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

FIs must haveeffective sanctions screeningprocesses toprevent transactions involving designated persons or entities.
Option A (Correct):Automated screening systemshelp financial institutionsidentify sanctioned individuals, entities, and countries in real time.
Option B (Incorrect):If a customer islisted on a sanctions list, the FImust freeze the account, not simply mark it "high-risk" and continue transactions.
Option C (Incorrect):Prohibited entities should not undergo EDD-transactions with them must beblocked or reported.
Option D (Incorrect):Freezing sanctioned assetsdoes not require board approval; it must bedone immediatelyas per regulations.
Sanctions Compliance Requirements:
Sanctioning Body
Examples of Sanctions Lists
U).S. (OFAC)
Specially Designated Nationals (SDN) List
United Nations (UN)
UN Security Council Sanctions List
European Union (EU)
EU Consolidated Sanctions List
UK (OFSI)
UK Sanctions List
Why Sanctions Screening is Important:
Failing to comply can result in billions in fines (e.g., BNP Paribas paid $8.9 billion in OFAC fines).
Transactions involving sanctioned entities can be blocked, leading to regulatory scrutiny.
Automated screening tools (e.g., SWIFT, World-Check, LexisNexis) improve compliance efficiency.
Reference:
OFAC Sanctions Compliance Framework
EU Sanctions Regulations
FATF Recommendation 6 (Targeted Financial Sanctions)

The internal review would most likely recommend that the institution provide product-specific anti-money laundering training to all relevant employees, not just actuaries. This is because life insurance products can be used for money laundering purposes, such as purchasing policies with illicit funds, surrendering policies for cash value, or using policies as collateral for loans. Therefore, all employees who are involved in selling, servicing, or processing life insurance products should be aware of the money laundering risks and red flags associated with these products, and how to report any suspicious activity. The institution should also ensure that the training is timely, effective, and tailored to the specific roles and responsibilities of the employees.
The other options are not as relevant or appropriate as the correct answer. Option A is too broad, as not all staff need to be trained on anti-money laundering, only those who are relevant to the institution's business activities and exposure to money laundering risks. Option C is too narrow, as it only focuses on actuaries and does not address the need for training other employees who may deal with life insurance products. Option D is not sufficient, as e-learning alone may not be effective in ensuring that employees understand and retain the anti-money laundering content, and the institution should also conduct follow-up assessments to measure the impact and outcomes of the training.
ACAMS Study Guide for the CAMS Certification Examination - 6th Edition, Chapter 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), page 57.
ACAMS CAMS Certification Video Training Course, Module 3: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 3.5: Training and Testing.
Best Practices for Anti-Money Laundering Compliance - DIRO Original, Section 3: Adequate Training.

The first valid step in the Mutual Legal Assistance Treaty (MLAT) international cooperation process is for the central authority of the requesting country to send a letter of request to the central authority of the other country. The letter of request should provide a summary of the facts and information required, the reasons for the request, and any specific legal or procedural requirements that need to be met. (CAMS Manual, 6th Edition, Page 233).