Which finding indicates issues that could result in clients being subject to incorrect scenarios and thresholds?

Which finding indicates issues that could result in clients being subject to incorrect scenarios and thresholds?
A . Firming 2
B . Finding 4
C . Finding 5
D . Finding 7

Answer: D

Explanation:

Significance of Finding 4 in Scenario and Threshold Calibration:

Finding 4 typically points to issues with the alignment of customer segmentation or risk profiling. Incorrect segmentation or categorization directly impacts the assignment of scenarios and thresholds, leading to clients being subjected to inappropriate monitoring settings.

For example, placing a low-risk client in a high-risk threshold group can cause unnecessary alerts, while the opposite scenario might miss genuine suspicious activities.

Other Options Evaluated:

Finding 2: May relate to broader systemic issues but does not specifically highlight misalignment with thresholds or scenarios.

Finding 5: Typically involves data accuracy concerns but does not directly result in the application of incorrect scenarios or thresholds.

Finding 7: Often pertains to gaps in coverage or monitoring rather than specific issues in the calibration of scenarios and thresholds.

Advanced CAMS-Audit Context:

Advanced CAMS-Audit emphasizes the importance of precise customer segmentation and scenario calibration to ensure transaction monitoring systems operate efficiently and effectively. Findings pointing to misalignments in these areas are critical indicators of potential weaknesses.

Regulatory Relevance:

FATF and Basel Committee standards require risk-based monitoring tailored to the risk profile of each customer. Misaligned thresholds violate this principle, potentially leading to regulatory scrutiny. Conclusion:

The correct answer is B. Finding 4, as it identifies the misalignment of scenarios and thresholds with customer risk profiles, which is a critical issue in ensuring effective AML monitoring systems.