Problem
Consider below the excerpt from the article written on the US bank Citigroup:
New York Times, Oct. 7, 2020
Citigroup is fined $400 million over 'longstanding' internal problems.
Two months after one of its bankers accidentally sent nearly $1 billion to the wrong people, Citigroup agreed to pay $400 million to federal regulators over long-running problems keeping its daily operations under control. ... The bank has also had trouble keeping track of the flow of illicit funds through its accounts. Over the past few years, it has grappled with problems in its Banamex USA unit, where prosecutors in 2017 said drug smugglers were using the bank to sneak dirty money into the United States from Mexico.
1. Explain why "keeping track of the flow of illicit funds" is an operational risk.
2. Explain how risk managers could use a Monte Carlo simulation to calculate the value at risk for operational risk.