Series 79 practice questionhardAnti-Money Laundering in IB Context
A private placement client is structured with multiple layers of ownership, including offshore shell companies and nominee directors. Which of the following actions should an investment bank take under FINRA Rule 3310 and AML best practices?
- AConduct enhanced due diligence on beneficial owners, including verification of identity and source of funds✓ Correct answer
- BRely solely on representations from the client’s law firm
- CAccept the structure without further inquiry if the client is well-known
- DFile a SAR immediately, without any investigation
Explanation
Why A — Conduct enhanced due diligence on beneficial owners, including verification of identity and source of funds
Enhanced due diligence is required when dealing with complex or opaque ownership structures in order to identify beneficial ownership and prevent money laundering. Relying solely on outside representations or failing to investigate increases AML risk.
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