An examiner reviews a nonbank mortgage company subject to 31 CFR 1029.210. Its 40-page AML program merely copies the regulation and contains no assessment or controls addressing the risks of its three loan products. Does this satisfy the reasonably-designed program requirement?
Correct Answer
B) Deficient: the program must be reasonably designed for this company
B. The program must address the actual company and its risks. The rule requires an implemented program reasonably designed to prevent misuse for money laundering or terrorist financing. Policies, procedures and controls must be based on risks associated with the company's products and services. Scope and exceptions: Using a template is not inherently prohibited; leaving it untailored to relevant risks is the defect here. Written documentation, senior-management approval, training, a designated officer and independent testing are separate obligations. Source: 31 CFR 1029.210(a), (b)(1)–(4) — https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/part-1029/subpart-B/section-1029.210
Why This Is the Correct Answer
B. The program must address the actual company and its risks. The rule requires an implemented program reasonably designed to prevent misuse for money laundering or terrorist financing. Policies, procedures and controls must be based on risks associated with the company's products and services. Scope and exceptions: Using a template is not inherently prohibited; leaving it untailored to relevant risks is the defect here. Written documentation, senior-management approval, training, a designated officer and independent testing are separate obligations.
Why the Other Options Are Wrong
Option A: Sufficient: length shows effort, and 40 pages exceeds what is typical
Document length does not demonstrate risk coverage.
Option C: Deficient: the program must run to at least 50 pages to be adequate
The provision sets no 50-page minimum.
Option D: Sufficient: reciting the rule is the safest form a program can take
Repeating the regulation does not establish adequate company-specific controls.
Exam Tip
Evaluate what a program controls, not how many pages it contains.
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