According to the Financial Action Task Force (FATF) 40 Recommendations, simplified customer due diligence (CDD) or reduced measures could be acceptable for certain types of products or transactions that have a low risk of money laundering or terrorist financing, based on a reasonable assessment of the risk by countries or by financial institutions. These include:
* Life insurance policies where the annual premium is no more than USD/EUR 1,000 or a single premium of no more than USD/EUR 2,500. This is because the amount of money involved is relatively small and the payout is usually contingent on a specific event, such as death or disability, which reduces the likelihood of abuse by criminals.
* Insurance policies for pension schemes if there is no surrender clause and the policy cannot be used as collateral. This is because the beneficiaries of these policies are usually predetermined and the funds are locked in until retirement age, which limits the possibility of transferring or withdrawing the money for illicit purposes.
* A pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages and the scheme rules do not permit the assignment of a member's interest under the scheme. This is because the source of funds is known and verified by the employer and the scheme is regulated and supervised by competent authorities, which reduces the risk of money laundering or terrorist financing.
The other option, trusts where the settlor, trustee and beneficiaries are identified and the shares are in bearer form, is not eligible for simplified CDD or reduced measures, because the use of bearer shares poses a high risk of anonymity and concealment of beneficial ownership, which could facilitate money laundering or terrorist financing.
:
FATF 40 Recommendations, Recommendation 10 and Interpretive Note to Recommendation 10, paragraphs
17-18.

According to the ACAMS CAMS Certification Video Training Course1, one of the red flags for money laundering is "transferring funds to or from foreign countries or jurisdictions that are known to have weak anti- money laundering standards or are considered high-risk for money laundering or terrorist financing" (Module
2, Lesson 3, Part 2). This is also consistent with the suspicious activity report (SAR) criteria, which require financial institutions to report transactions that "involve funds derived from illegal activity or are intended or conducted to hide or disguise funds or assets derived from illegal activity" or "involve the use of the financial institution to facilitate criminal activity" (31 CFR § 1020.320(a)(2)). Therefore, the customer's request to transfer funds to accounts in three different foreign jurisdictions should be the focus of the SAR, as it may indicate an attempt to launder money or finance terrorism.
:
ACAMS CAMS Certification Video Training Course
[31 CFR § 1020.320 - Reports by banks of suspicious transactions]

an employee who avoids taking periodic vacations despite having accrued vacation time may be trying to conceal fraudulent or illegal activities that would be exposed in their absence. This is a common red flag for internal fraud and money laundering, as it indicates a lack of segregation of duties, internal controls, and oversight. Employees who engage in such behavior may also exhibit other signs of stress, defensiveness, or secrecy.
:
Learn about red flags for internal fraud, section "An employee may be a higher internal fraud risk when a combination of the following red flags are present", bullet point 1: "Unwilling to share duties or take leave." Money Laundering Red Flags | Key Behaviours and Indicators, section "Employee Red Flags", bullet point 1:
"Avoiding taking holidays or time off work."
Top 10 AML Red Flags: Warning Signs and Financial Risks, section "AML Red Flags Categories", sub- section "Employee Red Flags", bullet point 1: "Avoiding taking vacations or sick leaves."

According to the Financial Action Task Force (FATF), financial institutions should apply a risk-based approach to customer due diligence (CDD), which includes obtaining and updating information on the identity, beneficial ownership, and business activities of their clients. If a client refuses to provide or update such information, or provides false or misleading information, the financial institution should consider this as a red flag for potential money laundering or terrorist financing, and should exit the relationship with the client, unless the circumstances warrant otherwise. Exiting the relationship with a client who refuses to update information is also consistent with the FATF's Recommendation 10, which requires financial institutions to terminate the business relationship if they are unable to perform CDD measures.
References:
1: This document contains the FATF's 40 Recommendations, which are the international standards for combating money laundering and terrorist financing. Recommendation 10 covers the CDD requirements for financial institutions, and paragraph 22 states that "If the financial institution is unable to comply with paragraphs 10 to 12, 15 and 17, it should not open the account, commence business relations or perform the transaction; or should terminate the business relationship; and should consider making a suspicious transactions report in relation to the customer."
2: This document provides guidance on the implementation of the FATF's Recommendations on transparency and beneficial ownership, which are relevant for CDD purposes. It explains the definition of beneficial owner, the risks associated with legal persons and arrangements, and the effective mechanisms to combat the misuse of such entities. It also provides examples of situations where financial institutions should exit the relationship with a client, such as when the client refuses to provide or update information on beneficial ownership or control, or when the client is a shell company or a trust with no legitimate economic purpose.

ARisk-Based Approach (RBA)allows financial institutions toallocate compliance resources effectivelyandprioritize higher-risk areasforenhanced due diligence (EDD).
Option A (Correct):An RBA enables institutions to tailor their AML controls based on risk exposure, ensuring better resource allocation.
Option B (Incorrect):While RBAimproves efficiency, itdoes not guarantee faster implementationof controls.
Option C (Incorrect):RBA is a regulatory requirement, butit is not necessarily determined by customer acceptance.
Option D (Incorrect):RBA provides guidance on risk mitigation, but itdoes not dictate specific resource usage.
Benefits of a Risk-Based Approach (RBA):
Efficient use of compliance resourcesby focusing onhigh-risk transactions, customers, and geographies.
Regulatory compliance alignmentwithFATF, Basel Committee, and Wolfsberg Group AML principles.
Flexibility to adjust AML controlsas new threats emerge.
Best Practices for Implementing RBA in AML Compliance:
Conduct enterprise-wide risk assessments (EWRAs).
Classify customers and transactions based on risk levels.
Apply enhanced due diligence (EDD) for high-risk clients.
Reference:
FATF Recommendation 1 (Risk-Based Approach to AML)
Basel Committee's Risk-Based AML Compliance Guidelines
Wolfsberg Group Principles on Risk-Based Compliance