Verified Answer: = A. Collect further customer reference data and determine what must be screened and at which frequency. and C. Deploy an independent risk-based test to ensure the screening on this customer is effective.
Comprehensive Detailed Explanation: = When an existing customer changes its business scope and jurisdictions, banks need to manage sanctions compliance risk effectively. Here are the steps they should take:
1. Collect Further Customer Reference Data: Obtain updated information about the customer’s new business activities, locations, and counterparties. Understand the nature of their transactions and assess the associated risks. Determine what specific data elements need to be screened (e.g., names, addresses, beneficial owners) and establish the appropriate screening frequency.
2. Deploy an Independent Risk-Based Test: Conduct a comprehensive risk assessment tailored to the customer’s changes. This assessment should consider factors such as the customer’s industry, geographic exposure, and transaction volume. The risk assessment helps identify high-risk areas that require enhanced scrutiny.
3. Screen Directors and Ultimate Beneficial Owners: Perform sanctions screening not only on the customer but also on their directors and ultimate beneficial owners. This ensures that any potential risks associated with these individuals are identified and mitigated.
4. Perform Politically Exposed Person (PEP) and Negative Media Screenings: Continue to screen the customer and related parties against PEP lists and negative media sources. This helps detect any adverse information related to politically exposed individuals or entities.
By following these steps, banks can proactively manage sanctions compliance risk and safeguard their institution’s reputation while adhering to regulatory requirements12.
[References:, 1. Protiviti: Sanctions Risk Assessment: A Key Risk Management Tool, 2. Moody’s: What Businesses Need to Know About Sanctions Compliance, , , ]
