Question 88

Immediately freeze the customer's account and notify the relevant authorities

When a financial institution identifies a customer on a sanctions list, it must take immediate action to freeze the customer's account and inform the relevant authorities to comply with legal and regulatory requirements.

A) Immediately freeze the customer's account and notify the relevant authorities

This option is correct because financial institutions are legally obligated to take swift action when a customer appears on a sanctions list. Freezing the account prevents any further transactions that could violate sanctions regulations, and notifying the authorities ensures compliance with laws designed to combat money laundering and terrorism financing.

B) Continue processing transactions but flag them for review

This option is incorrect as it does not adequately address the risk posed by a customer on a sanctions list. Continuing to process transactions, even with a flag for review, could lead to violations of sanctions regulations and potential legal repercussions for the institution.

C) Close the account without notifying the customer

This option is also incorrect. While closing the account is a necessary action, doing so without notifying the customer may not align with regulatory requirements. Institutions typically must follow specific protocols, including informing the authorities and, where appropriate, the customer about the closure due to sanctions compliance.

D) Request the customer to provide additional documentation

This option is incorrect because requesting additional documentation does not address the immediate need to freeze the account. Financial institutions are required to act decisively when a sanctions list match is identified, rather than delaying action by seeking more information.

Conclusion

The correct course of action is to immediately freeze the customer's account and notify the relevant authorities to ensure compliance with sanctions regulations. Options B, C, and D either fail to act decisively or do not follow the legal protocols necessary when dealing with customers on sanctions lists, which could expose the institution to significant risks and penalties.