Based on the USA PATRIOT Act, one action that the US might take to demonstrate extraterritorial reach is to send requests for information to a non-US based financial institution (FI). The USA PATRIOT Act expanded the authority of the US government to issue subpoenas and other legal orders to foreign banks that maintain a correspondent account in the US, requiring them to produce records relating to such account or any account at the foreign bank, including records maintained outside the US12. This provision was intended to enhance the ability of the US to investigate and prosecute money laundering and terrorist financing activities that involve foreign FIs3.
1: USA PATRIOT Act, Section 319(b)
2: Britannica, USA PATRIOT Act, History & Society
3: Princeton Legal Journal, FISA and the USA PATRIOT Act: Reforms and Legal Implications

According to the ACAMS CAMS Study Guide, one of the methods that attorneys may use to facilitate money laundering is to make payments to third parties on behalf of their clients, using funds from their client accounts. This may obscure the source and destination of the funds, and create a false appearance of legitimate transactions. Therefore, making payment to various people is a red flag for potential money laundering in this situation.
ACAMS CAMS Study Guide, 6th Edition, page 117
FATF Report on Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals, June
2013, page 341
AML/CFT Red Flags for Lawyers, AML-CFT.net, October 20202

* Paying premium several years in advance and terminating early for a refund (A):"A typical red flag is when a policyholder pays large premiums up front and then seeks early termination to receive a refund. This can be used to launder illicit funds by integrating them into the financial system and then retrieving 'clean' money."(CAMS 6th Edition, Life Insurance ML/TF Risks; FATF Guidance for a Risk-Based Approach for the Life Insurance Sector)
* Regularly switching policies and accepting penalties (D):"Frequent changes in insurance policies or products, even at a financial loss, are considered suspicious. This may indicate an attempt to obscure the money trail or integrate illicit proceeds."(CAMS 6th Edition, ML/TF Red Flags in Life Insurance) Incorrect Options:
* B: Having multiple policies is common and not itself a red flag.
* C: High premiums/payouts are not inherently suspicious.
* E: Beneficiary payouts to elderly people are not ML/TF red flags.
References:
CAMS 6th Edition, Life Insurance Red Flags
FATF Guidance for a Risk-Based Approach for the Life Insurance Sector

According to the Basel Committee on Banking Supervision's Customer Due Diligence for Banks, the compliance function should provide an evaluation of a bank's policies and procedures independent from its management. The compliance function is responsible for ensuring that the bank adheres to the relevant laws, regulations, and standards on customer due diligence, anti-money laundering, and combating the financing of terrorism. The compliance function should also monitor the implementation and effectiveness of the bank's customer due diligence policies and procedures, identify and report any breaches or deficiencies, and recommend corrective actions or improvements. The compliance function should have sufficient authority, independence, resources, and access to information to perform its duties effectively.
Customer due diligence for banks, Basel Committee on Banking Supervision, October 2001, paragraphs 55-56 CAMS Study Guide - 6th Edition, Chapter 6, page 172 CAMS Certification Exam Outline, Domain 3, Task 3.1, Skill 3.1.2 Anti-Money-Laundering Guidance: Basel Committee Consultative Paper ..., Office of the Comptroller of the Currency, February 2001, page 2

The auditor should include the regulatory violation in the audit report and report it to the board of directors.
This is because the auditor has the responsibility to report any findings of non-compliance or material weaknesses in the institution's internal controls, policies, and procedures. The auditor should also provide recommendations for corrective actions and follow-up on their implementation. The board of directors has the ultimate oversight and accountability for the institution's compliance program and should be informed of any significant issues or risks that may affect the institution's reputation, operations, or regulatory status12.
1: CAMS Certification Package - 6th Edition | ACAMS, Chapter 6: Developing an Effective Anti-Money Laundering Program, p. 125-126 2: The Wolfsberg Group, The Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, October 2014, p. 7, https://www.wolfsberg-principles.com/sites/default/files/wb
/pdfs/Wolfsberg-Correspondent-Banking-Principles-2014.pdf