers with authority to act Correct answer.
  2. A failure to calculate the organization's tax obligations
  3. An inability to recruit qualified compliance staff
  4. A reduction in the number of policies the organization can maintain

Explanation

An escalation path ensures serious matters reach decision-makers with authority to act within appropriate timeframes. Without it, critical issues may stall at lower levels or be handled inconsistently. Staffing, policy volume, and tax calculation are unrelated to escalation design.

Question 34Governance, Risk, and Compliance Program Structure

Which arrangement best supports the independence of an internal audit function providing assurance over the compliance program?

  1. The audit function's findings are reviewed only by the process owners
  2. The audit function reports to the same business unit leaders whose controls it reviews
  3. The audit function reports administratively to management but functionally to the audit committee Correct answer.
  4. The audit plan is set by the compliance head whose program is being audited

Explanation

Functional reporting to the audit committee preserves audit independence while administrative reporting to management supports day-to-day operations. Allowing the audited function to set the audit plan or review its own findings compromises objectivity. Reporting to the reviewed business leaders creates a direct conflict.

Question 35Governance, Risk, and Compliance Program Structure

A regulator asks how the organization ensures that compliance responsibilities are reflected in employee performance management. Which governance practice most directly addresses this?

  1. Scheduling annual compliance awareness training
  2. Publishing the code of conduct on the intranet
  3. Including compliance and conduct objectives in performance reviews and incentive decisions Correct answer.
  4. Maintaining a register of regulatory changes

Explanation

Embedding compliance and conduct objectives into performance reviews and incentive decisions aligns individual rewards with program expectations. This is a structural governance lever that reinforces accountability. Publishing a code, training, and tracking regulatory changes support awareness but do not link conduct to performance outcomes.

Question 36Governance, Risk, and Compliance Program Structure

Which characteristic most distinguishes a compliance governance framework that can adapt to regulatory change from one that cannot?

  1. An annual review cycle that ignores changes occurring mid-year
  2. A defined process for horizon scanning, impact assessment, and controlled policy updates Correct answer.
  3. Reliance on external counsel to interpret every new rule before any internal action
  4. A fixed set of policies that are revised only when a regulator issues an enforcement action

Explanation

Adaptability comes from a repeatable process that scans for regulatory developments, assesses their impact, and updates policies and controls in a controlled manner. Reactive revision, total reliance on external counsel, or rigid annual cycles leave the organization exposed to change occurring between reviews.

Question 37Governance, Risk, and Compliance Program Structure

A compliance program's governance documents exist but no one has assessed whether they are being followed in practice. Which governance concept does this most directly concern?

  1. Risk appetite calibration
  2. Operating effectiveness of the program Correct answer.
  3. Tone at the top
  4. Policy design adequacy

Explanation

Operating effectiveness concerns whether designed controls and governance arrangements actually function as intended in practice. The existence of documents addresses design, not operation. Tone at the top and risk appetite calibration are distinct governance concepts.

Question 38Governance, Risk, and Compliance Program Structure

Which statement best describes the purpose of a compliance governance committee that includes senior business leaders?

  1. It reviews individual employee grievances unrelated to compliance
  2. It exists mainly to approve the compliance department's travel and expense claims
  3. It provides a forum where business and compliance jointly oversee risk, decide priorities, and monitor remediation Correct answer.
  4. It replaces the board's oversight role by making all compliance decisions itself

Explanation

A cross-functional compliance committee brings business and compliance leaders together to oversee risk, set priorities, and track remediation. It supports and informs board oversight rather than replacing it. Administrative approvals and unrelated grievances are outside its governance purpose.

Question 39Governance, Risk, and Compliance Program Structure

An organization discovers that its compliance program's roles are defined differently in three separate governance documents. Which action best resolves this inconsistency?

  1. Reconcile the documents into a single authoritative source and retire or align the conflicting versions Correct answer.
  2. Remove all role descriptions to avoid future conflicts
  3. Leave the documents unchanged and rely on staff to interpret them
  4. Issue a new document that adds a fourth description of the roles

Explanation

Conflicting governance documents should be reconciled into one authoritative source, with superseded versions retired or aligned. Adding another version multiplies the inconsistency, and relying on interpretation creates uncertainty about accountability. Removing role descriptions eliminates accountability altogether.

Question 40Governance, Risk, and Compliance Program Structure

Which approach best allows a board to judge whether the compliance program's governance structure remains fit for purpose over time?

  1. Reviewing only the number of training sessions delivered during the year
  2. Reviewing a periodic independent assessment of the program against a recognized framework, with management action plans Correct answer.
  3. Comparing the compliance budget with prior-year figures alone
  4. Relying on management's assurance that no issues have been raised

Explanation

Periodic independent assessment against a recognized framework gives the board an objective view of program effectiveness and a basis for tracking management remediation. Management self-assurance alone lacks objectivity, and activity or budget metrics do not demonstrate fitness for purpose.

Question 41Regulatory Environment and Legal Foundations

Which body is the primary source of the global anti-money-laundering standards adopted by most national regulators?

  1. The World Trade Organization
  2. The International Organization of Securities Commissions
  3. The Financial Action Task Force Correct answer.
  4. The Basel Committee on Banking Supervision

Explanation

The Financial Action Task Force is the intergovernmental body that issues the FATF Recommendations, which set the global baseline for anti-money-laundering and counter-terrorist-financing regimes. National laws and regulators typically implement these Recommendations through their own statutes and guidance. Other bodies address banking supervision, securities markets, or trade rather than AML standard-setting.

Question 42Regulatory Environment and Legal Foundations

Under a risk-based approach to compliance, what should a firm do first when designing its AML program?

  1. Apply identical controls to every customer segment
  2. Freeze all accounts pending manual review
  3. Report all customers to the financial intelligence unit
  4. Identify and assess the money-laundering risks it faces Correct answer.

Explanation

A risk-based approach requires the firm to first identify and assess its exposure to money-laundering and terrorist-financing risk, then calibrate controls proportionately to that assessed risk. Uniform controls ignore differences in risk and are not the recommended model. Blanket reporting or freezing is not a standard obligation and would be operationally impossible.

Question 43Regulatory Environment and Legal Foundations

Which activity most clearly constitutes a predicate offense for money laundering under international standards?

  1. Paying income tax on investment returns
  2. Transferring funds between one's own savings accounts
  3. Depositing lawfully earned salary into a bank account
  4. Selling illegal narcotics for cash Correct answer.

Explanation

Money laundering requires proceeds from a predicate offense, and drug trafficking is a classic designated predicate offense in the FATF Recommendations and most national laws. Lawful salary, tax payments, and transfers of legitimately owned funds lack criminal proceeds and therefore cannot support a laundering charge.

Question 44Regulatory Environment and Legal Foundations

What is the primary purpose of a suspicious transaction report filed with a financial intelligence unit?

  1. To notify authorities of activity that may involve criminal proceeds Correct answer.
  2. To request reimbursement for fraud losses
  3. To obtain authorization before opening a customer account
  4. To certify that a customer passed identity verification

Explanation

A suspicious transaction report informs the financial intelligence unit that a transaction or activity may be linked to criminal proceeds or terrorist financing, enabling analysis and possible investigation. It is not an authorization mechanism, a compensation claim, or an identity-verification certificate. Filing one does not by itself prove wrongdoing.

Question 45Regulatory Environment and Legal Foundations

What does the term 'customer due diligence' require a financial institution to do?

  1. Extend credit only to customers with a criminal record check
  2. Identify the customer and understand the expected nature of the relationship Correct answer.
  3. Guarantee that a customer will never commit a crime
  4. Publish the customer's identity in a public register

Explanation

Customer due diligence requires identifying and verifying the customer, identifying beneficial owners, and understanding the purpose and expected activity of the relationship. It is an ongoing risk-management process, not a guarantee of future conduct. Public disclosure and lending restrictions are unrelated to the requirement.

Question 46Regulatory Environment and Legal Foundations

Which of the following best describes 'placement' in the classic money-laundering model?

  1. Transferring funds through multiple offshore accounts
  2. Selling assets to realize a profit
  3. Introducing illicit cash into the financial system Correct answer.
  4. Reinvesting laundered funds into legitimate businesses

Explanation

Placement is the first stage, in which criminal cash is introduced into the financial system, for example through deposits or purchases. Layering then obscures the trail through complex transactions, and integration returns the funds to the legitimate economy. Profit-taking and offshore transfers describe later stages or unrelated activity.

Question 47Regulatory Environment and Legal Foundations

Which principle of the Basel Committee framework addresses the obligation of supervisors to ensure banks have adequate AML controls?

  1. Liquidity coverage ratio calibration
  2. Supervisory oversight of compliance and internal controls Correct answer.
  3. Capital adequacy for market risk
  4. Deposit insurance coverage limits

Explanation

The Basel framework emphasizes that supervisors should ensure banks maintain adequate policies, procedures, and internal controls, including for AML compliance. Capital, liquidity, and deposit insurance rules address prudential or depositor-protection objectives rather than AML control oversight.

Question 48Regulatory Environment and Legal Foundations

What is the main function of a financial intelligence unit within a national AML regime?

  1. Receiving, analyzing, and disseminating suspicious activity reports Correct answer.
  2. Licensing securities brokers
  3. Prosecuting money-laundering cases in court
  4. Setting monetary policy interest rates

Explanation

A financial intelligence unit collects suspicious transaction reports, analyzes them for links to crime, and disseminates useful intelligence to law enforcement and other authorities. Prosecution is typically handled by judicial or prosecutorial bodies, while monetary policy and licensing belong to other agencies.

Question 49Regulatory Environment and Legal Foundations

A bank learns that a long-standing customer has been convicted of fraud. Under a risk-based approach, which action best reflects the required response?

  1. Ignore the conviction because the account predates it
  2. Reduce monitoring because the case is now closed
  3. Immediately publish the conviction in the customer's file
  4. Review the relationship and consider enhanced monitoring or exit Correct answer.

Explanation

A criminal conviction is a material risk trigger that should prompt a review of the relationship and, where warranted, enhanced monitoring, restrictions, or exit. Ignoring or reducing controls would be inconsistent with ongoing due diligence. Public disclosure of the conviction is not a compliance measure and may be unlawful.

Question 50Regulatory Environment and Legal Foundations

A customer requests a transfer to a country subject to comprehensive international sanctions. What is the most appropriate compliance action?

  1. Split the transfer into smaller amounts to reduce scrutiny
  2. Ask the customer to confirm the funds are legitimate and proceed
  3. Process the transfer because the customer is verified
  4. Screen the transfer against sanctions lists and block or reject if prohibited Correct answer.

Explanation

Sanctions obligations are independent of customer due diligence, so the transfer must be screened against applicable sanctions lists and blocked or rejected if it is prohibited. Customer verification does not override sanctions. Structuring transfers to avoid scrutiny is itself a red flag and may be unlawful.