Question

If a BD discovers that one of its clients is on the C (Office of Foreign Assets Control) (terrorism suspect list), then the BD must ________.

1) Terminate the client's account immediately
2) Report the client to the appropriate authorities
3) Continue providing services to the client
4) Ignore the client's status on the terrorism suspect list

Answer 1

If a Broker-Dealer finds a client on the OFAC terrorism suspect list, the BD must report this to the appropriate authorities and adhere to legal and regulatory procedures, which typically include freezing assets and terminating the account. The correct option is 2.

Step-by-step explanation:

If a Broker-Dealer (BD) discovers that one of its clients is on the Office of Foreign Assets Control (OFAC) list, which is associated with terrorism suspects, then the BD must report the client to the appropriate authorities.

The OFAC list is a list of individuals and organizations considered to be involved in terrorist activities, among other offenses. Financial institutions are required by law to consult the OFAC list to prevent doing business with those named on it.

In addition, a BD should review the account activity and freeze any assets in accordance with regulatory requirements. Immediate termination of the client's account is a part of the overall compliance process but must be done in line with appropriate legal and regulatory procedures.

Hence, Option 2 is correct.