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First line of defense interview questions


Questions can be found on the below works by clicking on them:

Transaction monitoring

What are the Three Lines of Defense?

As regulatory compliance management has evolved, having three lines of defense has become more important.

Here is an overview of the three lines of defense:

  • First Line: The first line of defense is the employees of the financial institution who are involved in the creation and selling of products and services, or operationally supporting customers, products, and services. It includes both sales roles and operational roles, like Wire Transfers and Customer Service. It is their responsibility to understand their roles and responsibilities, create and apply internal controls, and respond to risks that their work, sales, and interactions may present.

  • Second Line: The second line of defense is the financial institution's compliance- and risk-related functions. They are responsible for providing guidance and oversight of the first line of defense. Additionally, they are responsible for proactively testing and monitoring high risk areas to ensure policy, procedures and processes implemented by the first line are working as intended to comply with rules and regulations. They are also responsible, in most institutions, for fostering relations between the first and third line of defense, and providing some reporting to the Board and Senior Management.

  • Third Line: The third line of defense is the external and internal auditors who independently evaluate the compliance risks and controls. They are also responsible for reporting to the Board and Senior Management's oversight functions. 

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