Risk Assessment & Management Flashcards
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Read the first 7 Risk Assessment & Management flashcards as text
Which SWIFT security incident led to major reforms in the Customer Security Programme and mandatory control attestation requirements?
Answer: The Bangladesh Bank heist of 2016
The 2016 Bangladesh Bank heist, where $81 million was stolen via fraudulent SWIFT messages, directly prompted SWIFT to launch the CSP with mandatory security controls.
In risk management, what does 'de-risking' in correspondent banking primarily refer to?
Answer: Banks exiting high-risk correspondent relationships instead of managing the risk
De-risking refers to the practice of banks terminating or restricting correspondent relationships with higher-risk customers or jurisdictions rather than applying risk-based mitigation.
Under the SWIFT CSP framework, how frequently must member institutions submit their security attestation?
Answer: Annually
The CSP requires all SWIFT users to self-attest their compliance with mandatory controls on an annual basis through the KYC Security Attestation (KYC-SA) application.
A bank processes a payment for a customer that later turns out to be a sanctioned entity not yet on its screening list. Which type of risk has materialized?
Answer: Regulatory/compliance risk
Processing a payment for a sanctioned entity exposes the bank to regulatory penalties, fines, and reputational damage—core manifestations of compliance risk.
What is the role of a 'cover payment' (MT 202 COV) in cross-border transactions, and what risk does it create?
Answer: It moves funds between correspondent banks to cover an MT 103; risk is reduced AML transparency in the interbank leg
The MT 202 COV is the interbank funding message accompanying an MT 103, but historically the cover leg lacked originator details, creating AML transparency gaps now addressed by FATF standards.
Which approach to correspondent banking risk management does FATF recommend over wholesale de-risking?
Answer: Risk-based approach with enhanced due diligence for higher-risk relationships
FATF advocates a risk-based approach where banks apply proportionate controls—including enhanced due diligence—rather than exiting all high-risk relationships.
A bank implements a daily payment cap on its SWIFT outbound messages. Which category of risk control is this?
Answer: Preventive control
A payment cap prevents excessive or unauthorized transactions from occurring in the first place, making it a preventive control.
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