Risk Management, Compliance, and Anti-Money Laundering
What this domain tests
This domain tests fund risk controls, compliance monitoring, and AML obligations for UITF distributors and trustees. Expect scenario questions on suspicious transactions and control weaknesses.
Core rules and concepts
- Key risks include market, credit, liquidity, currency, concentration, operational, compliance, and reputational risk. Controls include investment limits, liquidity buffers, counterparty limits, independent custody, and documented valuation.
- Compliance monitors adherence to BSP rules, plan rules, and internal policies. Exceptions must be escalated and remediated.
- AML obligations include customer due diligence, identification of beneficial owners, PEP screening, ongoing transaction monitoring, and suspicious transaction reporting to the AMLC.
- Suspicion-based reporting does not depend on a peso threshold. Staff must not tip off the client. Records are retained for at least five years under AML rules.
- A risk-based approach should focus enhanced due diligence on higher-risk clients, channels, and jurisdictions.
Worked example
A client subscribes PHP 5 million in cash, then redeems after two days and directs proceeds to an unrelated third party. Red flags include unusual cash, rapid redemption, and a third-party beneficiary. The compliance officer should escalate, perform enhanced due diligence, review source of funds, and file a suspicious transaction report if suspicion remains. Staff must not tell the client a report was filed.
Traps that cost marks
Assuming UITFs are low AML risk and skipping CDD; ignoring the beneficial owner; waiting for a threshold before filing an STR; tipping off the client; failing to document escalation; treating a custodian's controls as a substitute for trustee oversight.