Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam 2025 - Free CAMS Practice Questions and Study Guide

The consequence of failing to comply with Basel Due Diligence Principles is that an institution may face lawsuits for violating Know Your Customer (KYC) standards. Compliance with these principles is essential for maintaining effective anti-money laundering (AML) controls and ensuring that financial institutions undertake adequate due diligence on their clients. When institutions do not adhere to these standards, they not only jeopardize their integrity but also expose themselves to legal risks.

KYC regulations require institutions to verify the identity of their clients, assess risks, and monitor transactions. If an institution neglects these responsibilities, it could face legal action from regulatory bodies, clients, or other stakeholders claiming damages resulting from the institution's failure to detect suspicious activity. The potential lawsuits can lead to hefty fines, reputational damage, and increased scrutiny from regulators, which can have lasting impacts on the institution's operations and ability to conduct business effectively.

In contrast to this, the other options suggest outcomes that are either positive (gaining a competitive advantage or receiving financial rewards) or imply a lack of consequences (no repercussions), which contradict the principles of governance and accountability that Basel aims to instill in financial institutions.