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TP TMI: Regulatory, Compliance, and Ethics

TP TMI · Work through your exam, one topic at a time.

All guide sections

Regulatory, Compliance, and Ethics

What the domain tests

Regulatory, compliance, and ethics tests AML and KYC, sanctions screening, anti-bribery rules, market abuse, data protection, and the control environment. The exam focuses on escalation, documentation, and the difference between a policy on paper and a control that operates.

Core rules and concepts

  • AML and KYC. Customer due diligence identifies the customer, beneficial owners, and purpose of the relationship. Enhanced due diligence applies to politically exposed persons and higher-risk jurisdictions. Suspicious activity reports are filed with the financial intelligence unit.
  • Sanctions. Screening compares names, entities, and ownership against lists such as OFAC, EU, UN, and UK sanctions. Sanctions are often strict liability. The 50% ownership rule can treat an entity as sanctioned if sanctioned persons own 50% or more, directly or indirectly; control and aggregation tests also matter.
  • Bribery. The FCPA and UK Bribery Act prohibit corrupt payments, including through third parties. Facilitation payments are not permitted under the UK Bribery Act. Gifts and hospitality need limits and approval.
  • Market abuse. Insider dealing, unlawful disclosure, and manipulation are prohibited. Personal account dealing usually requires pre-clearance and restrictions.
  • Data and records. Confidentiality, GDPR obligations, and retention rules apply to treasury data and communications.
  • Control environment. Segregation of duties, whistleblowing channels, conflict-of-interest declarations, and audit trails support compliance.

Worked example

A payment screening hit names a supplier whose beneficial owner holds 45% of a sanctioned person's group. The 50% rule is not automatically triggered at 45%, but ownership aggregation, control, and indirect interests must be checked. The payment is held, the compliance officer is notified, and the decision is documented before release. If the match is confirmed, funds are frozen or rejected and the required report is filed. The customer is not tipped off about the report.

Traps that cost marks

Tipping off; ignoring beneficial ownership; assuming sanctions screening is only name matching; treating facilitation payments as acceptable; failing to retain records; and dealing in securities before pre-clearance.