Banks mustcomply with legal subpoenaswhile ensuring AML compliance.
Option B (Correct):The bank shouldreview client transactionsandrespond fullyto law enforcement.
Option A (Incorrect):Filing a SAR simply because of a subpoenaisnot requiredunless suspicious activity is identified.
Option C (Incorrect):Tipping offthe client about the subpoena isillegalunder AML laws.
Option D (Incorrect):Risk scores should be reviewedbut not automatically adjustedsolely based on a subpoena.
Reference:U.S. Bank Secrecy Act (BSA) Subpoena Compliance Rules, FATF Recommendation 40 (International Cooperation).

According to the Anti-Money Laundering Specialist (the 6th edition) resources, the institution should develop a system to monitor all the activity of the customer's accounts to mitigate the risk associated with these accounts. This is because the customer's behavior and profile may indicate some red flags of money laundering, such as:
Operating an import-export business, which is a common sector for trade-based money laundering, where trade transactions are used to disguise the movement of illicit funds, either by over- or under-invoicing, misrepresenting the quantity or quality of goods, or falsifying documents1.
Receiving funds from a jurisdiction perceived as highly corrupt, which may increase the risk of the funds being derived from bribery, embezzlement, fraud, or other predicate offences2. Transparency International is a global civil society organization that publishes an annual CorruptionPerceptions Index, which ranks countries by their perceived levels of public sector corruption based on expert assessments and surveys3.
Making frequent transfers among the accounts, which may indicate a layering technique, where funds are moved through multiple accounts, institutions, or jurisdictions to obscure the audit trail and the source and ownership of the funds4.
Preferring to manage the accounts separately, which may indicate a lack of transparency or an attempt to avoid detection or reporting by the institution.
By developing a system to monitor all the activity of the customer's accounts, the institution can:
Identify and verify the identity and beneficial ownership of the customer and the parties involved in the transactions.
Obtain and verify information on the nature and purpose of the business relationship and the source and destination of the funds.
Conduct a risk assessment of the customer and the transactions based on the customer's profile, behavior, and geographic locations.
Apply enhanced due diligence and ongoing monitoring measures for higher-risk customers and transactions, such as obtaining additional information, documentation, or approval, or conducting more frequent or in- depth reviews.
Detect and report any suspicious or unusual transactions or activities to the relevant authorities.
The other three options are incorrect because:
File a suspicious transaction report is not the best answer, as it is a reactive measure that should be taken after the institution has identified or suspected money laundering or terrorist financing activity, not before. The institution should first conduct due diligence and monitoring of the customer and the transactions, and then file a report if there are reasonable grounds to believe that the activity is suspicious or unusual.
Diminish the importance of the subjective Transparency International rating is not the best answer, as it is a complacent and irresponsible attitude that may expose the institution to legal, regulatory, reputational, or operational risks. The Transparency International rating is not subjective, but based on credible sources and methodologies, and it is widely used as a reference by governments, businesses, civil society, and the public to assess the level of corruption in different countries3. The institution should not ignore or downplay the rating, but rather use it as one of the factors to evaluate the risk of the customer and the transactions.
Conduct a trade-price manipulation analysis is not the best answer, as it is a specific and technical measure that may not be sufficient or appropriate to mitigate the risk associated with these accounts. A trade-price manipulation analysis is a method of detecting trade-based money laundering by comparing the prices of goods or services in a transaction with the market prices or other benchmarks, and identifying any significant discrepancies or anomalies. However, this measure may not be feasible or effective if the institution does not have access to reliable and comparable data, or if the goods or services are not standardized or homogeneous.
Moreover, this measure may not address other aspects of the risk, such as the identity, ownership, or behavior of the customer and the parties involved in the transactions.
1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 108 2: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 107 3: Transparency International, Corruption Perceptions Index, 3 4: ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 106 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 103 :
ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 103 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 104 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 105 : ACAMS, CAMS Study Guide, 6th Edition, Chapter 5, p. 109

According to the Financial Action Task Force (FATF), the use of large amounts of cash is a common method for money launderers to move illicit funds [1]. Purchasing luxury items with cash can indicate an attempt to convert illegal funds into tangible assets that can be easily resold or moved across borders. As a result, businesses that deal with luxury items are required to implement enhanced due diligence measures, including monitoring transactions involving large amounts of cash [1].
Reference: [1] Financial Action Task Force. (2013). Money Laundering & Terrorist Financing Through the Real Estate Sector. https://www.fatf-gafi.org/media/fatf/documents/reports/ML-TF-through-real-estate.pdf

Reputational risk is the potential for negative publicity, public perception, or legal action to adversely affect a financial entity's image, brand, or customer loyalty1. Violating AML laws can have significant reputational risks for financial entities, as they may be perceived as facilitating or enabling money laundering, terrorist financing, or other illicit activities. This can result in a loss of trust, credibility, and revenue from existing and potential customers, especially those who are high-profile, sensitive, or socially responsible23. Moreover, violating AML laws can also attract negative media attention, regulatory scrutiny, and legal action, which can further damage the reputation of the financial entity and expose it to additional sanctions, fines, or penalties4.
1: ACAMS, CAMS Study Guide, 6th Edition, Chapter 1, page 16
2: ComplyAdvantage, 5 AML Reputational Risk Considerations for 2023, link
3: Exam-Answer, Reputational Risk Consequences for Violating AML Laws, link
4: Unit21, 8 AML Penalties, Fines, and Sanctions + Examples You Should Avoid, link Reference:https://www.ifc.org/wps/wcm/connect/e7e10e94-3cd8-4f4c-b6f8-1e14ea9eff80
/45464_IFC_AML_Report.pdf?MOD=AJPERES&CVID=mKKNshy

According to the FATF Guidance on Politically Exposed Persons1, financial institutions should assess the money laundering and terrorist financing risks associated with a business relationship or transaction with a PEP, their family members and close associates, on a case-by-case basis. This includes obtaining information on the source of wealth and source of funds of the customer and the beneficial owner, as well as conducting enhanced ongoing monitoring of the business relationship. Therefore, the appropriate next step for the analyst is to review the beneficial ownership of the customer to determine if the PEP or any other person poses a higher risk, and to apply additional measures accordingly. Removing the PEP as the authorized signatory, re-categorizing the customer as high-risk, or categorizing the authorized PEP signatory as high-risk are not necessarily required or sufficient steps, as they do not take into account the specific circumstances and risk factors of the customer and the PEP.
References:
CAMS Certification Package - 6th Edition | ACAMS
FATF Guidance: Politically Exposed Persons (Recommendations 12 and 22)
How Politically Exposed Persons Put Financial Institutions at Risk