Non-compliance with AML regulatory obligations can have severe consequences for financial institutions.
Among these, the most severe consequence is the loss of license. When a financial institution fails to meet AML requirements, regulators may revoke its license to operate. Losing the license effectively shuts down the institution's ability to conduct business, impacting its existence and operations significantly12.
References:
1. Unit21 AML: 8 AML Penalties, Fines, and Sanctions + Examples You Should Avoid
2. Financial Crime Academy: Ensuring Compliance: The Power Of AML Regulatory Reporting

Mutual Legal Assistance Treaties (MLATs)areformal agreementsforcross-border law enforcement cooperation.
Option D (Correct):MLATsallow countries toexchange information, conduct joint investigations, and provide legal assistance.
Option A (Incorrect):Memoranda of Agreement (MOA)are typicallynon-binding agreementsbetween private entities.
Option B (Incorrect):Declarations of understandingare informal statements, not legally binding treaties.
Option C (Incorrect):Memoranda of Understanding (MOUs)governgeneral cooperation, notformal legal assistance.
Reference:FATF Recommendation 40 (International Cooperation), U.S.-EU MLATs, INTERPOL Guidelines on Cross-Border Investigations.

According to the Basel Committee's principles on customer due diligence, banks must obtain the necessary information to establish the identity of their customers, beneficial owners, and any persons acting on behalf of their customers. This includes verifying the identity of the customer and the beneficial owners and assessing the customer's risk profile. Additionally, banks must conduct ongoing due diligence to ensure that the customer does not give rise to suspicions of money laundering or terrorist financing [1].

According to the Basel Committee on Banking Supervision, banks should apply a risk-based approach to customer due diligence, which means that they should adopt enhanced measures for higher-risk customers and simplified measures for lower-risk customers. Enhanced due diligence (EDD) may include obtaining additional information on the customer's identity, source of funds, business activities, beneficial owners, and expected transactions, as well as conducting more frequent and intensive monitoring ofthe account activity.
EDD is especially important for customers who are politically exposed persons (PEPs), who are from or have connections with high-risk countries or jurisdictions, or who are involved in high-risk industries or sectors.
Therefore, performing EDD including enhanced ongoing monitoring of the account activity is the correct way for banks to deal with high-risk customers.
Basel Committee on Banking Supervision, CAMS Study Guide, 6th Edition, Chapter 4, page 121.
Reference: https://www.bis.org/bcbs/basel3.htm