AHSAN HABIB Flashcards

Question

In which money laundering phase can virtual currencies be used?

Answer 1

Placement, Layering and Integration (all the three stages)

Answer 2

Large volumes and high values of transactions and limited information about parties and the source of funds; Lack of first-hand information about the respondent bank's customers as they (ultimate customers) are at arm's length (unrelated /independent); Effectiveness of the regulatory regime may be unknown; If the correspondent bank account is allowed to be used as a Payable-through-Account (PTA); If the correspondent bank account is allowed to be used by foreign banks to conduct large financial transactions on behalf of their customers; If the correspondent bank account is allowed to be used by other banks (Nesting).

Answer 3

They often do not leave an online footprint that could be tracked by law enforcement.

Answer 4

Unfamiliar signatures on checks; A set of “out-of-sync” (not in harmony) check numbers; Use of account shortly after the addition of a new authorized signer; Changes in Spending and Transaction Patterns; Sudden changes in accounts or practices, such as unexplained withdrawals of large sums of money, particularly with a vulnerable adult who is escorted by another (e.g., caregiver, family member, “friend”) who appears to be directing the changing activity patterns; Statements are sent to an address other than the vulnerable adult’s home.

Answer 5

Black Market Peso Exchange (BMPE). This method is complicated and involves multiple participants globally. BMPE is a form of trade-based money laundering, to convert the proceeds of drugs sold in the US or Europe from dollars and euros into pesos in Mexico and Colombia through the trade of commodities by money brokers. BMPE is primarily a method used to smuggle dollars or pesos across the border from the United States to Mexico, and vice versa. BMPE is very similar to Hawala/Hundi. If the following elements are added to Hawala, it becomes BMPE: Trade based activity; Peso and Dollar; Illegal money earned in US and transferred to Peso countries i.e. Mexico, Colombia, Argentina, Cuba, Chile, the Dominican Republic, the Philippines and Uruguay.

Answer 6

TPSPs are bank customers that provide payment processing services to merchants and other business entities. Popular third-party payment/credit cards of North America are Walmart Mastercard, Hudson's Bay Mastercard, Canadian Tire Mastercard, Sears Mastercard. Payment processors can be used to mask criminals’ illegal or suspicious transactions and to launder criminal proceeds, including the proceeds of consumer fraud. Automated Clearing House (ACH) credit transactions originating abroad also have been used to place illicit funds directly into domestic financial institutions. Payment processors pose greater money laundering and fraud risk if they do not have an effective means of verifying their merchant clients' identities and business practices and due to multiple layers of TPSPs that appear to be unnecessarily involved in transactions. Risks are heightened when the processor does not perform adequate due diligence on the merchants for which they are originating payments; If MSBs are used for ML by Cashing checks without obtaining adequate proof of identity; No Currency Transaction Reports have been filed when required.

Answer 7

FinCEN (a bureau within the U.S. Treasury Department) outlines six key principles: 1) leadership should be engaged, 2) Compliance should not be compromised by revenue interests, 3) Relevant information should be shared throughout the organization, 4) Leadership should provide adequate human and technological resources, 5) The program should be effective and tested by an independent and competent party; 6) Leadership and staff should understand how their BSA reports are used. FinCEN is the delegated administrator of the BSA. As such, it is charged with issuing guidance and regulations, enforcing the BSA and coordinating communication and investigations with law enforcement agencies and financial institutions.

Answer 8

Purposeful rejection or termination of financial relationships with groups of customers or lines of businesses considered high risk under BSA/AML standards. The approach towards de-risking is counter-productive to the goals of an anti-money laundering /countering the financing of terrorism (AML/CFT) framework as it encourages the flow of funds via unregulated channels. Financial institutions should instead manage their risks intelligently on a case-by-case basis rather than taking the shortcut and eliminating the risk wholesale.

Answer 9

Individuals, groups and entities subject to economic sanctions by the US Treasury and OFAC. These include individuals, groups and entities that are not country-specific. Their assets are blocked, and US entities /persons are generally prohibited from dealing with them. The SDN list is frequently updated; however, there is no predetermined timetable for updating. Names are added and removed as appropriate. Cross-border banking can get confusing when international regulation provides different regulatory regimes e.g. the U.S. sanctions list is not legally binding in Europe. Canada's economic sanctions apply to activities of Canadian nationals/firms outside Canada, regardless of any export from Canada.

Answer 10

Smurfing is a type of structuring in which multiple individuals ("smurfs") are hired to deposit the amounts under reporting thresholds or to avoid reporting requirements.Smurfs deposit cash, rather than withdrawing it. Smurfs often use accounts set up using dead peoples' identities.

Answer 11

It enhances security and protect the identity and confidential information of consumers; also reduces the normal time it would take to open a new account; enhances security by preventing the use of shared credentials; increases process efficiency and keeps customers' privacy.

Answer 12

It occurs when a social security number, or a list of numbers, is stolen or bought and a false tax return is filed and the money is mailed to an address accessible by the schemer.

Answer 13

Elder financial exploitation

Answer 14

Interstate funnel accounts and Interstate cash accounts. A funnel account (sometimes referred to as an interstate funnel account) is a method used to launder money that exploits branch networks of financial institutions. It involves illegal funds deposited into an account at one geographic location that gives criminals immediate access to the money via withdrawals in a different geographic location. The transaction amounts are kept under the AML reporting requirements in an attempt to avoid detection.

Answer 15

Understanding the features, functionality and options available in updated AML softwares; Understanding the complexity and life cycle of a new AML system; Understanding and keeping up with current regulatory expectations and issued guidances.

Answer 16

The FI's AML Policy should contain components on when and how employees will be trained (on-going training, as well as initial/onboarding training of new employees); Ability to incorporate relevant legislative and regulatory AML changes; Review of the AML policy by the Board of Directors. The policy should explain all technical terms and acronyms thoroughly and should exclude the FI's propriety information. The AML Policy does not need to have procedures in it.

Answer 17

Financial intelligence can be used effectively in three investigative methodologies: strategic investigations, tactical investigations, and historic investigations.

Answer 18

FSRB plays a role for identifying and addressing AML/CFT technical assistance needs. FSRBs work to protect the FATF Brand in the common interest of all.

Answer 19

Form 8821 authorizes any individual, corporation, firm, organization, or partnership designated to inspect and/or receive someone's confidential information verbally or in writing for the type of tax and the years or periods listed on Form 8821.

Answer 20

The sale of a stock that the investor does not own. To do so, a securities intermediary 'loans' the stock to an investor which comes from the intermediary's own inventory, another client's margin account or another intermediary.

Answer 21

It states that the intent and knowledge required to prove the offence of money laundering includes the concept that such a mental state may be inferred from Objective factual Circumstances. This means, the criminal liability may be proven if the objective factual circumstances indicate that the perpetrator has the ‘knowledge’ to commit the crime. Thus, it could be assumed that the laundering offences might be committed while the defendant either knew or reasonably ought to have known that the proceeds were derived from specified unlawful activities. This kind of liability is called ‘willful blindness’. The defendant may be required to prove his own diligence at trial in order to avoid a conviction.

Answer 22

Buying or selling of a security by someone who has access to material nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still nonpublic; trading while having special knowledge is unfair to other investors who don't have access to such knowledge. Using, disguising, converting, possessing the funds obtained from insider trading (or any item into which those funds have been converted to obtain property/asset) is considered 'money laundering'.

Answer 23

Penalties are at least € 5 Million or 10% of the total annual turnover for entities . Findings of risk assessment of ML and TF have to be submitted every 2 years (all 28 EU member countries have to conduct review every 2 years).

Answer 24

Embezzlement is a type of financial fraud, e.g. a lawyer might embezzle funds from the trust accounts of their clients; a financial advisor might embezzle the funds of investors; and a husband or a wife might embezzle funds from a bank account jointly held with the spouse.

Answer 25

Wire transfers to entities in high-risk jurisdictions with names that include a variation of medical terms (e.g 'Medicus'); Methods of payment such as wires payment, email money transfer, and bulk cash withdrawal; Payments between charities and medical tourism sites; Credit card payments to travel agencies, airlines or hotels, prior to movement of money and travel; First-line banking staff's indication of potentially ill customers moving large amounts of funds to numbered companies or charities prior to travel.

Answer 26

Sanctions laws, which are designed to prohibit state procurement as well as investment with companies doing business with certain countries or other entities that are under the scrutiny of sanctions by the US government.

Answer 27

FATCA was introduced by the US Department of Treasury and Internal Revenue Service (IRS) in 2010 to encourage better tax compliance by preventing US persons from using banks and other financial organisations to avoid taxation on their global income and assets. Individuals filing with any status other than a married, joint filing have a reporting threshold of $50,000 if they reside in the United States and a reporting threshold of $200,000 if residing outside of the United States.

Answer 28

Wolfsberg Principles primarily focus on standards and policies for KYC, AML and terrorist financing . Other areas covered are Risk-Based Approach for Managing Money Laundering Risks; Private Banking; Correspondent Banking; Prohibition of concentration accounts; Enhanced customer due diligence for money services businesses. Wolfsberg Principles hold NO force of law.

Answer 29

The first thing is to identify the root cause such as; Do they have any documented policy/procedure in place ? If no, then the recommendation is to develop one. If the policy is in place: Are the roles and responsibilities documented properly ? If no, then the policy/ procedure needs to be reviewed to make the roles and responsibility clearer; if yes; then it needs to be ensured that the responsibilities have been communicated and understood by the respective officer and he has received appropriate training to resolve such issues. If the policies are in place, roles and responsibilities are clear and communicated, and the staff is fully trained, then the Audit should get the staff's opinion on why there are deficiencies and report their opinion to management, recommending any appropriate action; However, recommendations may be generic, such as the staff needs more training or the FI needs to check the effectiveness of its training. The Audit can also discuss the issue with the management and conclude their recommendation. The senior management or Board will have to come up with their own disciplinary measures.

Answer 30

It is the United Nation 2000 convention Against Transactional Organised Crime. Countries should criminalize money laundering on the basis of the Palermo Convention. Countries should consider adopting measures that allow such proceeds or instrumentalities to be confiscated without requiring a criminal conviction (non-conviction based confiscation).

Answer 31

Countries should criminalize money laundering and apply the crime of money laundering to all serious offences, with a view to including the widest range of predicate offences. Predicate offences may be described by reference to all offences, or to a threshold linked either to a category of serious offences or to the penalty of imprisonment applicable to the predicate offence (threshold approach), or to a list of predicate offences, or a combination of these approaches.

Answer 32

Illegal arms sales, narcotics/human/organ trafficking, contraband (imported/exported illegally) smuggling and other activities related to organized crime, embezzlement, insider trading, bribery, influence peddling, tax crimes, Moonshine (US term) i.e taking goods into or out of a country illegally, computer fraud schemes, hush payments ( e.g. payments by US President Donald Trump to porn star Stormy Daniels to settle previous scandals). Money laundering consists of the conversion or transfer of property or of assisting any person who is involved in the commission of the crime. Green or environmental crime has been included as a predicate offence under the 6th EU Anti-Money Laundering Directive (6AMLD).

Answer 33

By designating a country or a financial institution as a primary money laundering concern, the US government can force US banks to halt many of their financial dealings with the designee. US government can also ensure the inclusion of that country onto FATF'S non-cooperative country and territory list. US Treasury Department has used Section 311 to go after the banks and front companies that help North Korea evade sanctions, to go after Iran’s nuclear program and terrorism financing, to isolate Syria, to pressure off-shore havens, like the Pacific island of Nauru, to pressure Shell Companies in Seychelles (East African country), Delaware (US State), British Virgin Islands or Belize that the US believes are complicit in money laundering. Belize, British Virgin Islands, USA, UK, Cayman Islands, Haiti, Venezuela, Bahamas, Curacao, Afghanistan, Mexico, Latvia, Russia are among the countries of primary ML concern.

Answer 34

Yes. Numbered (yet, anonymous) accounts are intrinsically linked to their owners, if at least one transaction performed using this anonymous account can be traced to a real person (for example, if the owner is a frequent cocaine buyer but had a gross mistake of paying for the air ticket or hotel room from this same account) one can associate this account (as well as payments that were and will be made through it) with its owner. Numbered accounts should not be prohibited but be subjected to exactly the same KYC procedures as other customer accounts.Numbered accountholders' name should be known to essential people of the bank, NOT everyone.

Answer 35

Desire to solve the double-spending problem of electronic funds transfers necessitated the intervention of financial institutions to allow for online payments. With this solution, Nakamoto (inventor of the idea) claimed that, online payments can be sent directly from one party to another without going through a financial institution. Numbered (yet, anonymous) private keys (used for cryptocurrency transaction) are intrinsically linked to their owners, if at least one transaction performed using this anonymous private key can be traced to a real person (for example, if the owner is a frequent cocaine buyer but had a gross mistake of paying for the air ticket or hotel room from this same private key) one can associate this private key (as well as payments that were and will be made through it) with its owner. In the ML cycle, cryptocurrencies would fall primarily into the placement stage. Cryptocurrency transactions are final and non-reversible.

Answer 36

USA, China and the UK are three of the largest destination countries for both licit and illicit cultural property (painting/sculpture). It stands to reason that someone trading in international cultural property may send the proceeds of those transactions internationally, if only, as noted above, to continue to further their activities. The funds may also be used to pay brokers working in specific countries to transport goods from conflict zones across transit countries to reach a dealer and eventual buyer in the USA, in China or in the UK. A red flag in this case may be that the artifacts are from a conflict zone, Venezuela.

Answer 37

Commodities are over or under-valued; Artifacts are shipped from areas of conflict and civil unrest (e.g. South Sudan, Syria, Yemen, Angola); Payments are made to a vendor by an unrelated third party; Commodities are being traded that do not match the vendor involved; and there is a sudden change in company name and ownership yet the business model remains the same

Answer 38

Credit Unions are owned by its own members. Credit Unions do not participate in trade based financing, correspondent banking relationships, large corporate relationships e.g. international banking.

Answer 39

Implementation of Foreign Accounts Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) along with the current EU Directives; Identification of a politically exposed person and their close associates and establishing source of wealth; Processes are manual and tend to be document intensive; Customer on-boarding can be a fairly long process due to multiple touch points; Increased KYC cost compared to return on investments.

Answer 40

TBML involves a number of schemes in order to complicate the documentation of legitimate trade transactions; such actions may include moving illicit goods, falsifying documents, misrepresenting financial transactions, and under- or over-invoicing/multiple invoicing the value of goods. Examples of Red Flags in TBML: Payments to a vendor by unrelated third parties; False reporting, such as wrong classification of commodities, commodity over or under-valuation; Repeated importation and exportation of the same high-value commodity, known as carousel transactions; Commodities being traded that do not match the business involved; Unusual shipping routes or transshipment points; Packaging inconsistent with the commodity or shipping method; Double/ multiple invoicing. In addition, 80 percent of trade activity is open account trade, which is not documentary-based, thus offering no banking documentation to help make determinations. Mexican Cartels control 90% of the cocaine that enters the US and in turn they smuggle the proceeds to countries where placement into the financial system is less scrutinized. The rugs (illegal money is often funneled through various antique rug shops) and clothing appear to be an example of TBML.

Answer 41

A “dual-use” item is one that has civil applications as well as terrorism and military or weapons of mass destruction (WMD)-related applications. Dual-use items are goods, software, technology, documents and diagrams which can be used for both civil and military applications. They can range from raw materials to components and complete systems, such as aluminium alloys, bearings, or lasers. At the micro level, this can be the terrorist groups smuggling chemical fertilisers such as ammonium nitrate to be used as explosives. The same materials used in agriculture or industrial manufacturing can be extracted and repurposed in biological or chemical weapons of mass destruction. Even the lyophilizer used in coffee processing can also be found in biological weapons. Hydrogen peroxide, used to bleach paper, is also a missile propellant. If a vessel carrying one of these dual-use goods (DUGs) from Colombia to China, makes a half-way stop in Chabahar, Iran, there is likelihood that the Taliban militants further East are making missiles (or perhaps not). But today it’s peroxide, tomorrow it’ll be the tungsten needed to make bullets. Banks face issues when they identify dual-use goods specifically involve generic descriptions/multiple descriptions of goods.

Answer 42

Geographic risk; AML program of the parent company should be considered, particularly whether or not the parent company’s program is extended to the client or if the client acts fairly autonomously from the parent company; Correspondent banking client’s ownership and management structures; Country of domicile and the reputation of the owners (if any politically exposed person in executive management or ownership structure); All significant controlling interests, the ultimate beneficial owners, sources of wealth and background, including their reputation in the marketplace (particularly related to negative news); Regulatory status and history of the client; AML controls of the client.

Answer 43

Nested correspondent banking refers to the use of a bank’s correspondent relationship by a number of respondent banks through their relationships with the bank’s direct respondent bank to conduct transactions and obtain access to other financial services. When the client engages in downstream correspondent banking, which increases the risk by exposing the correspondent banks to their customers’ customers, efforts should be made to understand the nature of the relationships with downstream clients, including (as appropriate) the types, number, scale of services and geographic distribution of clients; identified issues with the downstream correspondent; the degree to which the client examines the AML controls of its downstream clients and whether this activity presents elevated risk.

Answer 44

Black Market Peso Exchange (BMPE). The term was invented for Colombian importers for buying US dollars on black market to avoid official taxes and duties. This is where money brokers are used by drug traffickers to convert US dollars or euros to pesos through the sale of commodities, such as clothing or electronic equipment. If someone earns money in USA and have US Dollars and want to move this money to Peso based country, say Colombia, through a certain process by using Peso Exchange broker, that certain process is now referred to as BMPE.

Answer 45

Peer-to-peer lending, also known as Microlending enables borrowers to build businesses and create sustainable income within underbanked and economically restricted geographies. The reasons of its vulnerabilities to ML are: Transfers to, from, and between high risk geographies (and adjacent areas) with little oversight;The minimal due diligence required for microloan donors and recipients; Assuming a legitimate business purpose as a mitigating factor for transaction review; The nature of microloans i.e. small amounts transactions that inherently fall below reporting thresholds; No collateral backing required for loan transactions creates high default rates, an appealing prospect for terrorist financiers; Potential for diversion of funds once they reach the destination; False representation of loan recipients; Use of correspondent banks with complex, non-transparent ownership structures in high risk geographies to disburse funds.

Answer 46

Crowdfunding has been used which is the procedure of raising expansive amounts of cash, funding or financing from numerous people who are interacting via internet in online consumer communities. It became one of the main avenues for individuals around the world to raise capital online for various ideas and projects and to finance terrorism. To minimize the risk in crowdfunding involvement, FIs need to know more about the customer who participates in crowdfunding. FIs can also encourage peer-grouping.

Answer 47

Money laundering is a three-step process: placement, layering and integration. When money is raised and moved, this is the placement stage of money laundering. When money is moved and stored, it is the layering stage of money laundering. Illicit proceeds are separated from their source by a series of complex financial transactions designed to disguise the audit trail and provide anonymity. When the money flows from being stored to spent, it represents the integration stage of money laundering. This is where funding is accessed as being seemingly legitimate in furtherance of nefarious purposes. Recently, Association of Certified Anti Money Laundering Specialists (ACAMS) developed a four-stage model of ML: predicate offense, placement, layering and integration. As per their logic, without existence of any Predicate Offence, the rest 3 stages do not make sense.

Answer 48

Cash Courier. FIs should form Strategic and Tactical Response (STR) teams to deal with a Bank Secrecy Act/anti-money laundering (BSA/AML) response to situations they designate as emergency response situations, such as terrorist attacks. The STR team should be comprised of specially trained BSA/AML investigators and/or analysts as conducive to the size and capacity of the financial institution.

Answer 49

Wire stripping is the deliberate act of changing or removing material (sanction related) information from wire payments or instructions, thereby making it difficult to identify and restrict payments to and from sanctioned parties or countries. Wire-stripping is done when a bank alters bank codes to hide the origin of a transaction. This is usually done by changing the code that identifies the beneficiary's bank. The risks attached to it, are: If the information regarding sender is hidden/altered, beneficial owner unknown, source of wealth may not be verified, there is a risk that money is earned from illegal sources and placed in the financial system for laundering purpose; If the information regarding sender is hidden/altered: payment could be made to a sanctioned party.

Answer 50

ML was done here through Cuckoo Smurfing. To combat cuckoo smurfing, FATF recommends that banks have controls in place to identify depositors who pay cash into third-party accounts. Also, banks should monitor for unusual cash deposits that are structured or placed in branches other than where the customer's account is held. Cuckoo Smurfing requires an insider in an FI (here comes the issue of KYE i.e. Know Your Employee or Know the Enemy within).

Answer 51

Merging the 9 terrorist financing recommendations with the 40 Recommendations ; Applying Risk-based approach to all AML/CFT efforts; Targeted Financial sanctions related to proliferation of Weapons of Mass Destruction (WMD); Risk assessment of new products prior to launch; Implementing Enterprise/Group-wide AML/CFT programs and procedures; Inclusion of tax crimes within scope of designated categories of offenses of ML; More focus on Domestic PEPs; Focus on REPs ( Reputationally Exposed Persons) involved in international organizations; Transparency of beneficial ownership of legal persons. FATF advanced its core work on virtual assets, beneficial ownership transparency, and illicit finance risks. Among other things, the FATF: (i) approved an updated version of its Guidance on a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers for publication; (ii) proposed changes to beneficial ownership standards; (iii) approved the commencement of a study on Illicit Proceeds Generated from the Fentanyl and Related Synthetic Opioids Supply Chain; (iv) adopted an update to its 2016 confidential report on terrorist financing risk indicators; and (v) issued a statement regarding Afghanistan that reaffirmed the “United Nations Security Council Resolutions that Afghanistan should not be used to plan or finance terrorist acts, emphasizing] the importance of supporting the work of non-governmental organizations in the country and maintaining the flow of humanitarian assistance to the Afghan people, and for governments to facilitate information sharing with their financial institutions on any emerging illicit finance risks related to Afghanistan.”

Answer 52

Has to be strategically important; Has to be an observer first; Country should be active member of relevant FATF-Style Regional Body (FSRB) and should agree to implement all of FAFT recommendations within 3 years; Level of AML/CFT risks faced and efforts to combat those risks; Participation in other relevant international organizations; Size of GDP, banking sector and population; FATF’s geographic balance should be enhanced i.e that region/country's impact on global financial system; Regional prominence in AML/CFT efforts and level of commitment to AML/CFT efforts; Level of adherence to financial sector standards; Degree of openness of financial sector.

Answer 53

4 risks are associated with customer identification: Reputational, Operational (risk of direct or indirect loss resulting from inadequate or failed internal processes, people, and systems, or from external events), Legal (Possibility that lawsuits, adverse judgments or contracts that turn out to be unenforceable can disrupt or negatively affect the operations or condition of a bank) and Concentration risks (Assets side of the balance sheet).

Answer 54

1st Line of defense- Business Line; 2nd Line of defense-Compliance and internal control functions (contact point for internal and external authorities and responsible for reporting suspicious transactions); 3rd Line- Internal Audit. AML functions should have a centralized aspect to ensure consistency.

Answer 55

PEPs are natural persons holding or, as appropriate, having held, senior, prominent government or quasi-public positions with substantial authority over policy, operations or the use or allocation of government-owned resources, such as senior government officials, senior executives of government corporations, senior politicians, important political party officials as well as their close family (family member must include the spouses/civil partners of PEPs, the biological/adopted children of PEPs (and their spouse or civil partner) and the parents of PEPs, siblings) and close associates (family members also equal to close associates) /publicly known relationships. PEPs are NOT PEPs after 1 year of not being in a prominent position. Examples of PEPs include Head of state/government, Ambassador /counselor of an ambassador, Military rank of general, CEO/senior executives of state-owned company/bank, Head of International Organization, Federal Judge, Head of Crown Corporation (in Canada e.g. Bank of Canada, Canada Post, Canadian Broadcasting Corporation (CBC), Ontario Lottery and Gaming Corporation (OLG), VIA Rail, Liquor Control Board of Ontario (LCBO), Leader of political party). PEP relationships should be approved by senior management who understand both the financial crime risk and their responsibility within the FI’s AML control environment. The primary risk in dealing with a PEP is that the source of funds from PEP may be from corruption.

Answer 56

Every 2 years. Tax crimes relating to direct and indirect taxes are included in the broad definition of 'Criminal Activity'. EU AMLD has force of law (no need for approval of national parliaments of various member states). EU law prevails over national laws in case of directives.

Answer 57

To provide a forum for FIUs around the world to improve cooperation in the field against ML and TF and to foster the implementation of domestic programs in this field; Increasing the effectiveness of FIUs by offering training and promoting personnel exchanges to improve expertise; Promoting the establishment and operational autonomy of FIUs; Fostering better and secure communication among FIUs through application of technology such as the Egmont Secure Web (ESW). Egmont Group has 5 subgroups : IT, Training, Operational, Outreach and Legal.

Answer 58

Large cash transaction; Atypical/uneconomical fund transfers to/from a foreign jurisdiction; Unusual business activity; Large and/or rapid movements of funds; Unrealistic wealth compared to client profile; Defensive stance to questioning/providing information.

Answer 59

The Wolfsburg group is an association of banks and is concerned with managing banking policy. One of its major recommendations is : At least one person other than the private banker should approve all new clients and accounts. Wolfsberg Group’s first guidance addressed Private Banking. Private banking account is an account with a minimum deposit of $1 million for one/more Non-US persons (i.e. Private Banking client cannot be citizen/resident of the country where the account is maintained) and assigned to the FI's one employee acting as a liaison with the non-US person.

Answer 60

It allows the appropriate Federal Banking Agency to require a financial institution to produce within 5 days (120 hours) records or information related to the FI's AML Compliance or related to a customer or any account opened/managed in USA. FIs must reply within 1 week to law enforcement request.

Answer 61

Structuring of wire transfer; Establishment of tour operator networks and false booking/documentation; Refund on expensive airline ticket/ hotel booking; Paying for travel tours with multiple wires just under the reporting threshold. Travel agents are inherently high risk customers but the industry (Tourism Industry) itself does not represent AML risk.

Answer 62

Transactions made by intermediaries e.g. agents /independent brokers; Premium can be paid through cross-border transactions; Sales/Commission driven objectives; Decentralized oversight. If a customer purchases products with termination features without concern for the product’s investment performance, a customer purchases insurance products using a single, large-premium payment, particularly when payment is made through unusual methods such as currency or currency equivalents, a customer purchases a product that appears outside the customer’s normal range of financial wealth or estate planning needs, these are Red Flags.

Answer 63

Used to hide the actual operating person; Used to facilitate violations of sanctions requirements; Vulnerable to fraud. RDC is feasible in correspondent banking.

Answer 64

Mutual Legal Assistance Treaty (MLAT); Supervisory agencies for information exchange; Financial Intelligence Units. The supervisory channel of sharing information refers to sharing between Financial regulators. With regard to banking, information from supervisory agencies is normally of a general character and is designed to monitor the financial soundness of a banking group. Increasingly, however, inquiries relate more to specific assets or accounts because of concerns about reputational and legal risks.

Answer 65

AML/CFT Policies and Coordination; Money Laundering and Confiscation; Terrorist Financing and Financing of Proliferation; Financial and non-Financial preventative measures; Transparency and beneficial ownership of legal persons and arrangements; Powers and responsibilities of competent authorities and other institutional measures; International Cooperation.

Answer 66

OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries /territories/international narcotics traffickers and those engaged in activities related to proliferation of Weapons of Mass Destruction (WMD). OFAC applies to all US citizens, no matter where they are located, all people (permanent resident aliens) in the USA, all US-incorporated/domiciled entities and their foreign branches, all foreign-based entities that have US customers. OFAC has the power to impose controls on transactions and to freeze foreign assets under US jurisdiction.

Answer 67

Loss of reputation in the global market; Being forced into adverse fiscal (tax and budget) policy; Loss of tax revenue; Loosing control of monetary policies; Weakening the financial institutions; Loss of foreign direct investments; Increased risk to privatization efforts; Legitimate businesses are hurt from competition with front companies.

Answer 68

Creating and managing corporate vehicles or other complex legal arrangements e.g. LLC, Inc, Trusts, LLP ; Buying/selling property as a cover for transfers of illegal funds; Performing financial transactions, including making deposits, withdrawing funds, engaging in foreign exchange operations, buying or selling stock and sending international wires; Undertaking certain litigation; Setting up and managing a charity; Providing financial and tax advice; Providing introductions to financial institutions. Primary concern with regard to the use of gatekeepers is the fact that they can be used to enhance secrecy and to hide the beneficial owner of an account or transaction.

Answer 69

Account that is held under a Futures Commission Merchant (FCM) for another merchant. The latter's identity remains unknown to the holding FCM.

Answer 70

A risk-based approach allows an institution to focus on its highest risks. Moreover it is flexible (RBA fits all jurisdictions/ geographical areas, customers, products and delivery channels), effective (as companies know better than regulators how to mitigate risk) and proportionate (as it allows a common sense and intelligent approach rather than check-box approach). The motivation is not to save costs, or for the FATF to specify the risks faced by a specific institution or jurisdiction. The motivation behind adopting Risk-based approach is to make more effective use of resources to identify the beneficial owners. An institution cannot be expected to uncover all instances of money laundering and fraud. A risk-based approach can take into consideration the particular situation and circumstances of the institution.

Answer 71

A technique where an asset is apparently acquired for less than the normal price. This is paid for partly in clean money and partly in dirty money.

Answer 72

Account in which respondent bank's customers are allowed to conduct transactions without first clearing the transactions through the respondent bank. In a PTA relationship/payment, there may be a numeric code (or no numeric code) to identify the sub account in correspondent banking. Both the PTA holders and its sub account holders have the deposit and withdrawal privileges.

Answer 73

Concentration accounts are internal non-client accounts established for the purpose of facilitating the processing and settlement of multiple/individual customer transactions within the bank usually on the same day. Frequently used to facilitate transaction for private banking, trust and custody accounts, fund transfers and international affiliates. The primary money laundering risk pertaining to the use of concentration accounts is the fact that the customer-identifying information (name, transaction amount and account number) may not be included in transaction details, making the audit trail difficult or impossible to follow ; Accounts may be also be subject to misuse or improper administration.

Answer 74

PB clients usually come with a lot of family estate planning purposes; High profitability is associated with PB; Relationship Managers are prone to protect their clients (they become clients' advocates); High level of confidentiality is maintained for PB clients. To curb the ML risks, all nominees and Beneficial Owners must be identified. Source of fund, purpose and expected use of the account need to be checked/verified.

Answer 75

PICs are usually used to maintain client's confidentiality for tax purposes, these accounts are used to affiliate Trust companies in offshore secrecy havens. The most common risk with PICs is, they are usually established in financial secrecy havens. Switzerland, the United States, the Cayman Islands, Kenya, Taiwan are the world’s biggest contributors to financial secrecy.

Answer 76

The Securities industry runs on electronic transfers, NOT cash (Deposits normally in form of wire transfers, Credit Cards), so is usually part of the integration or layering stages. This industry is attractive to Money Launderers because of high speed, international nature; Ease of converting to cash without loss or penalty; Competitive, commission driven culture, meaning salespeople can overlook the source of funds; Practice of brokerage firms of maintaining securities accounts as nominees or trustees, concealing identity of true beneficiary; Use of cash trading accounts which are not subject to the AML controls of banks. Primary opportunity for laundering is in the derivatives market (Forward contacts, Futures, Options).

Answer 77

Factors are inadequate rules for the licensing and creation of financial institutions, including assessing backgrounds of managers and beneficial owners; Loopholes in financial system/regulation; Obstacles raised by other regulatory requirements; Obstacles to international cooperation; Inadequate resources for preventing and detecting money laundering activities. The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year. The FATF’s process to publicly list countries with weak AML/CFT regimes has proved effective. As of October 2018, the FATF has reviewed over 80 countries and publicly identified 68 of them.

Answer 78

Trust, nominee and fiduciary accounts; Corporate vehicles particularly companies with nominee shareholders or entities with shares in bearer (Bearer Shares are not forbidden but AML controls should be in place) form; Introduced businesses; PEPs; Non face-to-face customers; Private ATM Operators; Correspondent Banking clients; Accounts opened by professional intermediaries such as 'Pooled' accounts on behalf of Mutual Funds, Private Banking clients; Pension Funds/ Money Funds; New customer having account relationship for less than 90 days; Nonresident alien/ NRA (not a lawful permanent resident of a specific country during the calendar year); Cash-intensive businesses (Gas Station, Convenience Store, restaurants, pizza parlors, taxi firms, coin-operated machines or car washes); Non-governmental organizations and charities (foreign and domestic); Professional service providers (Lawyers, Doctors, Accountants), car dealers, embassies, MSBs, banks, casinos.

Answer 79

Factors are : Geographic risk; Ownership and Management structure of the correspondent banking client; Clients' products and services; Clients' AML controls; Visiting the clients' businesses (alternative means can include telephone discussions with the client and their AML staff); Clients' dealings with shell banks.

Answer 80

Financial institutions should be required, in relation to foreign/domestic politically exposed persons (PEPs) (whether as customer or beneficial owner), in addition to performing normal customer due diligence measures, to: have appropriate risk-management systems to determine whether the customer or the beneficial owner is a politically exposed person; Obtain senior management approval for establishing (or continuing, for existing customers) such business relationships; Take reasonable measures to establish the source of wealth and source of funds; Institutions that do business with these individuals must do Enhanced Due Diligence to detect if funds may involve proceeds of foreign corruption including assets or property obtained through theft, embezzlement of public funds, unlawful conversion of property by government, bribery, extortion etc.

Answer 81

Companies and other legal entities must obtain and hold adequate, accurate and current information on their beneficial owners, including the name, date of birth, place of residence, and nature and extent of beneficial ownership; Information on beneficial ownership will be held on central registers in the relevant country and must be adequate, accurate and current; Information on the central registers will be accessible to competent authorities, financial intelligence units, entities required to undertake customer due diligence and any person that can demonstrate a “legitimate interest.”

Answer 82

Fundamental rights of data and the data protection legislation in the EU allows making information available to the public when it is legitimate, necessary and proportionate. Therefore, necessary safeguards, including adequate policies and procedures, must be in place to ensure that public beneficial ownership information of companies and trusts is in conformity with data protection legislation and privacy rights. The directive requires member states to provide access to information on the beneficial ownership of companies and to enable tax authorities to access that information in monitoring the proper application of rules on the automatic exchange of tax information. Transparency is desirable and imperative. However, there are also good reasons for protecting private interests, which do not only serve to conceal illegal transactions. It is the task of the legislator to create an appropriate balance, which on the one hand serves to combat actual risks but on the other hand does not disproportionately burden or impair the economy.

Answer 83

The guidance is focused on traditional correspondent banking, such as establishing nostro and vostro relationships, cash clearing, liquidity management and short-term borrowing or investment needs. It may be applicable to SWIFT Relationship Management Application (RMA) relationships as well. When dealing with corporate clients, the AML program of the parent should be considered, particularly whether or not the parent’s program is extended to the client or if the client acts fairly autonomously from the parent. When dealing with an affiliate that is not substantively or effectively controlled by the parent, both the parent and the client should be reviewed.

Answer 84

Section 314(b) permitted two or more FIs to voluntarily share information with each other regarding individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities. It afforded FIs that participated in this information sharing initiative with safe harbor from liability for sharing information. The safe harbor affords a financial institution total immunity, even if it maliciously files a false SAR. Federal law provides civil liability protection to persons filing SARs, regardless of whether such reports are filed pursuant to SAR instructions or are filed voluntarily, this means that financial institutions and their employees involved in SAR reporting are protected from civil lawsuits.That does not exonerate (release from) a filing institution from complying with applicable legal requirements on customer financial privacy. Section 314(a) allows financial institutions to share financial information with law enforcement as well as with other FIs.

Answer 85

''In compliance with this subpoena request, please provide all transactional activity, including but not limited to transactions recorded outside the core system. This activity should include Cash activity, including deposits and withdrawals; Cash advances; Credit and debit memos; Deposit slips, items deposited; Currency exchanges (foreign and domestic); Cashed third-party and cashed on-us checks; Wires originated online and in branch; Foreign, domestic and foreign exchange (FX) wires; Monetary instrument purchases or encashments performed by or on behalf of the customer; Checks negotiated against the customer’s account and all check deposits; Account transfers including the receiving/sending account numbers; Payment 2 Payment (P2P) details; Automated Clearing House (ACH) debits and credits, including International ACH transactions (IAT)".

Answer 86

FATF is an inter-governmental body founded by G-7 countries and first chaired by France. FATF spreads the AML message worldwide; Monitors members’ progress in adopting recommendations (through annual self assessment and Peer or mutual evaluations); Reviews money laundering trends. FATF cannot impose fines or apply other direct sanctions but it may issue a statement that calls for FIs to give special attention to business relations and transactions with persons, companies and FIs domiciled in a non-complying country (FATF did it for Turkey) .

Answer 87

Cross Border Correspondent Banking; Money or Value Transfer Services (MVTS); New technologies and new products; In any occasional transaction or business relationship with a person established in a high-risk third country; if a business has determined that a client or potential client is a PEP, or a family member or known close associate of a PEP; In any case where a client has provided false or stolen identification documentation or information while establishing a business relationship; In any case where a transaction is complex and unusually large or there is an unusual pattern of transactions which have no apparent economic or legal purpose; In any other case which by its nature can present a higher risk of ML.

Answer 88

Low levels of member engagement; Voluntary contributions to accumulation accounts by members, where the source of money is difficult to verify; Payments to members and outgoing rollovers that are vulnerable to fraud and illegal early release; A growing reliance on online delivery of products and services, resulting in less face-to face interaction with customers; Use of third parties and intermediaries.

Answer 89

The amount of securities deposited into the account do not correspond with the client profile; The individual only sold securities from the account, while making no purchases; The sale of shares is structured; The funds were withdrawn rapidly from the brokerage account; The settlement is requested by way of certified cheque.

Answer 90

Document reasons for not filing an STR as the unusual large deposits pertains to sale of property and customer has also provided documentary evidence to support these transactions, so no STR needs to be filed in this scenario if the documents are ok. If the documents seem suspicious, compliance officer should file an STR with the competent authorities.

Answer 91

SUAs include virtually every US crime that produces economic advantage. At least one SUA must be proven in order to pursue a money laundering conviction. Knowingly using, converting, handling, retaining the proceeds (cash/dirty money) obtained through selling drugs or any predicate offence, is money laundering. In order to successfully convict a person for an offence of money laundering, it is not necessary for the prosecutor to prove that the offender knew the exact source of the 'cash/dirty money', they only have to prove that it came from 'some form' of criminal activity. Willful blindness is also synonymous to knowledge.

Answer 92

Action to address jurisdictional issues including safe havens and failed states; Outreach to the private sector to ensure the availability of information (in the form of Suspicious Transactions Reports) to detect terrorist financing; Building a better understanding across public and private sectors; Enhancing financial intelligence.

Answer 93

FATF Recommendation 10 on Customer Due Diligence underlines four categories of risk factors such as product, service and transactions; customer risk factors; country and geography related risk factors; and distribution channel risks. According to FATF Recommendation 10, both identification data as well as transaction records should be maintained for at least 5 years. Examples of the necessary components of transaction records include: customer's (and beneficiary's) name, address (or other identifying information normally recorded by the intermediary), the nature and date of the transaction, the type and amount of currency involved, and the type and identifying number of any account involved in the transaction. For products and services that rely on the internet, the internet protocol address (IP address) should be part of the identification data collected and retained by the provider.

Answer 94

MLAT provides a legal basis for transmitting evidence that can be used for prosecution and judicial proceedings. MLAT facilitates law enforcement agent obtaining evidence from authorities in a foreign country relating to criminal activity.

Answer 95

A Suspicious Transaction Report (STR) or a Suspicious Activity Report (SAR) is filed by a financial institution or, by a concerned citizen, to the local Financial Intelligence Unit if they have reasonable grounds to believe that a transaction is related to criminal activity. Once a financial institution has reported suspicious transactions on a customer, it should cooperate with competent authorities by providing the supporting documentation to competent authorities upon request.

Answer 96

Financial intelligence unit (FIU) serves as a national centre for the receipt and analysis of (a) suspicious transaction reports; and (b) other information relevant to money laundering, associated predicate offences and financing of terrorism, and for the dissemination of the results of that analysis. The FIU should be able to obtain additional information from reporting entities and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly. FIUs have to maintain close links with police and customs officials. There are four models of FIUs: Judicial, Law Enforcement, Administrative, and Hybrid.

Answer 97

Chinese Wall, sometimes referred to as China Wall, is a barrier to prevent the communication of information for the purposes of avoiding conflicts of interest. For example, a Chinese Wall is put up to prevent sensitive corporate information from leaking, or prevent insider trading. For political reasons, a country may have a Chinese Wall, which may hinder international money laundering investigations.

Answer 98

An act by any person who discloses to any other person, information or any other matter, which is likely to prejudice (i.e. make biased) an investigation. Tipping off a money launderer can include: changing the way the company handles the account informing other people not related to the investigation of the suspicions and directly alerting them of a suspicion.

Answer 99

Regulatory arbitrage is a practice where firms exploit the regulatory difference between different markets in order to circumvent unfavourable regulation. This can be achieved by conducting business, managing products and services in locations that have lower regulatory standards. To close down regulatory arbitrage, the Financial Action Task Force (FATF) encourages its member countries to apply the FATF recommendations consistently and effectively.

Answer 100

Escrow accounts are used in real estate transactions so that the buyer can perform due diligence on a potential acquisition while assuring the seller of his capacity to close on the purchase. For example, an escrow account can be used for the sale of a house. These accounts are vulnerable to ML because there are no regulatory obligations imposed on title or escrow providers (or on attorneys handling transactions in non-escrow states) to validate the origin of funds coming through a direct wire from an offshore banking account. The size and volume of routine escrow account activities smooth out the spikes (sudden ups and downs in the account).

Answer 101

The Suspicious Activity Report (SAR) is a tool provided under the Bank Secrecy Act (BSA) for monitoring suspicious activities that would not ordinarily be flagged under other reports (such as the currency transaction report). In USA, SAR is filed with FinCEN i.e. Financial Crimes Enforcement Network (in Canada, it is filed with FINTRAC ) who will then investigate the incident and reporting can be done electronically by attaching CSV (Comma Separated Value) file. A financial institution is allowed to file SAR within 30 days regarding any account activity that deems to be suspicious or out of the ordinary. FinCEN (also Federal law) requires FIs to keep SAR data for 5 years from the date of filing. The BSA and other privacy laws require that SARs be kept confidential and shared only with other law enforcement agencies.

Answer 102

Absence of ownership records; Lack of reasonable transaction value caps and time period limits.

Answer 103

Review the warrant ASAP to understand its scope; Ask for and obtain a copy/affidavit that supports the warrant; Call the appropriate in-house legal counsel immediately; Write down the names and agency affiliations of the lead agents who conducted the search; Remain present while the agents record the inventory of all items they seized and intend to remove from the premise; Ask for a copy of the agent's inventory of what they seized; Keep track of the records taken by the agents.

Answer 104

RMAs are ‘digital handshakes’ between financial institutions that specify whether transactions can be exchanged. Without an RMA in place, institutions cannot receive SWIFT messages from counterparts. Using RMA, banks can exercise further control by specifying which particular types of messages they wish to exchange over the network and with whom. Therefore, RMA enables banks to curb risk by avoiding the sending and receiving of unwanted messages and reducing the risk that someone within either institution initiates unauthorized transactions. RMA requests should be segregated between customer relationships and non-customer RMAs. Due diligence on the RMA holder should consider the message types used by the RMA holder and the risk associated with the activity conducted.

Answer 105

OFAC's 50 Percent Rule applies to entities owned 50 percent or more in the aggregate by one or more blocked persons. Accordingly, if Blocked Person X owns 25 percent of Entity A, and Blocked Person Y owns another 25 percent of Entity A, Entity A is considered to be blocked. This is so because Entity A is owned 50 percent or more in the aggregate by one or more blocked persons. For the purpose of calculating aggregate ownership, the ownership interests of persons blocked under different OFAC sanctions programs are aggregated.

Answer 106

GTOs broadly apply to any purchases made using currency or a cashier’s check, a certified check, a traveler’s check, a personal check, a business check, a money order in any form, a funds transfer, or virtual currency. The purpose of the GTOs is to help FinCEN and other federal agencies identify potential money laundering in certain real estate transactions. The GTOs require that title insurance underwriters and their agents report information about certain residential real estate transactions. GTOs require US title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate performed without a bank loan or similar form of external financing and the monetary threshold has been reduced significantly to $300,000.

Answer 107

Name Screening helps to manage the complexity of sanctions requirements and rapidly changing lists by automatically screening databases of individuals and entities (e.g. companies and organisations) against sanctions, Politically Exposed Persons (PEP), Relatives and Close Associates (RCA), Sanctions Ownership Research and private lists, as part of business as usual processes. Name Screening also supports web-based screening of single names to support customer onboarding and due diligence.

Answer 108

A form of ML (first originated in investigations in the UK) linked to Alternative Remittance System (ARS), in which criminal funds are transferred through accounts of unwitting (i.e. unaware) persons who are expecting genuine funds or payments from overseas. Cuckoo Smurfing requires an unwitting bank account owner, an insider in a financial institution and an accomplice in a foreign country who deposits cash. In Cuckoo Smurfing, third parties who hold the bank accounts being used are not aware of the fact that illicit money is being deposited into their accounts. To combat Cuckoo Smurfing, banks should identify depositors (who pay cash into third party accounts) and insiders within the FI.

Answer 109

High Risk Countries, including those identified by credible sources as having inadequate Anti- Money Laundering standards; High Risk activities, involving clients and beneficial owners whose source of wealth originates from activities known to be vulnerable to money laundering; Public officials, including those individuals who have or had positions of public trust.

Answer 110

Transactions with specified industries, entities /individuals listed on OFAC's Specially Designated Nationals (SDN) and Blocked Parties list. These sanctions often include the freezing of assets and travel bans where possible. The US Treasury Department of Foreign Asset Control issues a series of periodically updated lists which prohibit transactions and require the blocking of assets of persons and organizations that are found on those lists.

Answer 111

Yes, as MSB includes any person doing business, whether or not on a regular basis or as an organized business concern as a Money Transmitter, dealer in foreign exchange/check casher/Postal Service/Open and Closed loop credit cards (as these cards are prepaid cards and money can be moved through these).

Answer 112

If funds have been deposited with a foreign bank, it permits US government to seize funds for the same amount from a correspondent bank account in the USA that has been opened and maintained for the foreign bank.

Answer 113

The type and size of the business the customer runs; The legal structure of the customer’s business; The country or location where the customer is from or does business.

Answer 114

Updates on Compliance Monitoring Plan; How many reviews have been completed, how many in progress; Any high or medium risk issue identified, their action/treatment plan and updates on action plan.

Answer 115

FIs may prompt clients to take a picture of a government-issued identification on their mobile device. When a client takes a picture from their mobile device, the financial institution will also receive the client’s location, device identification number and type of device operating system. Financial institutions can then automatically authenticate that identification. Client may also be prompted to take a selfie on their mobile device. Financial institutions can then automatically validate that the selfie matches the picture on the government-issued identification initially provided. Client may be prompted to connect social media account(s) e.g. linkedin, twitter, meetup. Financial institutions will be able to understand clients’ interests, sentiments, personalities, social connections and interactions, and life events.

Answer 116

To set global standard-setter for the prudential regulation of banks and provide a forum for cooperation on banking supervisory matters. The Basel paper published in 1997 (covering Core Principles for Effective Banking) covered KYC, the use of high ethical standards in the fight against criminals using the banking system, and urged the adoption of the FATF 40 recommendations.

Answer 117

Under a “Top down” approach, the ultimate beneficial owner is the person who owns/controls 25% plus one share or more of the customer; and under a “bottom up” approach, the ultimate beneficial owner is the person who owns/controls 25% plus one share or more in the customer or any entity that owns at least 25% plus one share of the customer.

Answer 118

Anonymous card holders; Anonymous funding; No or high value limits; Global access to cash through ATMs; Lax offshore jurisdictions issuing the cards; and the cards being a substitute for bulk-cash smuggling. Where additional “twin cards” or “partner cards” are issued that are specifically designed and advertised for being passed on to third parties to allow remittances,these third parties/beneficial owners are often not identified; Large number of bank accounts held by the same prepaid card company (sometimes in different countries) are apparently used as flow-through accounts (may be indicative of layering activity); Prepaid card company located in one country but holding accounts in other countries (unexplained business rationale which could be suspicious); Back and forth movement of funds between bank accounts held by different prepaid cards companies located in different countries (may be indicative of layering activity as it does not fit the business model).

Answer 119

Cash vouchers can be bought anonymously at retailers, petrol stations etc. and are usually sold in units ranging from as low as 10 EUR up to 500 GBP (approx. 750 EUR). Cash vouchers are originally designed for person-to-business (P2B) payments on the Internet, but can also be used for Peer-to-Peer (P2P) transactions where they are accepted as a funding method by other NPM service providers (e.g., prepaid card issuers or digital currency exchangers), or where they can be used for online gambling.

Answer 120

Absence of credit risk (because funds for use with NPM are generally prepaid), speed of transactions, non face-to-face business relationship. Absence of face to face contact is particularly common among IPS (Internet Payment Services) providers who generally conduct most of their business activities online. Using dynamic codes which change with each single transaction or access to an IPS, or checking of biometric data (such as fingerprint and voice recognition systems, Iris/Eye Scans), can help prevent a single customer from opening multiple accounts unnoticed.

Answer 121

As per EU Data Retention Directive, communications data must be retained in EU countries for at least 6 months but not more than 24 months. This should allow law enforcement access to communications data, such as logs for email, phone calls, text messages and IP addresses, which have since been classified as personal data under EU and UK data protection regulations.

Answer 122

In respect of the financial institution's policies, closing the account may be an option but doing so may frustrate any investigation later undertaken by the Law Enforcement Agency (LEA). If any request is received from LEA to close it, the FI should consult its counsel and AML Compliance Officer whether the account may be closed in accordance with the FI's account closing procedures. Actually what happens to an account after an STR, depends upon the circumstances that led to the disclosure and each situation must be judged on its own merits.

Answer 123

Wire/Payment stripping is the practice of removing material information about sanctioned entities and individuals from a SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment to camouflage the true applicant or beneficiary, sending bank or receiving bank, or any combination thereof. A wire-stripping or U-Turn payment starts with a foreign entity such as an Iranian oil company which needs to purchase goods from the United States. The transaction originates with the oil company using an Iranian bank to send funds to an intermediary bank, such as in the United Kingdom, which in turn transfers the funds to the United States. When the UK bank transfers the money to the US bank the "scrub" occurs, i.e. the wire details are removed from the transfer to the US bank so as to avoid OFAC filter detection. The US bank then forwards the currency to the US based goods supplier, and the U-Turn is complete.

Answer 124

Use of third parties in situations where that is unusual; Use of third parties to mask the identity of a PEP; Use of a PEP’s family member or colleague as a legal owner; Use of shell companies and legal arrangements to mask ownership, industries, or countries related to the transaction; The PEP or facilitator provides information that appears to be untrue; The PEP or facilitator attempts engage a financial institution or a designated non-financial business or profession (DNFBP), such as a real estate agent, dealer in precious metals, attorney, accountant or company formation agent, that would normally not provide services to a PEP; The PEP or facilitator repeatedly moves money to and from countries other than his or her own; The PEP or facilitator has access to state funds; The PEP or facilitator has significant control over the financial institution or DNFBP that is a party or a correspondent in a transaction; The transaction involves government contracts that do not appear to make sense, such as “payments for construction projects directed to textile merchants”;Transactions involving government contracts that are coming from or going to shell companies; Suspicious documentation, such as invoices with inflated prices or that lack pricing information; Payments for government contracts that originate from non-governmental entities; and Transactions involving property or assets expropriated or otherwise taken over by corrupt regimes, including individual senior foreign officials or their cronies (close friends/companions).

Answer 125

Simplified CDD is acceptable for life insurance policies where the annual premium is no more than USD/EUR 1,000 or a single premium of no more than USD/EUR 2,500; Insurance policies for pension schemes if there is no surrender clause and the policy cannot be used as collateral; A pension that provides retirement benefits to ex-employees.

Answer 126

Accounts with multiple deposits which are shortly transferred to other accounts; Accounts with multiple deposits from multiple locations outside the banking area from multiple sources (e.g., cash, ATM deposits, checks, wire transfers); Accounts opened in the USA, by individuals temporarily within the USA who are bearing immigration identity documents (such as border crossing cards), then used to wire transfer funds back to Mexico; Accounts with an unusually high number of charge-backs (a charge that is returned to a payment card after a customer successfully disputes an item on his account transactions report); Anonymous cash deposits made in destination states [interior states] followed by rapid cash withdrawals made in source states [border states].

Answer 127

Identify/determine whether the account is being opened by a nominee or "straw man" on behalf of or to be used by a third party; The identity of all individuals must be established by a single piece of original, valid and current (unexpired) government-issued (or issued by acceptable private organization) photo identification; Build a Profile or develop dear descriptions of acceptable customers; Complete a Customer Risk Rating (CRR); Conduct Enhanced Due Diligence (EDD), if required.

Answer 128

The commodity is shipped to (or from) a country or jurisdiction designated as “higher risk” for ML/TF activities; Significant discrepancies appear between the description of the commodity on the bill of lading and the invoice; Significant discrepancies appear between the description of the goods on the bill of lading (or invoice) and the actual goods shipped; The type of commodity shipped is designated as “higher risk” for ML/TF activities; The method of payment appears inconsistent with the risk characteristics of the transaction; The transaction involves the use of repeatedly amended or frequently extended letters of credit; The transaction involves the use of front (or shell) companies.

Answer 129

Convertible VC exchangers are required to conduct customer due diligence when exchanging VC for fiat currency or vice versa in a one-off transaction greater than the designated threshold of USD/EUR 15,000

Answer 130

The Chief Compliance Officer may be bared (exposed) to : Laid off; Forbidden to work and/ or barred from banking in the financial services industry in the future. Banks and individuals may incur criminal and civil liability for violating AML and terrorist financing laws. Banks risk losing their charters. In September 2012, HSBC Holdings PLC agreed to pay a record $1.92 billion in fines to US authorities for failing to maintain an effective program against money laundering, specifically their failure to identify High Risk customers, conduct Enhanced Due Diligence (EDD) and monitor adequately. In 2017, Deutsche Bank (Germany's biggest bank) was fined $630m (£504m) by US and UK regulators in connection with a Russian money laundering plan. Under the scheme, clients illegally moved $10bn out of Russia via shares bought and sold through the bank's Moscow, London and New York offices.

Answer 131

Loansharking (also known as usury) is defined as lending money at an interest rate that exceeds the allowable legal limit. In Canada, loan-sharking is officially designated as a criminal offence if the effective rate (including fees and penalty payments) exceeds 60% per annum.

Answer 132

'Bureau de Change' (Exchange House) buys/sells foreign currencies; Consolidates small denomination bank notes into larger ones; Exchanges financial instruments e.g. Traveler's Checks, Money Orders and personal checks; Offers telegraphic transfer facilities. They are attractive to money launderers as they are not as heavily regulated as traditional FIs and most customers are occasional, as such KYC is harder. Casas de cambio direct the remittance of funds via multiple funds transfers to jurisdictions outside of the jurisdiction that bear no apparent business relationship with the casas de cambio. Funds transfer recipients may include individuals, businesses, and other entities in free trade zones. Casas de cambio deposit numerous third-party items, including sequentially numbered monetary instruments, to their accounts at US banks.

Answer 133

Natural persons who ultimately owns/controls a customer; Person on whose behalf a transaction is being conducted; Person (s) who exercise effective/significant control over a legal person/arrangement. Each individual, public body or public traded company that owns or controls directly or indirectly at least 25% (or less if required by local law) of a corporation or other legal entity, is a Beneficial Owner.

Answer 134

AMLID is a secure, multi-lingual database which acts as an important reference tool for law enforcement agencies involved in cross-jurisdictional work. (web address : IMOLIN.org)

Answer 135

Article 7 is designed to protect the European Union's fundamental values. It sets out ways various EU bodies can act if they believe those values are at risk, or have been seriously breached. These values are founded on respect for: human dignity, freedom, democracy, equality, the rule of law, respect for human rights, including the rights of persons belonging to minorities. Violation of these core values may lead to sanctions against a country. Hungary is in the latest sanction list in EU.

Answer 136

Customer Due Diligence (CDD) steps for non-personal customers include: Establishing the identity/existence of the customer; Verifying the existence and good standing of the customer; Determining the purpose or intended use of the account; Determining the source of initial funds and ongoing funding; Determining the expected activity of the account; Determining the beneficial owner(s) and verifying their identity; Confirming that all funds in the account will be beneficially owned by the account holder(s) and will not be used for the benefit of someone other than the individuals named as the beneficial owners (“Third Party Determination”); Confirming whether any beneficial owner(s) is a Politically Exposed Person (PEP).

Answer 137

At its core, sanctions compliance requirements in the US, other than those imposed by bank examiners and similar regulatory oversight (or New York banking law, which is pretty prescriptive), are fairly basic: Do not conduct business which contravenes the spectrum of published regulation and guidance, or there will be an investigation. How one accomplishes that goal, by implementing appropriate controls, is up to the individual firm.

Answer 138

Cross-selling is a practice whereby multiple products of the organisation are sold to existing customers. It is aimed at earning increased revenue from the existing customers. For instance, if a customer has an auto loan account and deposit account in the same bank then he is more likely to take up a credit card also in that bank–resulting in more revenue for the bank. FATF Recommendations have laid down the rules that no account in fictitious names will be opened and that information obtained from Customers will not be used for cross selling purposes. This recommendation all financial institutions have to comply with. In 2016, Wells Fargo was found guilty of the violation of this recommendation. The bank was accused in a law suit in early 2018 of putting pressure on employees to open accounts for people who don’t exist and charging customers for products without permission.

Answer 139

Money mules are individuals who, often unwittingly (unaware), have been recruited by criminal organisations as money laundering agents to hide the origin of ill-gotten money. Tricked by the promise of easy money, mules transfer stolen funds between accounts, often in different states/countries, on behalf of others and are usually offered a share of the funds that pass through their own accounts. The term, "mule” actually comes from the narcotics trade. Criminals dupe innocent victims into laundering money by pretending to offer legitimate jobs via newspapers, chatrooms, job websites or ‘work-at-home advertisements’. They target vulnerable groups such as migrant workers or university students, newcomers to a State, the unemployed and people in economic distress who are tempted to earn some extra cash for receiving money from a victim’s account and transferring it to the criminal using a payment service.

Answer 140

A few of indicative abnormal employee behaviour patterns of willful blindness are: Quick and sudden change of an employee’s lifestyle quality, for example owning a high-priced sports car; Reluctance of the employee to go on vacation for a long time (or avoids taking periodic vacations); Employee’s spending habits become noticeably unrealistic in line with his/her known income levels; Employee getting too close to a certain client or group of clients; Employee refusing or avoiding getting transferred from a certain branch or function; Overrides internal controls or circumvents policy (employee overrides a hold placed on an account identified as suspicious so that transactions can occur in the account); Certain customers or suppliers dealt with exclusively by one employee and guarded jealously; Certain apparently mundane/dull tasks retained when they could be delegated; Entering into unnecessarily complex transactions; Transactions or structures created with no clear purpose; Evasive or excessively complicated answers to routine queries; Employee becoming too protective and defensive of a client’s relationship details; Employee’s sacrificing raises and promotion for the sake of keeping the same position/work location; Employee involved in excessive number of unresolved exceptions; Employee exaggerates the resources of a customer.

Answer 141

At or before the time of payout or before the beneficiary intends to exercise rights vested under the policy.

Answer 142

Yes, because a check casher is a consumer of cash, not a depositor, unless there is another substantial cash generating activity going on at the business, which was not presented in the scenario.

Answer 143

No, because it is already stated that the store operates 24 / 7 and that it makes 3 deposits every calendar day. Many multi-shift businesses make it a point to have a deposit made for every shift, so, the three daily deposits would likely not be a case of structuring, but that of a valid business decision. Also, just because the bank files the CTRs without the customer's knowledge, it is not suspicious. Indeed, it can and does happen every day in the real world.

Answer 144

No, because there are multiple ATM deposits made at the same time each day, but the key element here is the statement that there are 400-500 items total in the daily deposits. Very few ATM machines can handle an envelope that thick. Therefore financial institution's machines force the customer to split the deposits into multiple envelopes. All that being said, AML Analyst should not view this as suspicious.

Answer 145

The customer's ethnic heritage, sexual orientation and political beliefs are more discriminatory factors, and while they may help frame the context of certain transactions, they should not be a major factor in assessing risk. But the size of financial institution is a critical element in determining the level of sensitivity to risks for certain customers. Other factors to be considered are : Where the customer resides or where the business is headquartered; What occupation or type of business does the customer derive their income from ?

Answer 146

The AML program should include development of internal policies, procedures and controls, including appropriate compliance management and must be approved by the Board of Directors; An ongoing AML training program for all personnel (including contractors); The review of the bank’s Financial Intelligence Department, as part of the audit of the AML program, to be performed by an independent (and knowledgeable) party; A Compliance Officer (MLRO) appointed by the Board of Directors (or upper management with the Board's approval).

Answer 147

The employee can and should be interviewed, as well as notified of the investigation to demonstrate the seriousness of the issue/offence and to get the employee’s full attention and cooperation.

Answer 148

It should perform a comprehensive risk analysis.

Answer 149

Numbered or alternate name accounts will only be accepted if the bank has established the identity of the client and the beneficial owner. These accounts must be open to a level of scrutiny by the bank’s appropriate control layers equal to the level of scrutiny applicable to other client accounts. Wire transfers from these accounts must reflect the true name of the accountholder.

Answer 150

Cancellation of correspondent banking relationships; Forfeiture of funds in a US interbank account; Prohibition of correspondent accounts for shell banks.

Answer 151

A bank that maintains a correspondent account in the United States for a foreign bank must obtain a completed certification form from the foreign bank and receives a recertification on or before the three-year anniversary of the execution of the initial or previous certification. Banks must obtain certifications (or recertification) or otherwise obtain the required information within 30 calendar days after the date an account is established and at least once every three years thereafter. If the bank is unable to obtain the required information, it must close all correspondent accounts with the foreign bank within a commercially reasonable time.

Answer 152

A bank must retain the original of any document provided by a foreign bank, and retain the original or a copy of any document otherwise relied on for the purposes of the regulation, for at least five years after the date that the bank no longer maintains any correspondent account for the foreign bank.

Answer 153

Under section 319(b) of the USA PATRIOT Act, the Secretary of the Treasury or the U.S. Attorney General may issue a subpoena or summons to any foreign bank that maintains a correspondent account in the United States to obtain records relating to that account, including records maintained abroad, or to obtain records relating to the deposit of funds into the foreign bank. If the foreign bank fails to comply with the subpoena or fails to initiate proceedings to contest that subpoena, the Secretary of the Treasury or the U.S. Attorney General (after consultations with each other) may, by written notice, direct a bank to terminate its relationship with a foreign correspondent bank. If a bank fails to terminate the correspondent relationship within ten days of receipt of notice, it could be subject to a civil money penalty of up to $10,000 per day until the correspondent relationship is terminated.

Answer 154

Thorough due diligence on prospective owners

Answer 155

Supply the information to the other FIU spontaneously as soon as the relevance of sharing the information is identified.

Answer 156

Close some or all correspondent or payable-through accounts relating to that country.

Answer 157

Determination of what type of customer the financial institution will accept; Training as to how and to what extent to identify prospective customers; Obtaining date of birth and address of a prospective customer.

Answer 158

File a suspicious transaction report with the Financial Intelligence Unit.

Answer 159

Shell bank does not conduct business at a fixed address in a jurisdiction in which it is authorized to conduct business; It does not employ one or more individuals at its fixed address where it is authorized to conduct business or maintain operating records at that address; It is not subject to AML laws that require it to implement an AML program. Shell bank is subject to inspection by the banking authority that licensed it to conduct banking activities.

Answer 160

Arrange bank-wide employee training; Regularly monitor staff performance and adherence to KYC procedures; Use standard identification procedures for non face-to-face customers; Develop clear and concise descriptions of acceptable customers; Take appropriate action against employees who fail to follow KYC procedures.

Answer 161

The client changed his address without advising the institution.

Answer 162

Verify the bank has a physical presence in the country where it is incorporated i.e. it is not a shell bank; Confirm the bank is subject to regulatory supervision with adequate anti-money laundering laws. Basel Committee on Banking Supervision's Customer Due Diligence for Banks Paper covers generally accepted terms issued by big international banks.

Answer 163

The branch manager should be formally reprimanded (strong official criticism) for failing to ensure proper instruction was given. Under the BSA, in the USA, a financial institution must report to FinCEN single or structured currency transactions that exceed $10,000 using a Currency Transaction Report (CTR). Currency transactions include "any deposit, withdrawal, exchange or other payment or transfer" that involves currency. CTR must be filed within 15 days following the day on which the reportable transaction occurred (25 days if filed electronically).

Answer 164

Financial institutions should not keep anonymous accounts.

Answer 165

Correspondent bank, certifying that they do not open correspondent accounts for Alternative Remittance Companies (ARS). This Certification should be completed by any foreign bank that maintains a correspondent account with any US bank or broker-dealer in securities. A branch or office of a US bank outside the United States is a foreign bank. Such a branch or office is not required to complete this Certification with respect to Correspondent Accounts with US branches and offices of the same US bank.

Answer 166

For ML, origin of funds is from criminal proceeds whereas for TF, funds may not be derived from criminal proceeds. In case of ML, individuals responsible for the illegal activity are usually the ultimate beneficiaries of the laundered funds. In case of TF, individuals responsible for raising the funds are not the beneficiaries of the funds. In other words, the money trail for money laundering is circular with money eventually ending up with the person who generated it. On the other hand, the money trail for terrorist financing is linear with the money generated being used to propagate terrorist groups and activities. In ML, the motivation is purely for profit; in TF, the motivation tends to be ideological. In ML, the detection focus tends to be on suspicious transactions; in TF, the tendency is a focus on suspicious relationships.

Answer 167

No, because Jane has a legitimate reason for conducting these transactions.

Answer 168

Yes, because there is no logical relationship or connection between the sender (an auto parts company) and the ultimate beneficiary of the fund (jewelry supplier).

Answer 169

Free exchange of information based on reciprocity; Exchange of information should be informal and rapid; Communication between FIUs should be direct without intermediaries. Communication between FIUs is based on an MOU and FIUs use MLATs (Mutual Legal Assistance Treaties) to obtain intelligence that may lead to evidence.

Answer 170

Receipt of a government subpoena or search warrant; Learning that government investigators are asking questions about institution's employees, business associates, customers or even competitors; Information from employees or a company hotline; Information from third parties, such as customers; A report of examination from the regulators; Information derived from surveillance or monitoring systems; Filing of civil law suit against the FI.

Answer 171

Information about the respondent bank’s management (whether anyone in management chain is a PEP), major business activities, location and money-laundering prevention and detection efforts; Purpose of the account; Identity of any third party entities that will use the account; Condition of bank regulation and supervision in the respondent’s country.

Answer 172

Devote adequate resources to compliance function and communicate compliance expectations to staffs; Ensure a strong compliance program and Senior Management is informed of compliance efforts/all major AML issues; Establish and oversee compliance program, including procedures, processes and controls; Include regulatory compliance in all relevant job descriptions and performance appraisals; Incorporating compliance with the institution’s AML policy into the annual evaluation process; Ensure that, risks are not compromised by revenue interests; Management must understand the purpose of its AML/CFT efforts and how its STR reporting is used; A numerical summary of all the STRs filed (including additional detail on significant cases) and a summary of key STRs, including PEPs, key employees should be provided to the Board of Directors; Relevant information from various departments within the organization must be shared with Compliance/AML staff to further AML/CFT efforts.

Answer 173

Credit cards are not likely to be used in the initial placement of money laundering. They are more likely to be used in the layering or integration stages of money laundering. One example of using credit cards for money laundering purposes is frequently overpaying a credit card balance and then asking for a refund. Receiving a check from the reputable credit card company makes it look like the funds received are legitimate.

Answer 174

Use of investment account as a pass-through vehicle for offshore wires; Customer not interested in usual decisions around fees or investment vehicles; Deposits of cash, money orders, travelers cheques, or cashiers cheques under the reporting threshold in order to fund the account; Customer cashes out investments such as annuities or life insurance early.

Answer 175

Transactions are primarily made using debit or credit cards, and the casinos are located in unregulated off-shore locations so prosecuting individuals is difficult. Credit card transactions are identified by codes which enable such transactions to be blocked by banks and credit card companies; Online gambling is not used for cash movement as there is no physical presence to pay in cash.

Answer 176

Wash trading is where two opposite transactions (Buying a Put and Call on the same stock in two different accounts) are placed – for example dirty money could be introduced into a brokerage, and a long and a short position could be taken on the same security or future in different brokerages. No matter which way the market moves, the principal is safe, as losses on one side are offset by gains on the other side. If the market moves so that the dirty money is lost, then the gains in the other brokerage account can be withdrawn which look like legitimate investment returns.

Answer 177

Account holder's name on a list of suspected terrorists; Frequent large cash deposits in a non-profit organization’s account; High volume of transactions; Lack of clear relationship between activity and account holder's business; Large cash deposits followed by frequent withdrawals until the funds are depleted; A dormant, low sum account suddenly receive wire transfer deposits followed by daily cash withdrawals that continue until transferred sum is removed and lack of cooperation by the client in providing information.

Answer 178

Front Companies are companies that actually carry on business where illegal profits can be co-mingled with revenues derived from legitimate undertakings. Money Launderers use legitimate businesses that offer a service, and commingle illicit funds with legitimate proceeds from the business. Such criminally controlled companies often use nominee owners or directors to hide beneficial ownership. Selling these criminal companies is a way to create legitimate funds for the launderer, and they often get high prices as the turnover appears artificially high. The most obvious business front seems to be a casino (arbitrary amounts of anonymous cash comes in, arbitrary amounts similarly paid out). Another idea is something like diamond mining (assuming rough diamonds may be bought easily and anonymously for cash), but this is less preferable because it takes a large upfront investment. Laundromats, Car Wash businesses, Medicare companies, Mattress Stores, Payday Loan organizations are also used as Front Companies.

Answer 179

Wire Transfer record keeping requirement mandates that all information must be collected for wire transfers of $3,000 or more, regardless of payment method.

Answer 180

This occurs when a bank employee fails to collect or verify any CIP (Customer Identification Program)information, neglects to complete a CTR when necessary, neglects to complete an SAR, or completes a wire transfer or sale of negotiable instruments when either transaction involves $3,000 without collecting and verifying the customer and transaction information. An individual employee in violation of the BSA (including those who willfully "look the other way") may face employment termination; be barred from the financial services industry; and/or be subject to up to 10 years in prison and/or fines in an amount up to $500,000.

Answer 181

Double invoicing is where a subsidiary purchases goods from a parent at too high a price, or a parent purchases from a subsidiary at too low a price.

Answer 182

APG is voluntary and cooperative in nature; APG and FATF have reciprocal rights of attendance; APG encourages jurisdictions to implement AML/CFT initiatives with more effective mutual legal assistance.

Answer 183

Based on FATF Recommendations, EAG conducts mutual evaluation of members; Coordinates international cooperation and technical assistance programs; Analyzes ML and TF trends.

Answer 184

Senior Management and Board of Directors do not need the same training as compared to Front Line officers, Internal Compliance and Internal Audit employees. Their training should focus on AML/CFT regulatory requirements, penalties for non-compliance and personal liability.

Answer 185

Legal framework on which AML/CFT laws apply; Penalties for violating AML/CFT laws; Internal Policies e.g customer identification and verification procedures; Review of the internal AML/CFT and sanctions compliance related risks; Legal record keeping procedures; Actions needed once suspicious client/activity is identified; Duties of employees.

Answer 186

Sanctions are restrictions and obligations that must be respected by countries, non-state entities, companies, organizations and individuals. It is an international tool used to impose a change in a country or a regime or to isolate specific targets (like companies, persons, vehicles, aircrafts). United Nations (UN), European Union (EU) and individual countries can impose sanctions.

Answer 187

Legally fulfill the requirement of the subpoena/warrant; Determine whether the customer identified, requires filing of STR. A search warrant is not open-ended and does not compel any testimony.

Answer 188

Property is often used to disguise the source of funds, making it useful in the layering phase e.g. investing in a condo/house. It can also be used in the integration phase where an asset such as condo, house or a holiday complex can be purchased, adding to the air of legitimacy. Because real estate is costly, it is not usually a good candidate for placement, which would require very large sums of cash, or structuring, which requires multiple small sums of cash to avoid reporting thresholds.

Answer 189

Fraudulent transfer pricing schemes are most often associated with the undervaluing of exports. They can be used in conjunction with the Black Market Peso Exchange (BMPE); however they are not necessary for the BMPE to work.

Answer 190

There is no requirement to refuse to do business with such entitles, however there is no register of owners to check. Banks cannot insist that the shares be handed over, as possession equates to ownership. Bank should satisfy itself as to the beneficial owners of the entity. Financial institutions are not obligated to verify the identity of the presenter of a bearer check unless the transaction exceeds a particular threshold.

Answer 191

The officers of the FI should not act on the legal process until they have contact with the agent and learn what the agent is investigating. Senior Management/Counsel of the FI should be informed and they should review the subpoena /summons. FI should provide all the documents completely and timely if there is no ground for contesting the subpoena and should not notify the customer who is being investigated.

Answer 192

Yes, they can, but it requires a written request under proper letterhead and authority from the Government.

Answer 193

The information is reliable and verifiable; If it is customer's reputation related information, it has to be ensured that the research has been done using news/quasi-news websites; Using metasearch and/or multiple search engines; Using country specific local search engines.

Answer 194

The institution’s policies and procedures for closing an account; The legal basis for closing the account; Reputation risk for the FI if the account is maintained (NOT closed); Seriousness of the underlying conduct of the account; Signed written requests by a law enforcement agency or prosecutor on official letterhead for the account to remain open.

Answer 195

Criminal history of the FI ; Cooperation history of the FI; Whether the FI has discovered and self reported the ML related issue/ violations; Whether the FI has any comprehensive and effective AML/CFT Programme in place; Whether the FI has taken any timely and effective remedial action; Whether any civil remedies are available that can serve as punishment; Whether the FI is deterring wrongdoing by others; Intent of the institution when it undertook the action in question (i.e. violated AML rules).

Answer 196

The FI should respond quickly and completely to all request; FI should inform its Senior Management; FI needs to retain qualified experienced legal counsel; Conduct an inquiry of its own to determine the underlying facts; All information should be centralized which can serve as a single point of contact.

Answer 197

The representative could actually be the beneficiary owner of the account opened in the name of the grantor; The representative could be a trustworthy person that might deceive the bank from conducting enough Customer Due Diligence on the grantor; Powers of Attorney do not always mention a specific Bank where the representative is allowed to open the bank account – thus, there is the risk that the same Power of Attorney can be used at several banks to open accounts and be used for the personal use of the representative (abuse of the Power of Attorney); Banks do not generally monitor that the accounts opened through specific Powers of Attorneys are used exclusively for operations linked to that specific purpose – there is the risk that the account may be used for other transactions ; Most Powers of Attorney give the representative the power to open and manage bank accounts, but not the power to close them after the specific purpose was achieved.

Answer 198

Large number of visits of the safe deposit box in a given period compared to other customers (especially if the customer profile doesn’t justify it); The safe deposit box is visited only/mainly by the empowered person /delegate of the customer (hint that the customer is just a front man and the beneficiary owner of the safe deposit box is actually the empowered person/delegate who for some reason wants to hide this ownership); A person already having a current account opened with the bank, doesn’t have a safe deposit box on his name but frequently uses the safe deposit box of another customer as empowered person/delegate; The customer is always brought by / comes with someone else to visit the safe deposit box ;Discrepancy between the customer profile and his need for a safe deposit box (eg. students, low income customers, customers that reside in a different area or town than where the safe deposit box is – hint that they may be used as front men); The customer remains a long time in the safe deposit box area (hint that he may have large amounts to number / order or that he may even engage in illegal activities in the safe deposit box area, like drug packaging).

Answer 199

Placement and Integration.

Answer 200

Wire stripping occurs when a bank willfully decides to weed out, tamper, or even alter the payment details of a Swift message be it an MT 103, 202, or 700 especially, with regard to ordering/beneficiary client details (country, address, name), origin of goods and sea ports involved. Such a premeditated practice is usually done to override sanctions filters (to circumvent restrictions imposed by economic sanctions) and make a non-compliant payment look compliant so that it will not be rejected or flagged by the correspondent. What makes stripping so problematic is that it’s an evasion strategy coming from within the financial institution itself and here arises the importance of KYE. These cases involved staff inside the institution itself who, for whatever reason, formulated strategies to strip payment messages of customer information for which the institution’s sanction screening tool would have raised an alert. The real risk in these types of cases is that stripping requires a level of knowledge and intent by the individuals involved. To mitigate this risk, where payments are linked to other payments, discrepancies between these payment pairs may indicate that wire stripping has occurred.

Answer 201

'Isolation' or “cut-off” companies are used to obscure or conceal the activities which another company or legal entity may engage in. These can be both “shell” and “shelf” companies.

Answer 202

The 5th EU AML Directive (MLD5) reinforces the obligations regarding the Beneficial Owners to corporate vehicles and trustees, not only to obliged entities. The European Banking Authority would be able to directly force individual banks to take measures against money laundering “as a last resort” if national authorities do not act. EU Member States have until 10 January 2020 to implement MLD5 into their national legislation.

Answer 203

Cuckoo Smurfing because in relation to money laundering, it involved criminals, without the knowledge or consent of an account holder, depositing money from crime in their account. While legal or clean money, the customer was expecting to receive, usually from offshore, is hijacked and given to offshore based crime groups.

Answer 204

Structuring is the money laundering process by which individuals or criminal syndicates are able to bypass this recognition of money transfers by breaking up cash amounts into sums lower than the threshold so that they're not picked up by banks and therefore reported. Structuring can take different ways [of being executed], for example, a person can go around and individually deposit those small amounts at different locations or ATMs or bank branches and do the manual labour himself. As such, Structuring is making cash deposits or withdrawals at dollar values of $10,000 or less, making them at multiple teller windows on a single banking day, or making them at multiple branch locations or by multiple individuals into a single account on a single day. The most effective tool used to detect structured transactions is verification of the source of funds.

Answer 205

Regulation 847/2015 is a good way to identify the parties of cross-border transactions and help Authorities in their ML/CFT investigations. It does place a burden on EU banks and especially on the EU customers that find themselves “innocent victims”, with their money blocked due to the fact that the SWIFT message doesn’t contain the address of the ordering party from outside the EU. it applies to all transactions that are performed within the European Union, all incoming transfers that are received by European Union banks from banks outside the European Union. It is also a good way to educate non-EU banks to send the mandatory information through SWIFT message, even though they are not bound by EU Regulation 847/2015. The mandatory information are name of the payer; The payer’s account number; The payer’s address or official personal document number or customer identification number or date and place of birth (it is mandatory only for transactions that come from banks outside the European Union.

Answer 206

The existence of these deposits is not necessarily grounds to reconsider the relationship with a customer; It could be the indicator of laundering, therefore it should be examined carefully; Law enforcement will need information on the depositor, so banks should seek to identify cash deposits made by third parties and should retain surveillance footage.

Answer 207

Section 312 requires institutions must set up risk based due diligence to mitigate the money laundering risks posed by foreign financial institutions; Section 313 prohibits US financial institutions from opening or maintaining correspondent accounts for foreign shell banks and requires them to take "reasonable steps" to ensure that a correspondent account of a foreign bank is not being used indirectly to provide banking services to a shell bank; Section 319 requires US financial institutions to maintain records with the names and address of the owners of foreign banks for which they maintain correspondent accounts.

Answer 208

Withdrawal of assets through transfers to unrelated accounts or to high‐risk countries; Frequent additions to or withdrawals from accounts; Checks drawn on, or wire transfers from, accounts of third parties with no relation to the client; Clients who request custodial arrangements that allow them to remain anonymous; Transfers of funds to the adviser for management followed by transfers to accounts at other institutions in a layering scheme; Investing illegal proceeds for a client; Movement of funds to disguise their origin.

Answer 209

Lawyers often serve as trustees by holding money or assets “in trust” for clients. This enables lawyers to conduct transactions and to administer the affairs of a client. Sometimes, the illicit money is placed in a law firm’s general trust account in a file set up in the name of the client, a nominee, or a company controlled by the client.

Answer 210

Customer identification; Compliance with laws/legislation; Conformity with high ethical standards and local laws and regulations; Full cooperation with national law enforcement to the extent permitted without breaching customer confidentiality; Staff training; Record keeping and audits.

Answer 211

FATF designated specific thresholds that trigger AML scrutiny. For example, the threshold that financial institutions should monitor for occasional customers is €15,000 [Recommendation 10]; for casinos, including Internet casinos, it is €3,000 [Recommendation 22]; for dealers in precious metals, when engaged in any cash transaction, it is €15,000

Answer 212

Determining whether enhanced due diligence is necessary; Assessing the money laundering risk presented by the correspondent account; Applying risk‐based procedures and controls reasonably designed to detect and report suspected money laundering.

Answer 213

Policies and procedures should be in writing, and must be approved by appropriate levels of management. In general, institution‐level policies should be approved by the board, while business unit procedures can be approved by business unit management.

Answer 214

The anti‐money laundering compliance officer should be responsible for designing and implementing the AML program, making necessary changes and disseminating information about the program’s successes and failures to key staff members, constructing anti‐money laundering‐related content for staff training programs and staying current on legal and regulatory developments in the field.

Answer 215

The ultimate responsibility for the AML compliance program rests with the board of directors. Board Members must set the tone from the top by openly voicing their commitment to the program, ensuring that their commitment flows through all service areas and lines of business, and holding responsible parties accountable for compliance. The Board should routinely converse with regulators and auditors about their commitment to the program, their understanding of the law, and knowledge of how their institution operates. The Board is also responsible for ensuring that corrective action is taken for all program shortcomings identified by regulator or auditor examination.

Answer 216

The cost of the fines and penalties levied by regulators due to non‐compliance with anti‐money laundering laws and regulations is only part of the overall expense; Significant additional costs include legal bills; Potential loss of business due to reputational damage; Extensive compliance review charges, consulting fees, costs for system and other compliance program enhancements, as well as the opportunity costs as the compliance staff and others will be spending the bulk of their time addressing the consent order.

Answer 217

Daily cash activity in excess of the country’s reporting threshold; Daily cash activity just below the country’s reporting threshold (to identify possible structuring); Cash activity aggregated over a period of time (e.g., individual transactions over a certain amount, or totaling more than a certain amount over a 30‐day period) to identify possible structuring; Wire transfer reports/logs (with filters using amount and geographical factors); Monetary instrument logs /reports; Check kiting/drawing on uncollected funds (significant debit/ credit flows); Significant change (credit/debit flows) reports; New account activity reports.

Answer 218

Central Authority (requesting authority) sends Commission Rogatoire (Letter of Request) with details on information request, nature of request, criminal charges and legal provisions; Local investigator in request receiving country finds if information is available; Requesting country sends agents for such information; Local investigator in request receiving country obtains the Central Authority's permission to remove the evidence; Local witness from request receiving country may need to attend court hearings in requesting country.

Answer 219

Acting as a formation agent of legal persons; Providing a registered office, business address or correspondence for a company, a partnership or any other legal person or arrangement; Acting as (or arranging for another person to act as) a trustee of an express trust; Acting as (or arranging for another person to act as) a nominee shareholder for another person; Acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons.

Answer 220

Risk-based approach; Designated categories of offenses to serve as ML predicates; TF and financing of proliferation of Weapons of Mass Destruction (WMD); Knowledge and criminal liability; CDD measures; Suspicious transaction reporting; Transparency and beneficial ownership; Powers and responsibilities of competent authorities; International Cooperation.

Answer 221

This guidance includes risk assessments, due diligence in relation to third parties (including the use of intermediaries), political and charitable contributions, gifts and entertainment, whistleblowing, as well as controls (e.g. monitoring, surveillance) and communication, training and awareness. Wolfsberg Group's focus has expanded to the emergence of new payment methods and the Group published Guidance on Prepaid and Stored Value Cards, which considers the money laundering risks and mitigants of physical Prepaid and Stored Value Card Issuing and Merchant Acquiring Activities, and supplements the Wolfsberg Group Guidance on Credit/Charge Card Issuing and Merchant Acquiring Activities of 2009.

Answer 222

Internal Controls should inform the board of directors, Audit committee and Senior Management of the compliance initiatives, identified compliance deficiencies and corrective action taken and should notify directors and senior management of SARs filed. They should also provide for dual controls and the segregation of duties to the extent possible. For example, employees that complete the reporting forms (such as SARs, CTRs and CTR exemptions) generally should not also be responsible for the decision to file the reports or grant the exemptions.

Answer 223

Consulting applicable lists and taking appropriate actions to determine if customers appear on such lists; Reporting matches from lists of known or suspected terrorists to relevant authorities; Maintaining customer information to facilitate timely retrieval of such information.

Answer 224

The quality of the respondent's AML and client identification controls; Whether a Politically Exposed Person (PEP) has an interest or management role in the respondent (Criminals or their associates, convicted in relevant areas, are prevented from holding management functions or indirectly controlling certain obliged entities); The sources of wealth for all significant ownership interests.

Answer 225

Compliance requirement of host and charting countries; A training program for senior management and staff; An anti-money laundering compliance program, internal audit program, and procedure manual.

Answer 226

Lawyers, Foreign Exchange Dealers, Precious Metal Dealers

Answer 227

The institution should request for a written letter from the law enforcement agency signed by an appropriate authorized signatory.

Answer 228

File an STR with the competent authority.

Answer 229

Only provide information that is specifically and directly requested. OR Ensure communication with regulatory authorities and law enforcement agencies is conducted only through the Board of Directors.

Answer 230

While the explanation appears plausible, the FI should for a period of time, monitor the account for cash transactions and suspicious activity.

Answer 231

By reviewing a copy of the corporation’s latest audited reports and accounts; By undertaking a company search or other commercial inquires to see that the institution has not been, or is not in the process of being dissolved of terminated; By using an independent information verification process, such as by accessing public and private databases.

Answer 232

Review applicable domestic and international AML Guidance; Perform a risk analysis on a regular basis and compare it to the coverage of the AML Program; Review the accuracy of the account opening applications and procedures.

Answer 233

File an SAR (Suspicious Activity Reporting) on the customer.

Answer 234

Commission Rogatoire are time-consuming; They are based on a pre-existing mutual treaty between the countries; They must be approved in advance by the countries' judicial authorities.

Answer 235

The bank should limit the amount of money which can be processed per transaction.

Answer 236

Reviewing documents, particularly of relevant accounts; Interviewing knowledgeable employees of the institution; Exploring leads through internet searches (open source search).

Answer 237

Document the identity of the party opening the account ; Determine the beneficial owner(s) of the account; Seek to determine the source of deposited funds.

Answer 238

No, because in financial regulation, a PEP is a term describing someone who has been entrusted with a prominent public function, including a political party leader (current leader, NOT a candidate) or member.

Answer 239

A cash intensive business is one that receives a significant amount of cash for the products or services provided, such as restaurants, convenience stores, coin-operated machines, gambling venues or lotteries, a food stall at a hawker centre (street dealers are popular in South East Asian countries e.g. Bangladesh, India), flea markets (popular in North-East of USA) that handle a high volume of cash transactions daily. In these businesses, cash transactions are anonymous, leaving no paper trail behind. Businesses that deal heavily in cash are naturally susceptible to under-reporting and generally vulnerable to money laundering activity. This is a high risk business as cash may trigger red flags which however would be disguised and difficult to be traced.Small restaurants like some located in Toronto or world's major cities' Chinatown areas demand cash only in an industry where use of plastic money is the norm. The owners of these companies could likely be reporting incorrect income or could have some irregular/abnormal cash transactions (whether in the company names or family names) that would garden some flags in AML transaction monitoring.

Answer 240

Second-hand/ pre-owned car sale business is a cash-intensive business. If the AML Compliance Officer digs deep to unveil the actual position and browses the websites of these businesses, he can see a lot of 2nd hand cars are being sold at a price which is below $10K, for example a Toyota Sedan is often advertised at a drive-away price of $9,650. As this happens frequently in real-life world, no SAR needs to be filed for this customer.

Answer 241

Items shipped that are inconsistent with the nature of the customer’s business (e.g., a steel company that starts dealing in paper products, or an information technology company that starts dealing in bulk pharmaceuticals); Customers involved in potentially high-risk activities, including activities that may be subject to export/import restrictions (e.g., equipment for military or police organizations of foreign governments, weapons, ammunition, chemical mixtures, classified defense articles, sensitive technical data, nuclear materials, precious gems, or certain natural resources such as metals, ore (metal-bearing mineral or rock) or crude oil); Significantly amended letters of credit without reasonable justification or changes to the beneficiary or location of payment (any changes in the names of parties should prompt additional OFAC review); Customer’s standby letter of credit is used as a bid or performance bond without the normal reference to an underlying project or contract, or in favor of unusual beneficiaries.

Answer 242

A huge leak of confidential documents has lifted the lid on how the rich and powerful people use tax havens to hide their wealth, to launder money and dodge sanctions. The files were leaked from one of the world's most secretive companies, a Panamanian law firm called Mossack Fonseca.

Answer 243

Review on a regular basis of all high risk accounts and transactions; Review of STR filing trends and typologies; Periodic training on identification of red flags.

Answer 244

FATF exerts peer pressure policy through the practice of naming and shaming. FATF issues warnings to FIs worldwide to do business with US-warned institutions with caution. FATF Recommendations are only minimum standards of actions for countries to implement. FATF puts non-cooperative countries on Black List and put countries (which are not doing enough to fight ML and TF) on Grey List as a warning (similar to yellow card in a football match). But being on Grey List, countries may face some problems too : Problem in getting loans, Economic Sanctions, Reduction in trades.

Answer 245

The criminal AML law can apply to transactions that occur partially overseas; Economic and trade sanctions by OFAC may pose extraterritorial risks for FIs and businesses outside the US; The defendant does not need to know the funds came from an illegal activity under state, federal or foreign law.

Answer 246

Mutual evaluation has to be conducted within a maximum of 3 years after being invited to participate as an observer in FATF. Mutual evaluation is unsatisfactory if the country has 8 or more non-compliant ratings for technical compliance.

Answer 247

A ponzi scheme is a category, or specific kind of investment fraud. A fraudster executing a ponzi scheme (like US fraudster Bernie Madoff, Heera Gold in India, Jubok Group of Bangladesh are types of Ponzi or multilevel marketing scheme, for instance) convinces individuals to invest their money with the schemer, promising a high rate of return. The ponzi schemer uses the next investor’s funds to pay the first investor and themselves, never legitimately investing funds at all, continue until there are no more new investors to fund the scheme or until the underlying funds run out. Sometimes terrorist acts are being funded by Ponzi Schemes. Indian ponzi scam by Saradha Group and a Bangladeshi bank were being investigated for ties to terrorist funding. Money laundering, on the other hand, refers to the effort to move and disguise the proceeds of activities, especially illegal activity, through the financial system.

Answer 248

Credit Institutions, Financial Institutions, Auditors, external accountants, tax advisors, Legal Professionals, Trust and Company Service Providers, Estate Agents, High value goods dealers who trade-in cash over EUR 15k, Casinos.

Answer 249

FATF and FSRBs are the free-standing organizations that share the common goals of combating money laundering, financing of terrorism, proliferation of Weapons for Mass Destruction (WMD) and of fostering effective AML/CFT systems; FSRBs identify and address AML/CFT technical assistance needs for their individual members to implement FATF standard; They operate on the basis of mutual/joint/common recognition of their work. There are 9 FSRBs that have similar forms and functions to those of FATF. They are considered FATF Associated Members.

Answer 250

Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If undertaken successfully, it also allows them to maintain control over those proceeds and, ultimately, provides a legitimate cover for their source of income. In other words, the source of the illegally obtained funds is obscured through a succession of transfers and deals in order that those same funds can eventually be made to appear as legitimate income.The term money laundering is said to have its origins from the mafia’s ownership of Laundromats in the USA in the 1920’s and 1930’s.

Answer 251

In case of Online gambling, to access the site the gambler must download the software, create a profile and fund an e-wallet. The control of such sites can only be as strong as the e-wallet provider. Dirty money can be put into the wallet, clean money from gambling can be paid into it or in some circumstances paid by cheque and money laundering is done. There is little control over where the e-wallet providers are situated.

Answer 252

Trade based Money Laundering has been done through involvement of Over Invoicing.

Answer 253

Antiques can be of high value and often easily transported and the market in antiques and fine art can be secretive and is susceptible to trade based money laundering. The dealer in this deal may take cash without carrying out the relevant checks; The value of the art can be overvalued; Multiple invoices may be prepared for the same artwork; Back to back loan schemes can be used to launder money through the art.

Answer 254

Free Trade Zones have the legitimate aim of encouraging exports by having exemptions from duties and taxes. Whilst they encourage trade they also provide an opportunity to money launderers allowing them to use dirty money to buy goods which can then be re-sold to create clean money.

Answer 255

To foster multiple cooperation on drug issues in USA and to carry out regular multilateral evaluations of progress by member states in all aspect of the drug problem.

Answer 256

Geographic risks (Countries subject to sanctions, embargoes or similar measures issued by, for example, the United Nations), customer types (Non-resident customers, Cash-intensive businesses), products and services offered (Private banking, Non-face-to-face business relationships), ownership structure of the company appears unusual or excessively complex given the nature of the company’s business.

Answer 257

The review should be conducted annually; RBA should be evaluated for ML and sanctions vulnerabilities for new products and functions introduced; RBA should include appropriate inherent and residual risks. Most commonly used risk criteria are Product and Service Risk, Customer Risk, Country/Geographic Risk, Delivery Channel Risk.

Answer 258

Cuckoo mining occurs when bad actors nefariously “borrow” the computing power from connected “nests.” Basically it takes a lot of computing power to make a “coin”. This 'cuckoo mining' only works in lesser known coins, called 'alt-coins' (called that because they’re alternatives to bitcoin). Bitcoin has become so difficult to be used in regular types of computers. So other coins like Monero, Zencash, etc can be used in regular types of computers. Bad actors are infiltrating people’s computers and phones through phishing or smishing (combination of SMS and phishing) and then deploying malware that uses the victims computing power to mine coins that go into the bad actor's account. But because of the way it’s done through a mining pool and original creation, no trace of the illegal activity would be pictured up.

Answer 259

AML/CFT Risk Rating Review should be conducted within a time frame whenever a new product is going to be launched, acquisition of a new bank/company is made, annually (as a part of annual review). The risk rating should be modified/ changed if the customer has received a subpoena OR in case of any unusual activity such as alerts, cases and STR Filings.

Answer 260

1) Confidentiality: To keep information and systems secure from unauthorized access (including “hacking”). Keep data safe, keep email accounts from being compromised; 2) Integrity: To keep data from being tampered with. Keep a criminal from sending emails from a compromised account, as if they were impersonating the owner. Stop a criminal from manipulating account balances or trading data; 3) Availability: Ensure data and systems remain accessible. Ransomware, hurricanes and other disasters could affect the ability to continue business operations. Malicious emails, social engineering and sophisticated cybercrime fraud attempts are now the norm.

Answer 261

The High Intensity Drug Trafficking Areas (HIDTA) program, created by Congress with the Anti-Drug Abuse Act of 1988, provides assistance to Federal, state, local, and tribal law enforcement agencies operating in areas determined to be critical drug-trafficking regions of the United States. This program is administered by the Office of National Drug Control Policy. HIDTA-designated counties are located in 49 states, as well as in Puerto Rico, the US Virgin Islands, and the District of Columbia. The purpose of the HIDTA program is to reduce drug trafficking and production in the United States.

Answer 262

The BSA was enforced by the Financial Crimes Enforcement Network (FinCEN), a section of the US Treasury Department and was amended by the passage of the USA PATRIOT Act of 2001. Goals of BSA include preventing and detecting money laundering and the financing of criminal activity, documenting large currency transactions, improving reporting and aiding in the investigation of financial crimes. Minimum requirements of BSA are internal controls and metrics to ensure compliance, independent auditing of compliance, the designation of individuals responsible for managing compliance, staff training for compliance. For violations, an individual may be sentenced to as much as 20 years in prison and ordered to pay up to $500,000 in fines. Personal property, loan collateral, bank accounts or any other assets or involved property may be seized. FI may lose its institution charter; be fined up to $1 million; and/or be the subject of a cease-and-desist order covering all of its operations.

Answer 263

The USA PATRIOT Act authorizes the Attorney General or the Secretary of the Treasury to issue a summons or subpoena to any foreign bank that maintains a correspondent account in the United States for records related to such accounts - even if maintained outside US borders and requires the maintenance of records identifying a legal agent for correspondent accounts.

Answer 264

Yes, payroll customers (i.e., customers that have maintained transaction accounts at the exempting institution e.g domestic banks, any government agencies for at least two months and that frequently withdraw more than $10,000 cash to pay their employees) are exempted from the reporting.

Answer 265

It has been FinCEN's experience that such activity may be part of a layering scheme.

Answer 266

Banking regulatory agencies do not need any subpoena/ search warrants. Their authority to conduct examinations negates (nullify) the need for any subpoena/search warrant. In the United States and several other jurisdictions, the banking regulatory agencies' authority to conduct examinations includes the ability to inspect all books and records of a regulated institution. The documents and testimony are designed to allow the law enforcement agency to investigate suspicious transactions, develop evidence and, ultimately, put together a case for prosecution.

Answer 267

Comprehensive Sanctions generally prohibit all direct or indirect import/export, trade brokering, financing or facilitating against most goods, technology and services. These are often aimed at regimes responsible for gross human rights violations and nuclear proliferation. The UN Security Council applies these sanctions to support peaceful transitions, deter non-constitutional changes, constrain terrorism, protect human rights and promote non-proliferation. Canada has implemented comprehensive sanctions against countries such as Iran, North Korea, Syria and Crimea.

Answer 268

The complexity of the product; The need to verify the identification of the customer; Whether the product is easily transferable.

Answer 269

Trusts are typically set up to minimize taxes.

Answer 270

USA PATRIOT Act extend not only to the conduct of US citizens abroad, but also that of non-US citizens who have never been physically present inside the US, but if their conduct occurs in part in the US and the transaction involves more than $10,000. This act gives the US government the ability to reach the assets of every financial institution and business in the world and to confiscate assets of non-US citizens who have never even set foot inside the US borders.

Answer 271

Person's second name is the father's name; Bin and ibn mean 'son of'; Family name sometimes is preceded by 'al'; Abu means 'father of' and is followed by a noun meaning 'freedom' or 'struggle' and is used by political leaders and terrorists (Mumbai-based terrorist Daud Ibrahim has 27 aliases); Mohamed, ahmed, au, abd-, or abdul means 'servant of' and is usually followed by one of 99 adjectival nouns used to describe God.

Answer 272

Foreign financial institutions that receive a written request for information from a US federal law enforcement agency must provide records within 7 days. If information is not provided, the US Bank has 10 days to terminate the account, to impose $10,000 fine for every day over/exceeding 10 days until the account remains open.

Answer 273

ATM usage, Moving customers, Backup withholding (a tax that is levied on investment income, at an established tax rate, as the investor withdraws it), Opening deposits or investments and Out of market windfalls (Pay attention to one whose address is far from the institution, especially if there is no special reason why you were given the business). Investigation is needed on why would a customer willingly allow the government to withhold from his or her income-generating account (Backup Withholding). These accounts, particularly those with expired or invalid non-resident alien Taxpayer Identification Number certifications, need to be monitored.

Answer 274

The program should be reassessed at least annually.

Answer 275

Refuse to open the account; Suspend transaction activity; File an SAR; Close the account.

Answer 276

Currently only a handful of providers, mainly private, offer a PEPs database e.g. World-Check (Thomson-Reuters); the “Corruption Perceptions Index” published by Transparency International (UK-based international non-governmental organization devoted to combating corruption), could be useful in focusing on high-risk jurisdictions. However, not every customer from a country in the top 10 list of perceived corrupt countries is a PEP whereas a PEP from a low risk jurisdiction may not be above bribery, extortion and other corruption. Some government agencies, such as the US Central Intelligence Agency, already publish lists of Heads of State and Cabinet Members of Foreign Governments. Lists are on its website at www.cia.gov.

Answer 277

An institution may perform fingerprint checks periodically for employees in sensitive positions, or it may contract with a vendor to conduct an extensive background check (especially for criminal history) when the employee is being considered for promotion to a high-level position; Credit checks; Checking against terrorist watch lists; Verification of Social Security Number, education and employment; Checking on employees' social media accounts. KYE is vital to understand employees’ background, conflicts of interest, susceptibility to ML.

Answer 278

There is no international clearinghouse for keeping SARs, but Financial Intelligence Units in various countries often publish reports on how many SARs are filed each year, which areas are filing the most reports and what the suspicious activity trends are. This information can be shared country to country through agreements (MOU) the FIUs sign with each other.

Answer 279

If the national FIU issues new risk indicators. Automated transaction monitoring system should have the ability to store at least 12 months' data.

Answer 280

Offenses involving dishonesty or a breach of trust (unless it has the prior written consent of the federal agency having jurisdiction over the financial institution to hire or retain the person).

Answer 281

The international standards and North American countries' national laws do not make such distinctions. In addition, this is not public information (adoption vs biological). It is private information, only if they disclose it, then it becomes available to the public.

Answer 282

A system of internal policies, controls and procedures; An ongoing employee training program; A designated compliance officer with day-to-day oversight over the AML program. However, a description of the FI's OFAC program to address government watch-list screening is an element that does not have to be specifically addressed in the AML program.

Answer 283

The AML Specialist should recommend to cancel the meeting as the Accounts Officer has already behaved inappropriately by alerting (Tipping-Off) the customer to the investigation.

Answer 284

Update the FI's monitoring software that contains sanctioned persons' names/ list.

Answer 285

Alternative Remittance System (ARS) or Parallel Remittance System (e.g Hundi/ Hawala), Black Market Peso Exchange (BMPE). Hawala is a type of ARS ethnically originating in the Middle East and Southwest Asia (e.g. Bangladesh, India).

Answer 286

Determine purpose of the account; Take all reasonable steps to check the background of the individual based on public information; Investigate the source of funds.

Answer 287

The FI should review its customer base, location, products and services.

Answer 288

Trusts may hold assets of significant size.

Answer 289

Dealers in Art when they engage in cash transactions with a customer at/above a designated threshold; Real Estate Agents when they are engaged in transactions for clients concerning buying and selling of properties; Trusts and Company Service Providers.

Answer 290

Deutsche Bank needs to file a suspicious transaction report on the transaction in Germany.

Answer 291

The FI should request the AML Compliance Officer to review and evaluate AML risk prior to the product's going live; The FI should evaluate where, how and to what extent the product is going to be used; The FI should roll the product out on a preliminary basis to determine what risks develop with regard to the product.

Answer 292

B. If the deposited financial instruments were sequentially numbered or currencies were wrapped in currency straps.

Answer 293

If there is a reason to think they are related or working together or they come in to the branch at the same time, in that case, branch's video surveillance outside the building may pick up anything unusual going on between them prior to entering the branch. Red flags may or may not be here but it is a curious coincidence. Maybe EDD would turn up something.

Answer 294

Customer risk, Geographic risk, Transaction risk.

Answer 295

The anti-money laundering specialist should advise the bank's Senior Legal Advisor of this situation.

Answer 296

Yes, the correspondent institution will monitor the respondent institution’s transactions with a view to detecting any changes in the respondent institution’s risk profile or implementation of risk mitigation measures (i.e. compliance with AML/CFT measures and applicable targeted financial sanctions), any unusual activity or transaction on the part of the respondent, or any potential deviations from the agreed terms of the arrangements governing the correspondent relationship. Where such concerns are detected, the correspondent institution will follow up with the respondent institution by making a request for information (RFI) on any particular transaction(s), possibly leading to more information being requested on a specific customer or customers of the respondent bank.

Answer 297

Correspondent institutions need to monitor the respondent institution(s) and help them understand the correspondent’s AML/CFT policy and expectations, and when needed, engaging with them to improve their AML/CFT controls and processes. Such communication supports the monitoring requirement by helping to flag new and emerging risks and better understand existing ones, strengthen risk mitigation measures, and resolve any issues that may arise concerning the exchange of information. It can also help to avoid unnecessary restriction on or termination of a relationship without a thorough assessment of the risks associated with the specific customer in line with the RBA (i.e. avoiding de-risking)

Answer 298

Development of internal policies, procedures and controls; An ongoing employee training program; The designation of a compliance officer; An independent audit functions to test the program.

Answer 299

The enhanced due diligence provisions would apply to foreign banks operating under an offshore banking license; A license issued by a country designated as being non-cooperative with international anti money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the United States representative to the group or organization concurs; A license issued by a country designated by the Secretary as warranting special measures due to money laundering concerns.

Answer 300

An owner is any person who directly or indirectly owns, controls, or has the power to vote 10 percent or more of any class of securities of the respondent bank/foreign bank (which is not publicly traded company).

Answer 301

The need to continue to cooperate with law enforcement ; The importance of keeping law enforcement apprised as to what the institution is doing; The need to respect the law enforcement investigation and to refrain from doing things that might interfere with their investigation.

Answer 302

AML Specialist should include notes pertaining to activity that is unusual. An internal investigation log is primarily intended to Detect and monitor possible suspicious activity.

Answer 303

Sharing should be possible on the basis of reciprocity, including spontaneous exchange; Differences in the definition of offenses should not be an obstacle in the free exchange of information; The exchange of information between FIUs should take place as informally and as rapidly as possible and with no excessive formal prerequisites.

Answer 304

INCSR stands for International Narcotics Control Strategy Report which is issued annually by the US State Department. INCSR includes a narrative status of Money Laundering issues in most nations.

Answer 305

A rule of the Basel Committee allowing properly regulated financial institutes of another member state of the Basel Committee to do business without additional supervision to the degree that the other state grants the same right.

Answer 306

Mr. Brown did not make withdrawals of cash against check deposits.

Answer 307

The AML program should be tested by an independent person, NOT the compliance officer.

Answer 308

The US Bank will obtain the respondent bank AML policy and get clarification on the Policies on identification and verification of customer, Screening process, Nested Correspondent list, Annual periodic review policy, ensure that they don’t deal in prohibited clients such as Shell bank, US PATRIOT Act Certificate. In case of payable through account, some US banks decided not to open payable through account. If they open payable through account, they need to obtain the details of types of sub account holders. US Bank may put some restrictions an what type of client US Bank don’t want to deal with like Money service business. Also US Bank must have appropriate surveillance system to monitor unusual transaction at the sub account holder level.

Answer 309

Financial Action Task Force of South America against Money Laundering (GAFISUD). UK, USA, Canada, Mexico, France, Spain, the Netherlands are co-operating nations of the Caribbean Financial Action Task Force (CFATF).

Answer 310

Trading between accounts controlled by the same person.

Answer 311

When the large cash deposit is made by a customer who has never conducted a transaction in cash before; Transacted in segments smaller than the reporting thresholds at various times during the day (Structuring); Deposit is followed by an immediate wire transfer to an offshore secrecy haven.

Answer 312

Using counter deposit slips

Answer 313

The institution’s size, nature of business and type and location of its customers.

Answer 314

This scheme means expansion of credit or high utilization of credit line. In this fraud scheme, a merchant applies for a merchant account without any intention of actually operating a legitimate business. These merchant accounts are then used to process fraudulent transactions or to acquire lines of credit before abandoning the account altogether. Bust out merchant accounts are associated with high chargeback rates. Once chargebacks start to pile up, these merchants are usually rapidly shut down by the acquirer. However, at this point the damage is already done. When the merchant escapes, leaving an empty shell of a business behind, the acquirer is stuck with the bill.

Answer 315

Electronic money laundering, also known as Transaction Laundering, is the most common, but least enforced, method of money laundering. In Transaction Laundering, an unknown online business uses an approved merchant’s payment credentials to process credit card transactions for unknown products and services. For example, a cyber criminal can set up a website in a matter of minutes, accepting payment via card, and disguise their income from illegal activities by rerouting payments through a legitimate merchant account, like an online book shop.

Answer 316

A search warrant is a grant of permission from a court for a law enforcement agency to search certain designated premises and to seize specific categories of items or documents. Generally requesting agency is required to establish that probable cause exists to believe that evidence of a crime will be located. Warrant is authorized based on information contained in an affidavit submitted by a law enforcement officer.

Answer 317

With a payable-through, pass through or pass-by account, a foreign financial firm is able to create a corresponding account in the US. However, the foreign bank also provides checks to its foreign customers who might be interested in conducting US transactions. These foreign customers are then able to write checks to withdraw from or make deposits into the account. In general, these foreign customers of a foreign bank are not subject to anti-money laundering screening, but they end up having full access to the US financial system.

Answer 318

The potential for facilitating money laundering or terrorist financing; Risk of OFAC violations; US bank (or any global bank) may be unable to identify and adequately understand the transactions of the ultimate users (all or most of whom are outside of that country) of its account with a foreign correspondent. PTAs used for illegal purposes can cause banks serious financial losses in criminal and civil fines and penalties, seizure or forfeiture of collateral, and reputation damage.

Answer 319

Identifying how customers are using products

Answer 320

Submitting a request for overseas assistance to the corresponding supervisory body.

Answer 321

Customer having unusual documents from a foreign country; Customer being new to the community; Customer having no permanent address.

Answer 322

Prohibition on offering products or services to shell banks; Periodic risk-based reviews of clients; Assessing the regulatory status and history of the client.

Answer 323

Develop a system to monitor all the activity.

Answer 324

Meet with staff who opened the account to understand its nature and purpose.

Answer 325

Policies and procedures should be designed not merely to comply strictly with all relevant laws and regulations.

Answer 326

The legal counsel should request formal company authorization to conduct the investigation. Such authorization should be granted, if possible, by the board of directors or audit committee.

Answer 327

There is a greater difficulty in matching the customer with the provided identification documentation. Other risks are The nature of online banking itself, with the elimination of face-to-face contact between customer and employee, necessarily makes it more difficult to know who is actually controlling the account; The ease of access through the Internet enables crossborder movements of funds from nearly every physical location; The rapidity of electronic transactions enables the execution of multiple, complex transactions within very short timeframes; Conducting anonymous transactions; Difficulties in Know Your Customer (KYC) / Enhanced Due Diligence (EDD), customer and third-party identification.

Answer 328

Misspelling names to foil watch-list filtering systems

Answer 329

Who its owners are and what its regulatory history is.

Answer 330

The anti-money laundering officer should be independent of business functions.

Answer 331

Records on beneficial ownership and any Politically Exposed Person (PEPs) in the management chain should be collected. Charitable organization is the most often used vehicle to hide beneficial ownership.

Answer 332

U.S. Patriot Act, FATF 40 Recommendations and Customer Due Diligence for Banks issued by Basel committee on Banking Supervisions.

Answer 333

The AML Specialist should promptly report it to the competent authority. The Recommendations say that If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, directly by law or regulation, to report promptly its suspicions to the financial intelligence unit (FIU). The financial institutions and the employees reporting such suspicions should be protected from liability for reporting and should be prohibited from disclosing that they have reported such activity.

Answer 334

An ongoing employee training program, the designation of a compliance officer, an independent audit functions to test the program.

Answer 335

For their involvement in terrorism

Answer 336

When deciding on the range of offences to be covered as predicate offences, each country may decide, in accordance with its domestic law, how it will define those offences and the nature of any particular elements of those offences that make them serious offences.

Answer 337

Countries should be able to freeze and confiscate assets of persons designed by the UN Securities counsel for involvement in terrorist act or WMD. Generally, the order is obtained based on a sworn affidavit, which is sometimes included with the order.

Answer 338

The AML officer and the compliance staff; Employees who have contact with customers or transactions; The Board of Directors and Senior Management. It is important that the compliance department has strong board support, and one way to ensure that is to keep board members aware of the reputational risk that money laundering poses to the institution.

Answer 339

The information the LEA could ask for from a bank in respect of an STR varies depending upon the circumstances and each situation should be dealt with on its own merits. They should have already got answers to the following questions when an STR was submitted: Who is the subject of the STR ? (name, birth date, address, account number(s) of interest, full details of any associates included in the transaction; A full description of the event including the modus operandi (method) and state whether or not it is a new/known ‘trend’; When did the event occur? Where the event occurred? Why the transaction seems suspicious? (detail of what has been done to ascertain the veracity of the transaction and what enquiries have been carried out to allay the suspicions; How did the event occur? The LEA may ask for transactional information in relation to the account(s) subject of their attention, checks that were drawn on or received into the account, or any other instrument, including bankers’ notes and other correspondence. Some banks provide business accounting and invoicing services so the LEA could ask for those items. They could ask for information in respect of other services provided for that customer which is not subject of the STR but that may be subject of a court order.

Answer 340

The internal audit methodology should include an assessment of compliance risk. An internal audit program of adequacy of the bank's compliance function should be established, but should not include review of transactions.

Answer 341

The provider of funds (e.g., settlor); Those who have the power to appoint or remove trustees; Those who have power over the funds (e.g., trustees).

Answer 342

Limited types of institutions and persons covered by money laundering laws and regulations; Little enforcement of the laws, weak penalties or provisions that make it difficult to confiscate or freeze assets related to money laundering; Absence of an effective FIU.

Answer 343

The need to have on-going training as to potential red flags that the institution might encounter; The appropriateness of having a centralized review of suspicious transactions and recommendations to file an STR to ensure consistency; A system for tracking STRs and ensuring that appropriate supporting documentation is segregated and maintained.

Answer 344

Creating complex legal arrangements; Buying and selling property; Performing financial transactions on behalf of a client.

Answer 345

The answer is A...If the institution filed the STR, then they have to provide the documents which were collected at the time of filing because the institution had reported that a transaction was suspicious. If it was the law enforcement which initiated the investigation WITHOUT the financial institution filing the STR, then most certainly you will ask them to provide a subpoena/court order. Then the process would be completely different where you will have it reviewed by the legal counsel as well before providing any documents.

Answer 346

An unknown client purchases multiple monetary instruments for one person during the course of one day.

Answer 347

They should be informed of all significant STRs and the numbers and trends of the filings.

Answer 348

Having control over such funds or entitlement to such funds

Answer 349

A lawyer’s trust account regularly receives wire transfers from unknown remitters in a high risk country and immediately redirects the same funds to the same remitters account in a low risk country.

Answer 350

The type and location of the institution’s clients; The nature and breadth of the services and products the institution provides; The geographic locations where the institution does business.

Answer 351

Money laundering

Answer 352

Inform counsel of all request for documentation; Make copies of all documents provided to law enforcement; Keep a log of the documents requested.

Answer 353

MSBs deal primarily in cash transactions; They engage in international transactions and can route funds to more high risk countries than banks; They conduct transactions for walk-in customers.

Answer 354

Layering, Integration and Structuring

Answer 355

Verify the identities of all new vendors and customers and conduct due diligence on them; Avoid accepting cash payment from the buyers; Insist all vendors submit an appropriate license issued by enforcement agencies authorizing the sale.

Answer 356

Informal financial systems; Currency exchange firms; Cash couriers. Terrorist financing is very difficult to identify because the funds needed to conduct a terrorist act can be relatively small.

Answer 357

An unlicensed investment advisor offers profits other investments cannot guarantee. Examples of Ponzi schemes include The prime bank guarantee program, High yield promises, Bank debenture program, Roll program.

Answer 358

Getting a reimbursement from an overfunded policy

Answer 359

The institution's anti-money laundering policy

Answer 360

Knowingly financing a resort development with the proceeds of arms trafficking

Answer 361

Cancellation of correspondent banking relationships; Forfeiture of funds in a U.S. interbank account; Prohibition of correspondent accounts for shell banks. Although [correspondent] accounts were developed and are used primarily for legitimate purposes, international correspondent bank accounts may pose increased risk of illicit activities. There are also concerns with regards to Act violations including: failure to have an effective AML program, (2) failure to conduct adequate due diligence or to obtain "know your customer" information with respect to foreign correspondent bank accounts, and (3) failure to detect and adequately report evidence of money laundering and other illicit activity. However, regarding the regulatory impact of Patriot Act on such Foreign Correspondent Accounts is that Patriot Act has (1) extra territorial reach and (2) the FFI have to designate a local representative in US to receive any Government Orders (Subpoena and warrants) in US. The implications of extra territorial reach means if US law enforcement agencies identify any AML or TF related concerns relating to US or USD, they can block/confisdicate the available balances in the FFI Correspondent accounts in US which may not be directly related to the AML transaction.

Answer 362

Frequent wire transfers into an account immediately followed by debit card transactions and frequent wire transfers into an account immediately followed by checks or other payment instruments drawn on the account.

Answer 363

Who will control the account ?

Answer 364

File a suspicious transaction report with the appropriate Financial Intelligence Unit.

Answer 365

Obtain additional information about customers permitted to use this account.

Answer 366

Consult with senior management and the legal advisor.

Answer 367

Frequent payments in multiples of small amounts to online advertising and promotional services; Frequent purchase for airline, train and/or bus tickets, possibly for multiple individuals, in relatively short timelines; Payments for short accommodation stays and/or stays in multiple cities in a relatively short time; When customers state that wired funds are for a 'living fee'; Accounts of foreign workers or students where the employer or employment agency serves as a custodian; Victim accompanied to the bank by a third party, and behavioral activity which implies control over the victims e.g. victim reads their address information from a form OR Interpreter used to execute transactions; Rapid drawdowns of deposited funds or salaries paid, often in cash; Multiple wire transfers conducted at different branches of a financial institution to or from US or Mexican cities along the southwest border on the same day or on consecutive days; Wire transfers that originate from countries with high migrant populations (e.g., Mexico, Guatemala, El Salvador, Honduras) are directed to beneficiaries located in a US or Mexican city along the southwest border; A customer’s account appears to function as a funnel account, whereby cash deposits (often kept below the $10,000 reporting threshold) occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made.

Answer 368

A customer is falsely labeled as a risk. Most customer data is riddled with errors and duplicates due to data entry issues, inconsistent standards and multiple source databases. To eliminate false positive alerts/trigger, use Truth Technologies for this purpose. With the customers valid ID, it's a lot easier to rule out false positives on the basis of age, place of active location (country or state), names not matching with the hits on Worldcheck. It is also important to consider the customer`s nature of business/profession especially in situations where there are no IDs. Minimum of 2 criteria is required. Do online search for any information that would assist you in ruling out the hits. This is a very sensitive aspect of AML profession and getting it wrong could expose the organization to reputational risks. Data cleansing allows for a better “apples to apples” comparison of customer data to the compliance data during the screening process. For example, knowing the DOB format, determining first name-last name order, or maintaining consistency such as United States vs. USA in the country field facilitates better standardization between the customer and compliance data, which produces more accurate alerts. Use varying data types, such as passport numbers, for adding context to the screening process. Avoid using place names in a country, as they can be applied only to that country’s programs. False negatives are the opposite of false positives. They are results indicating that there is no match, when in fact there is.

Answer 369

The jurisdiction is a known tax haven. Nauru, Guernsey, Seychelles, Monaco, Luxembourg and Cyprus are other known tax havens.

Answer 370

Someone who voluntarily (or being coerced) swallows or inserts drug-filled packets into a body cavity in an attempt to smuggle it across secure borders.

Answer 371

Ensuring no delay in informing the Board of Directors

Answer 372

Frequent deposits from third parties into the charity's bank account. Other risk factors are disbursement of funds to entities unrelated to the purpose of the charity and frequent changes to the senior management of the charity.

Answer 373

Respondent's management, nature of license, and major business activity; The quality of supervision in the home country; Respondent's location, in particular the existence of a real physical presence.

Answer 374

Conduct a risk assessment of the bank's international electronic fund transfer activity.

Answer 375

Analyze the branch activity reports to determine whether there has been a decrease in branch activity.

Answer 376

Provide copies of the customer's loan documents; Send the deposit documents referenced in the suspicious transaction report.

Answer 377

Switzerland is not a member of European Union, so EU AML Directive is not imperative for Swiss Bank. But for the sake of compliance, Swiss Bank is required to alert local law enforcement authorities of unusual activities observed in these accounts.

Answer 378

Report the facts to the competent authorities

Answer 379

"No, only correspondent accounts of U.S. banks can be seized and forfeited by government agencies."

Answer 380

The AML Consultant should recommend the bank to revise the procedures to better assess ongoing customer activity.

Answer 381

The AML Specialist will recommend to perform enhanced due diligence.

Answer 382

The company has not implemented an anti-money laundering training program.

Answer 383

If the jurisdiction enters into a mutual legal assistance treaty, it may be considered for removal from the FATF's Non-Cooperative Countries and Territories list.

Answer 384

Close the account and return the funds to the source from which they were received.

Answer 385

Results of related audits and examinations

Answer 386

A professional association

Answer 387

The requirement to identify the beneficial owners of accounts; The requirement for customer identification for the opening of new accounts; The financial institution's obligation to report suspicious transactions.

Answer 388

FIs should take measures to verify the legal existence and ownership structure of the legal entity.

Answer 389

Ensure alert parameters are based on risk.

Answer 390

Product-specific anti-money laundering training should be provided company-wide.

Answer 391

Establish the account based on the information provided.

Answer 392

The junior account manager should file a suspicious transaction report with the Financial Intelligence Unit.

Answer 393

The Compliance Officer should file a suspicious transaction report with the competent authority.

Answer 394

Verify the casino is licensed. On top of that, the FI needs to keep in mind, casinos provide a ready made excuse for recently acquired wealth with no apparent legitimate source. Casinos are not subject to Customer Identification Program (CIP) regulations, which results in casinos not having the ability to rely upon non-documentary verification of a customer’s identity. FinCEN requires casinos use suitable non-documentary methods to verify online customers’ identification and the suitability or non-suitability of any particular method should be evaluated based on risk. The notice also notes that a casino’s anti-money laundering program requires describing when the casino will verify identity by documentary methods, non-documentary methods, or a combination of both.

Answer 395

Report the activity as suspicious to the competent authority because the lawyer is covered by these directives.

Answer 396

The anti-money laundering officer should be independent of business functions.

Answer 397

A client requests a winnings check in a third party's name; Acquaintances bet against each other in even-money games and it appears they are intentionally losing to one of the parties; A client requests the transfer of winnings to the bank account of a third party in a country without an effective anti-money laundering regime; Betting both “red and black” or “odd and even” on roulette; Purchasing chips, but engaging in minimal gambling and then cashing the chips back in.

Answer 398

Yes, the anti-money laundering officer /compliance officer should have been involved during product development to perform a risk assessment of the product and prior to the product's going live.

Answer 399

If the customer does not want to provide more information than when the first account was opened. Another risk factor could be here if the proposed offshore jurisdiction is known for its strong privacy laws limiting access to customer information by law enforcement.

Answer 400

Include a detailed presentation of this case in the Board report.

Answer 401

The AML Specialist will insist that, when analyzing individual transactions, examiners will review an appraisal or evaluation to determine whether the methods, assumptions, and value conclusions are reasonable. Examiners also will determine whether the appraisal or evaluation complies with the Agencies' appraisal regulations and is consistent with supervisory guidance as well as the institution's policies. Examiners will review the steps taken by an institution to ensure that the persons who perform the institution's appraisals and evaluations are qualified, competent, and are not subject to conflicts of interest.

Answer 402

Investigate the source and purpose of the transactions because the school teacher received several EFTs from a person engaged in unrelated, different profession/occupation (Diamond Distributor) and funds were immediately transferred to bank accounts in another jurisdiction (Hong Kong).

Answer 403

Ability to transfer value across jurisdictions

Answer 404

Accounts with almost identical/very similar names.

Answer 405

Investigate the source of funds; Identify people and companies that are clearly related; Identify a person fully, including their political history.

Answer 406

Contact the customer for further information without disclosing the suspicion.

Answer 407

Integration stage because these are common ways for the launderer to enjoy their illegal profits without necessarily drawing attention to themselves.

Answer 408

Egmont Group's 100 Cases, Financial Action Task Force Typologies and The Wolfsberg Principles

Answer 409

Beneficiaries of transfers are not on a terrorist watch list.

Answer 410

Funds for money laundering and terrorist financing are derived from illegal sources; The source and disposition of funds are similar.

Answer 411

Concentrate on trades made in the brokerage account

Answer 412

Procedures to ascertain the potential risk to the organization.

Answer 413

Persons residing in or having funds from countries with inadequate AML standards; Persons engaged in business activities known to be susceptible to money laundering; Persons determined to be Politically Exposed Persons (PEPs).

Answer 414

Ensure that all relevant documents are identified, secured and maintained; Review all relevant transactions in light of expected and normal business transactions; Interview all pertinent employees who may know something about the transaction.

Answer 415

Crowdfunding platforms are vulnerable to being exploited for illegal purposes because people can mask the true reason for their fundraising efforts. The actual information on who the investors are, the identities of the companies and the individuals — all that information is maintained by the crowdfunding platform. So it becomes inherently very difficult for banks to be able to spot illicit activity within those transactions.

Answer 416

Late-night deposit into multiple ATMs; Multiple bookings of hotels, taxis; Payments for online advertising should be checked with caution and related account transactions should be taken with a grain of salt (look critically).

Answer 417

Gold is vulnerable to ML because it is relatively compact and easy to transport; It is lucrative and holds its value regardless of the form it takes; Gold carries values to certain religions.

Answer 418

To mitigate ML risks, art and antiquity dealers, auctioneers require all art vendors to provide names and addresses; Ask that they sign and date a form that states that the item was not stolen and that they are authorized to sell it; Verify the identities and addresses of new vendors and customers; If there is reason to believe an item might be stolen, immediately contact the Art Loss Register (www. artloss.com), the world’s largest private database of stolen art; Look critically when a customer asks to pay in cash; Be aware of money laundering regulations; Appoint a senior staff member to whom employees can report suspicious activities; Being suspicious of any item whose asking price is significantly lower than its market price.

Answer 419

US Specially Designated Nationals (SDN) list is the most recognized. Other lists are UN Sanctions, EU Sanctions.

Answer 420

Junket operator is a form of casino based tourism. Junket participants largely rely on third parties, junket operators, to move the funds across borders and through multiple casinos, creating layers of obscurity around the source of funds and ownership of the money and the identities of the players. Junkets are trips offered to VIP Casino customers for travel to and play at a particular casino. Depending on the player, the hosting casino will pay some or all of the VIP players travel and accommodation costs in exchange for undertaking to play at the casino during the players stay. Junkets sell dead chips that must be used for gambling this means that all funds transferred via Foreign Holding Accounts must be gambled.

Answer 421

A customer routinely bets both sides of the same line for sporting events (i.e., betting both teams to win), and thus the amount of overall loss to the customer is minimal. This is known as Hedging.

Answer 422

Section 313 of USA PATRIOT Act requires financial institutions to take reasonable steps to ensure that foreign banks with correspondent accounts do not themselves permit access to such accounts by foreign shell banks. They must use a form that they send to foreign banks to certify at least every 3 years that they themselves are not a shell bank and do not permit shell banks access to US correspondent account through a nested relationship.

Answer 423

For opening account of a corporate entity, the FI should obtain Name of institution, Principle place of its business operations, Mailing address, Names of primary contact people or those authorized to use account, Some form of official identification number like tax ID, Original or certified copy of Certificate of Incorporation, Resolution of the Board Of Directors to open an account and identification of those who have authority to operate account, including Beneficial Owner, Nature and purpose of business and its legitimacy, Verification identity of agent who opens the account.

Answer 424

If a financial institution is found to have weak OFAC controls or is engaged in activity with an entity identified on the SDN list or sanctioned under any OFAC sanction program, federal and state examiners, OFAC may take actions including, but not limited to, issuing monetary penalties, criminal penalties, and regulatory actions (e.g., Written Agreements and Matters Requiring Attention).

Answer 425

Payment made in cash by a third party with no connection to the transaction; Payment made by wire transfers from third parties not connected to the underlying transaction; Payments made with checks, banks drafts or money orders not draw on the account of the purchaser; Structured currency deposits to individual checking accounts with multiple daily deposits to multiple accounts at different branches of the same bank on the same day; Consumer accounts that are used for a bit then become dormant; Personal checking accounts opened by foreign nationals who come to the bank together; Multiple accounts opened on the same day or held by the same foreign nationals at various banks; Increases in the frequency or amounts of currency deposits by US business account holders who export to Colombia.

Answer 426

Technology helps AML program by providing the Transaction monitoring, Watch list filtering, Automation of regulatory reporting (STRs, CTRs), Detailed audit trail, Background checks, Automation of PRFs (PEP Referral Forms) for FI's internal use, Incident reporting databases, Case management tracking systems, Record-keeping, Profiling system, Creating and maintaining Corporate "hot file".

Answer 427

Reputational damage, Fines, Loss of employment, International prosecution, Imprisonment, Compliance monitoring at the Bank's expense. The laws in the country of residence are not the only laws that could apply. If the suspicious activity has connections to other countries, employees and/or the Bank may be subject to investigations or may be charged under the laws of the other countries in addition to the laws of their country of residence. Some Anti-Bribery and Anti-Corruption laws have extraterritorial application which means that employees and/or the FI could be prosecuted anywhere in the world.

Answer 428

IBC stands for "International Business Company" - a term used to define a variety of offshore corporate structures, also called exempt companies. Its common characteristics are Dedication to business use outside the incorporating jurisdiction; Rapid formation and low cost; Minimal filing and reporting requirements.

Answer 429

The Loan Back method of money laundering

Answer 430

The funds are being wired to a numbered account; The funds are being wired to a small bank in Belize (a jurisdiction with strict secrecy laws); The level of cash being deposited into the account of a young adult; The level of transactions taking place in the account of a foreign student who is on study permit; The deposits are all cash and are being wired out of the country the same day.

Answer 431

The FI may ask the customer to provide copies of all customs documents related to each foreign transaction. Lying on customs documents is a criminal action, and hardly any money launderer would like to expose themselves to that needless risk. Therefore, customs documents can give the financial institution a clearer understanding of the transaction that took place and the product(s) involved.

Answer 432

Willful Blindness because no SAR has not been filed for apparent suspicious activities. Only CTR filing will not suffice.

Answer 433

Many small, incoming transfers of funds are received, or deposits are made using checks and money orders. Almost immediately, all or most of the transfers or deposits are wired to another city or country in a manner inconsistent with the customer's business or history; Funds transfers that occur to or from a financial secrecy haven, or to or from a high-risk geographic location without an apparent business reason or when activity is inconsistent with the customer's business or history; Payments or receipts with no apparent links to legitimate contracts, goods or services received; Large, incoming funds transfers are received on behalf of a foreign client, with little or no explicit reason; Funds transfers are sent or received from the same person to or from different accounts; Funds activity is unexplained, repetitive, or shows unusual patterns; Transaction involves countries/islands that are not easy to be found on World Map.

Answer 434

Yes, it requires the filing of a Suspicious Activity Report (SAR) with the national FIU as it would be unlikely that a bunch of GBC students going out dancing would only have $50 and $100 bills.

Answer 435

A permanent street address should be acquired. A mailing address, such as a Post Office Box, is not sufficient; The person's occupation should be acquired when inquiring about employer (the type of work a person does changes much less frequently than who pays them for it); Confirming the permanent address by a utility bill, tax assessment, bank statement, or a letter from a public official in the name of the accountholder; Confirming the validity of official documentation through certification by an authorized person, such as an embassy official; Confirming the date of birth from an official document (eg, birth certificate, driver's license, passport, etc); Contacting the customer by telephone, letter or e-mail to confirm information provided (a disconnected phone, returned letter, or incorrect e-mail address should warrant further investigation).

Answer 436

The policyholder purchased the policy in a foreign country, despite similar policies being easily available back home; The insurer and agent failed to determine what ties the policyholder had to Monaco (business, second residence, etc); The agent accepted a cash payment and hid this fact from the insurer; The insurer did not run the policyholder's name against known "hotlists" and restricted persons lists; No reason appears to have been obtained when the policy was surrendered; No one at the insurer appears to have viewed this as a potentially suspicious transaction and / or failed to notify their Money Laundering Reporting Officer (MLRO).

Answer 437

Price flexibility in the art world is just one of the many advantages for a certain subset of the criminals — money launderers. Other advantages include portability, lack of a paper trail, anonymity, and no regulations. Artwork is lightweight compared to other valuables, like gold and cash. Artwork is bought and sold with minimal paperwork, unlike real estate. Artwork purchases can be anonymous, unlike everything else. Unlike traditional money laundering methods, such as real estate, money service businesses (MSBs), and cash-intensive businesses (CIBs), artwork is not highly regulated by the international financial sector.

Answer 438

To train all pertinent employees on the legal and internal procedures that must be followed; To train employees on the dangers they and the business face; To report suspicious activity to the proper authorities if the law allows; To train employees on how, based on their job responsibilities, they may encounter specified money laundering risks; To prevent money laundering and terrorist financing.

Answer 439

Shelf Companies are ready made "paper companies" that have fulfilled all requirements for legal registration. They may be bought by anyone to bypass the lengthy registration of incorporation process. Shelf companies are formed and sold, often by accounting or law firms. They are also referred to as shell companies or blank check companies. They can be a money launderer's tool because they can reference when they were formed, but that may have been years before it was sold and taken "off the shelf."

Answer 440

Black Market Peso Exchange

Answer 441

By permitting forfeiture in all cases following conviction; Permitting courts to decide that all property obtained during a prescribed period of time by a person convicted of drug trafficking has been derived from such criminal activity; Enabling the identification, tracing and evaluation of property subject to seizure; Defining money laundering based on the model laws of the Organization of American States (OAS).

Answer 442

Increased crime and corruption; Legitimate businesses are hurt from competition with front companies; Weakened financial institutions; Economic distortion and instability; Impaired ability to make sound decisions by governments regarding economic policy; Loss of tax revenues; Increased law enforcement and health care expenditures; Increased risk to privatization efforts; Reputational risk to countries; Increased risk to stability of governments due to flight capital.

Answer 443

"We recognize that investigations can and do occur, so we should have detailed plans in place in case one ever comes our way."

Answer 444

Credibility and experience with prosecutors and other government officials; Comprehensive understanding of domestic and international legal and banking requirements and business practices; Substantial experience trying and defending complex corporate cases involving money laundering.

Answer 445

Over €200bn ($227bn) of suspicious transfers originating in ex-Soviet countries may have been rinsed through the bank’s Estonian branch. Danske Bank was accused of failing to report suspicious transactions, not training staff in anti-money-laundering procedures, and having no senior manager responsible for compliance. 3 correspondent banks linked the Estonian branch to America’s financial system: Deutsche Bank, Bank of America and JP Morgan Chase. The source of funds passing through the Non-Resident portfolio was identified as more than 58% coming from Russia, Estonia and Latvia. Danish authorities could fine Danske Bank 4 billion Danish kroner (£475m).The fine could be as high as $8.3 billion. This is a classic case of money laundering where ownership often passes through a series of shell companies before the eventual owner can be identified.

Answer 446

Limited liability partnerships are not required to publish details of their eventual owners. Thus ownership often passes through a series of shell companies before the eventual owner can be identified.

Answer 447

Law enforcement agencies

Answer 448

The institution should correct the deficiencies as soon as possible; The institution should review past transactions to determine if additional STRs should be filed.

Answer 449

Present the matter to the Board of Directors to obtain guidance as to what to do.

Answer 450

PEPs from corrupted countries; PEPs with substantial net worth from poor countries; PEPs who want to be exempt from currency transaction reports.

Answer 451

Employees can be tempted to collude with money launderers; Employees can decide to embezzle from the bank; Employees can override internal controls (Monitor the employee's activity and exception rate). Common red flags concerning employees are employees who exaggerate their academic credentials, employees who drive very fancy cars or leads a lavish lifestyle, not in line with the salary, employees who avoid taking vacations, if the employee is unusually friendly with a customer.

Answer 452

The adequacy of the bank's preventive measures; The adequacy of the bank's sharing information with employees; Whether the bank's high-risk customers are properly identified.

Answer 453

Country, Bank, Transaction

Answer 454

Description of business operations; Anticipated volume of sales; List of major customers and suppliers; and financial statements; Domicile (location of business); Customer's primary trade area and proximity of customer's residence, place of employment and place of business; Anticipated volume of currency and wires; Banking references; International transactions; Explanations of changes in account activity; Purpose of the account; Beneficial owners; Occupation / type of business; Source of funds versus source of wealth.

Answer 455

MOU is not a treaty and is usually not binding upon the governments; Reflects an understanding of the signing supervisory authorities' policies; Information communicated is sometimes for supervisory purposes only; May be valuable based on the reach of the regulatory authority.

Answer 456

Cuckoo smurfing

Answer 457

Bank Account Smurfing

Answer 458

Generally, only upon receipt of a lawfully executed order, following the country's laws and regulations.

Answer 459

Certification of documents presented; Independent contact with the customer by the bank; Subject to the "fit and proper" criteria (criminal records, financial position, civil actions against individuals to pursue personal debts, refusal of admission to, or expulsion from, professional bodies, sanctions applied by regulators of other similar industries, and previous questionable business practices); A third party introduction); Requisition of additional documents to compliment those which are required for face-to-face customers; Requiring the first payment to be carried out through an account in the customer's name with another bank subject to similar customer due diligence standards.

Answer 460

EU 5th AML Directive brings the “gatekeepers” of virtual currencies within the scope of EU anti-money laundering and terrorist financing legislation. Providers engaged in exchange services between virtual currencies and fiat currencies (“virtual currency exchange platforms”) and providers of services to hold, store and transfer virtual currencies (“custodian wallet providers”) have been made “obliged entities” for the purposes of the EU anti-money laundering and terrorist-financing framework.

Answer 461

5th EU AML Directive grants new powers for financial intelligence units, including the power to request, obtain and use information from any obliged entity based on their own analysis and intelligence, rather than just when triggered by a prior suspicious activity report.

Answer 462

Doug Ford laundered money through the placement, layering and integration phases (all the 3 stages of money laundering).

Answer 463

The officer should document the nature and results of the internal investigation and keep the documentation in an appropriate log.

Answer 464

Request the law enforcement representative to provide a court order or grand jury subpoena as long as the bank has already led an STR on the matter.

Answer 465

Develop and follow an action plan to remediate the issue and report to audit on the progress made on the issue.

Answer 466

Speak to the mortgage unit about revising the income verification process to do this earlier in the process, as suggested by the FIU.

Answer 467

Check with the account officer to see if the customer has indicated a change in his investment strategy.

Answer 468

Carry out the interview as soon as possible to ensure memories are fresh; General background questions should be asked at the start, with contentious questions left to the end; Counsel should prepare staff before the interview, and debrief them afterwards to identify the line of questioning.

Answer 469

Documents can be destroyed in line with the document destruction policy, provided no government investigation is on-going. Once notified of an investigation, documents should no longer be destroyed, as they may need to be provided as evidence. Retaining documents for a minimum of 5 or 6 years, would depend on the specific documentation and the legal requirements of the jurisdiction. It is not a blanket approach (i.e. cannot cover everything) to all documents.

Answer 470

Documenting activity and transactions; reviewing databases and reviewing licensing and registration files; Analyzing financial transactions, Reviewing STRs and conducting computer based searches; Follow the money, identify the unlawful activity and obtain international cooperation.

Answer 471

The lack of identifying information (e.g. date of birth) on World-Check (part of the Thomson Reuters Risk Management Solutions) makes false hits common. While screening PEP data on an “exact match” basis will likely be too restrictive, it is acceptable to undertake screening on a “close match” basis. This should take account of transposition errors, common variations on names and minor typos and misspellings.

Answer 472

Wire transfers, travelers cheques, bankers cheques are vulnerable to ML risk as they allow cash management and are negotiable instruments.

Answer 473

The directive only covered drug trafficking and domestic financial services.

Answer 474

The Basel paper covered capital requirements, liquidity measures, monitoring and reporting requirements. The paper also covered KYC, the use of high ethical standards in the fight against criminals using the banking system, and urged the adoption of the FATF 40 recommendations.

Answer 475

The money launderer uses offshore wealth to purchase the company that he already owns, thus repatriating the cash and maintaining his ownership of the company.

Answer 476

Foreign PEPs are always considered high risk and require the application of enhanced due diligence measures e.g. obtaining additional information on the customer; obtaining additional information on the intended nature of the business relationship, and on the reasons for intended or performed transactions; obtaining information on the source of funds or source of wealth of the customer.

Answer 477

Record keeping is a key part of the CDD process. Customer records are required to be maintained for seven years after an account is closed or last transaction takes place (whichever is later). They must also be kept in a way that makes them readily retrievable (i.e. within 30 days).

Answer 478

The use of multiple bank accounts without any good reason.

Answer 479

Self-funding by foreign terrorist fighters; Terrorists raising funds through the use of social media (Crowdfunding); New payment products and services; Exploitation of natural resources.

Answer 480

It depends on what other source is available in the bank to provide information to AML Analyst. Normally there are some back up plans. The IT may provide the Analyst a cut of data that belong to a few hours or a days earlier. But if for any reason no such information is available, AML Analyst needs to wait for the restoration of system. AML Analyst can speak with Line of Business, if they have any AML related document available. If the line of business and IT are unavailable to provide any such information, then he is doomed, he has to wait. He cannot make decision on assumption.

Answer 481

Effective Customer Due Diligence procedures help to: Verify identity and complete the Know Your Customer (KYC) process; Develop an understanding of the customer by building the KYC profile; Understand the underlying need for the product or service; Establish source of funds or source of wealth for a customer /client; Gather information to assist in assessing if the activity of the customer/client is in keeping with their risk profile.

Answer 482

Most commercial real estate purchases are made through LLCs (Limited Liability Company) formed specifically to purchase and own the individual property. These LLCs can be formed by anyone but the actual owners may not be fully-disclosed in the operating agreements. Their domestic agents forming the LLCs may be cut-outs for the real owners, just like in practices used for illegal gun sales where a willing accomplice purchases a gun in their own name, on behalf of a shadow party. Commercial property is also ideal for ML because the size of these transactions can move a significant amount of money, at one time.

Answer 483

Entities organized under US laws and their non-US branches; Individuals and entities physically located in the United States; US citizens and permanent resident aliens (“Green Card” holders) wherever located or employed.

Answer 484

This person must be classified as PEP (depending on the corporate policies of Bank of America), as he owns sufficient control over organisation due to his political exposure (being President's daughter Ivanka's spouse).

Answer 485

Storefront dispensaries can exhibit typical red flags that are associated with typical cash-based illegal businesses. Those red flags can include large cash activity with no day-to-day business expenses seen on the account, vague or misleading know your customer documents with no ability to provide supporting documents, and no corporate or private business registration papers.

Answer 486

The dark web is host to marketplaces that offer for sale of all forms of illicit goods. Drugs, guns, human trafficking and fraud-related items are available for sale on dark web marketplaces, with cryptocurrencies as the preferred method of payment.

Answer 487

Fis should visualize and compare the terrorist funding cycle (raise, move, store and spend) with the money laundering process (placement, layering and integration). In the Raise stage, FIs should assess funding sources; In Move stage, FIs should assess funding methods; In Store stage, they need to assess funding streams; In Spend stage, FIs should assess funding access.

Answer 488

Deep web that is not discoverable by means of standard search engines, including password-protected or dynamic pages and encrypted networks.

Answer 489

Approval for new correspondent banking relationships should be obtained from someone senior to or independent of the sponsor of the relationship.

Answer 490

A risk-based approach should be taken to assess the client’s AML controls. This can include obtaining responses to AML questionnaires (e.g., the Wolfsberg AML Questionnaire, which was updated in 2014 along with the guidelines), speaking with representatives of the client, reviewing AML controls (e.g., policies and procedures, a synopsis of them, or even an independent review of them). These opportunities, particularly speaking with the client’s AML staff, can help corroborate other findings and may often result in a mutually beneficial dialogue between the institutions’ AML departments.

Answer 491

Each institution should develop its own methodology for deriving the client risk levels, which can include some or all of these factors, weighted or combined in whatever manner the institution chooses. Bank-wide policies and procedures should be implemented to detect and investigate unusual or suspicious activity and report such as required by applicable law. These policies and procedures should include guidance on what is considered unusual or potentially suspicious, including examples. The institution should develop a holistic view of the client, incorporating the ongoing monitoring of clients’ activity with the due diligence (including risk rating and other appropriate factors) in assessing the risks of transactions. The institution should also incorporate the results of monitoring into the periodic review of the client’s file, particularly when the results indicate elevated risk levels. The due diligence collected and the monitoring performed should be complimentary; both should inform the other.

Answer 492

The Anti Tax Avoidance Directive sets out 3 key anti-avoidance measures, which all Member States should apply, to counter-act some of the most common types of aggressive tax planning. Controlled Foreign Company (CFC) rule (to deter profit shifting to no or low tax countries); Interest Limitation (to discourage companies from creating artificial debt arrangements designed to minimize taxes; General Anti-Abuse Rule (to counter-act aggressive tax planning when other rules do not apply).

Answer 493

Under the Fifth AML Directive, the EU is providing assistance to the industry in meeting this challenge by requiring the establishment of centralized and public registries of legal entities and their beneficial owners.

Answer 494

During its June 2019 plenary, the Financial Action Task Force labelled the following jurisdictions as having strategic anti-money laundering and counterterrorist deficiencies: The Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Panama, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen.

Answer 495

VPNs enable Internet users to scramble their IP addresses by funneling their traffic through a distinct, standalone network. TOR (The Onion Router) routs traffic through multiple servers in several, disparate geographic locations to mask the customer. Hypothetically, a citizen of a low-risk jurisdiction such as Canada or Germany may own a seemingly legitimate firm that covertly engages in prohibited trade with Iran, and, to that end, may visit the Islamic Republic or neighboring countries such as the UAE and Turkey. From there, he or she could access online banking through a VPN or TOR.

Answer 496

According to the Financial Crimes Enforcement Network, red flags related to corrupt Venezuelan senior political figures, their family members and associates include: cash deposits instead of wire transfers in the accounts of companies involved in Venezuelan government contracts originating from Nicolás Maduro's regime; Payments involving government contracts of Nicolás Maduro's regime that originate from non-official Venezuelan accounts, particularly those located in jurisdictions outside of Venezuela; and export businesses operating in South Florida that are engaged in the trade of heavy equipment, auto parts and electronics from Florida to Venezuela.

Answer 497

According to the Basel Committee, financial institutions that deal with virtual currencies should: employ a comprehensive risk analysis before acquiring exposure to cryptocurrencies, including assessing its credit, market and money laundering risks; implement a robust risk management program that is fully integrated into the financial institution's overall risk management processes; and inform supervisory authorities of exposure to cryptocurrencies and provide assurance that risk management processes are being implemented.

Answer 498

The language of FATF Recommendation 12 is consistent with a possible open ended approach (i.e., “Once a PEP, could always remain a PEP”). Different banks have different approaches to this. For some banks, the PEP status does indeed never expire, others are less rigorous. In the end, it depends on the national regulation, additional guidance of the prudent regulator, and the individual risk appetite of the institution, manifested in written policies and procedures.

Answer 499

Leaked documents those revealed a textbook example of how legal loopholes and secrecy jurisdictions enable corruption and environmental exploitation on a global scale.

Answer 500

AML is the bigger picture and KYC is one of the pillars of it but is important and can rupture the entire AML framework if not performed diligently. Other pillars of AML include but not limited to Fraud Investigation, Fraud Analysis, Audit Control, Behavioural Analysis, Reporting, Policies and Procedures.

Answer 501

FinCEN granted exceptive relief to the beneficial ownership requirement for legal entity customers who opened a new account as a result of any of the following: A rollover of a certificate of deposit; A renewal, modification, or extension of a loan that did not require underwriting review and approval; A renewal, modification, or extension of a commercial line of credit or credit card account that does not require underwriting review and approval; A renewal of a safe deposit box rental. This relief/exemption applies only to the rollover, renewal, modification or extension of any of the above types of accounts on or after the May 11, 2018 implementation deadline of the Final Rule and does not apply to the initial opening of such accounts.

Answer 502

Politically exposed persons are people who hold, or have held, important public functions. Due to their position they hold and influence, it is recognized that many politically exposed persons are in positions that potentially can be abused for the purpose of committing money laundering offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing. As a result, a candidate in an election, who does not hold any other PEP role/association, would not classify as a PEP until they are ultimately elected into a PEP classifying role.

Answer 503

LexisNexis, Dow Jones, Dunn & Bradstreet, FIS Global Qualfile, Fiserv Aperio, EastNets, to name a few.

Answer 504

Triangle fraud describes the thought process leading to fraud: opportunity, incentive, rationalization. The proceeds of fraud would be a predicate crime for money laundering.

Answer 505

The Kimberley Certificate refers to a process established in 2003 that imposes extensive requirements on participants, enabling them to certify shipments of rough diamonds as conflict-free and prevent conflict diamonds from entering legitimate trade. Thus, the certificate is only mandatory for those clients directly dealing with rough diamonds. The certification is focused on whether or not the country that the raw diamond is exported from is free from conflict involving rebel groups.

Answer 506

A PHC is a corporation which holds assets, such as funds or investments, for individuals or families. Personal holding companies are those holding passive funds, such as privately held with no or very minimal business operations. These companies are separate legal entities from its owners, requiring financial statements and separate filing of corporate tax returns. Quite often, individual family members (or a family trust) will hold the various common and preferred shares of the private corporation, which owns the underlying investment. Firstly, it is important to understand whether a PHC is a “passive non-financial entity” as described above or not, as they may not fall under the Auto-High Risk (AHR) category and subsequently not subject to Specialized EDD. Secondly certain legal entities may be structured to obscure ownership or for possible tax avoidance. Many PICs, PHCs, BICs, and IBCs, are Shell Companies whose role is limited to holding assets; this may qualify them as “passive non-financial foreign entities,” which is relevant for FATCA. If the purpose of the client is anything other than that described above (hold and distribute funds), an RFI (Request For Information) to clarify the true nature of the business is encouraged.

Answer 507

Yes, It is important to determine whether the primary cardholder would be considered a close associate or family member of the PEP since one way for a PEP to benefit from a bribe is to allow her/ him to spend via card, and have their bill paid-off by a third party (in this case the primary accountholder) in exchange for a benefit to that accountholder. If it is determined that the accountholder is a close associate of the Primary PEP it would make sense to determine the source of funds that is being used to pay the credit card bill, and perform EDD on all parties.

Answer 508

The Board of Directors of a State Owned Enterprise (SOE) does not qualify outright as a PEP, however the Chair of The Board of Directors would qualify in certain situations. The role of President is considered a PEP. It’s also important to consider whether there are any co-chairs, if a co-chair is also the president then all co-chairs may be considered as Associated PEPs. A co-chair position does not necessarily qualify on its own as a PEP, however could be considered a PEP if that controlling power is present, or could be considered as an Associated PEP depending on the relation with other co-chairs.

Answer 509

It involves storing bitcoins offline—that is, entirely separate from any Internet access. Keeping bitcoins offline substantially reduces the threat from hackers. Many bitcoin owners who use cold storage keep some tokens in a standard wallet for regular spending and put the rest in a cold storage device. This reduces the effort of digging out coins from the cold storage every now and then for everyday use. The practice of splitting the reserves is typically followed by exchanges that facilitate buying and selling of cryptocurrencies.

Answer 510

BlueBell Contractors looks like a shelf company in a secrecy haven.

Answer 511

Terrorists would use cash couriers to finance their operations, the other options might create a trail.

Answer 512

B) refer it to Compliance Officer All STR must be reported to Compliance Officer, and the Compliance Officer has to do the second line checks and investigation. Any person in the organization can file an suspicious transaction/activity report, The AML software access is limited to Compliance/AML staff, so it will not be possible for first line of defense staff to input. Based on the result of the Compliance Officer he/she will take final call to report the case to FIU/FID. Discussing the case with anyone else will be consider as a tipping off. In general FIU/FID will not give their opinion without investigation and for the investigation Compliance officer has to report the case. Most of the FIUs/FIDs will not response back what happened with the case after the reporting except if they need more details. normally FIU/FID investigation can go up to 3 years. "An AML/CFT compliance program......how the institution will....clearly explain the importance of reporting suspicious activity, including describing how and to whom concerns should be raised, the role of the compliance officer and what the "tipping off" restriction means in practice." (Chapter 3, AML Policies, Procedures and Controls, Page. 153). So basically it should be the organization that will decide (in their policy) to whom employees should raise their suspicions.

Answer 513

The Venezuela sanctions program is one of the most complicated - and unique - regimes administered by OFAC. Beginning in 2005, the United States imposed economic sanctions in response to the malignant activities of the Venezuelan government and certain individuals. In more recent years, the Obama administration, pursuant to EO 13808, implemented sectoral-like sanctions affecting debt issued by the Government of Venezuela. These actions have been expanded upon by the Trump administration, including EO 13884, which blocked the property of the Government of Venezuela.

Answer 514

KYCC simply is a process that a FIs might establish to perform due diligence on the customers of their e.g. correspondent banking clients, (2) KYCountry simply is country due diligence, and (3) KYE is a process to determine the reliability of employees of an organization (e.g., by checking the police records and credit history). There might be local differences on how these processes are designed and applied in practice.

Answer 515

Bills of exchange are related to trade based ML. Fake transactions or invoices can be generated to transfer funds. The risk lies in fraud or the manipulations of the transaction itself (e.g. under-invoicing and over-invoicing goods, ghost shipping etc.) in trade-based money laundering. The bill of exchange is the written agreement between two or more parties for a particular transaction but I believe that the major ML risk lies in the manipulations or fraud conducted within the transaction itself either by shell companies, front companies or legitimate companies attempting to mix legitimate and illegitimate funds.

Answer 516

D) Proactively talk to the project manager and request him to include you in the product development for compliance feedback. It's the Compliance officer's responsibility to have the financial institution adhere to internal and external policies and procedures and to act proactively.

Answer 517

A) because as a Compliance officer I did my job to guide team members, however, organization's (directors') responsibility is to clearly state/implement Compliance culture in the organization. Looking at the question, it states that the regulators discovered its breach of common CDD policy and imposed civil money penalty which would definitely be on the organization for lack of proper internal compliance policy. It's now left to the management of the organization to reprimand the officers involved for not adhering to the company's policy By the same token, if we think ourselves as AMLRO, 1st time mistake was rectified and coaching was completed however if employee is still doing the same mistake then it boils down to the training deficiencies. As it says that CDD policy was not robust which is the responsibility of the Organization. .

Answer 518

The transaction types with the greatest KYCC risk are USD Clearing involving third party payments and documentary trade finance transactions. In both cases the institution may have no direct connection to the third parties and therefore no firsthand knowledge of the customer’s customer. Bad actors who utilize these transaction mechanisms very often embed shell companies in the process to hide the unsavory part of the transaction. It may also be that the originating FI doesn’t know the customer’s customer either. So, for third party payments and trade finance, KYCC is a practical necessity. From the institution’s customer side, for higher risk customers, the institution may want to determine some background on the customer’s customers during the onboarding process or at the appearance of negative news as part of enhanced due diligence.

Answer 519

Assuming that the origination of the question is front office personnel – as the first line of defense – and what’s the first “right” step for that group, the response would be a question, “What does the Institution’s Policies and Procedures (P and P) say?” If the P&P is unclear as to what to do, the Professor suggests filing – with the correct form – an internal suspicious transaction report to the Compliance Officer while requesting guidance from Compliance as to what, if any, additional steps the front office needs to take. If the P&P is clear, that’s what to do; if not, Compliance should develop the policy and procedure in order to (1) make clear to all staff the proper steps in reporting unusual/suspicious activities and (2) avoid regulatory examination comments.

Answer 520

Option 4 is correct , compliance manager can sensitize Senior Management about the inherent risk new product carries with reference to the AML/TF. Now it's up to the Management to take a call to discontinue the product or not. Option 3 could be correct answer too because if the product is being used for AML/TF then we need to stop it first to ensure the product is not being used for ML then we can talk to the board and request suggestions, increase our DD with strict measurements which is kind of similar to doing business with High Risk Customers wherein compliance says to invoke higher measurement techniques. Similar example could be of Real Estate which is being exploited for ML hence FATF recommends to put more controls/measures towards that. As the product is profitable hence Board may not either stop the product or let the deficiencies to remain hence will either ask for tighter controls or go back to the development team to change the model/structure of the product which in itself will be time consuming activity. Stopping a product is a commercial call which Management should take post inputs from compliance officer, alone compliance officer cannot have a authority to stop a product. CAMS handbook page 212 last para states that " in some cases if the activity presents a significant or potentially ongoing risk to the institution,the leaders of the institution should be made aware so that high level decisions can be made regarding potential changes to system, staffing, products, services or particular relationship maintained by the institution."

Answer 521

It's very difficult to ascertain since student might provide you his or her parents financial bank statement and relationship proof to validate funds received from close relatives however one can track spending pattern on student account if some red flag appears then one can have a detailed clarification from the concern staff who has sourced a relationship or the person managing it on day to day basis. One should also get into more transactional details if inflows or credits exceeds with a large extent as compared to the applicable University free + standard living expenses for a student. One can also do a detail profile/CDD of an account holder with regards to his maintenance of multiple bank account, if any. If customer does not co-operate than its a suitable case for STR.

Answer 522

There are 3 kinds of risk here - regulatory risk, reputational risk and financial (penalty) risk. There is not a regulatory requirement in the US to perform that function, so if we want to make sure if there is a regulatory requirement, the answer is no. But that is where the potential risk exposure ends. The other two kinds of risk are still relevant and should be assessed and mitigated, or assumed, by management.

Answer 523

C. Seize $1 million from Bank A's correspondent account in the U.S.

Answer 524

A (privately owned ATM) because privately owned ATM is the spring of reduce in cash deposit as well as increase in credit card slip. Unless charge back on credit card slip has not increased reporting fraudulent activities, i believe that is not a trigger option.

Answer 525

Option 3 The funds are being sent to the same recipient each week. Answer can be Option 1 also.

Answer 526

B,C,D are correct answers ,option A is one of the distribution channel through which Insurance companies sell there products similar to FI.

Answer 527

A. Withdrawing cash. We may assume, it's a private banking client whose funds are being managed by a lawyer who may be a nominee director with Ultimate Beneficiary his client. If that is the case, receipt of multiple remittance will only raise a red flag if they are coming from different remitters which has no link with UBO. Moreover Transferring funds to his law firm's account online is leaving a audit trail which a person would avoid in case it's not legitimate transaction. However, if that's not the case then cash withdrawal can be a trigger.

Answer 528

B. Front Company

Answer 529

C. The respondent bank has recently exceeded acceptable limits in the primary banks' recently developed risk model. Opening a branch in an OFAC sanctions list doesn't mean the corresponding bank in US would honor a transaction from the branch. Also, the question does not speculate the actual sanction imposed the country. Thus opening a branch should not result in total closing of business between the two banks.

Answer 530

C. In this 🚩 is signatories are defendant’s in fraud lawsuit that shows screening/CDD not conducted and business activities don’t match with actual transaction. So, prepare a suspicious activity or transaction report (SAR/STR) and file it with the FIU in the bank's jurisdiction.

Answer 531

It doesn’t say which rule triggered the alert (ie structuring pattern vs velocity pattern). AML transaction monitoring systems have various rules ranging in complexity with various thresholds and suppression/display logic. Plus just because they attempt to avoid structuring does not mean they are successful at it. Therefore I would say C. They might be using combination of counter and ATM so the deposits can be smaller to avoid triggering thresholds.

Answer 532

C because there were inconsistencies in his transaction. He transferred money to an off shore secrecy haven to probably hide the transaction, avoid tax and avoid reporting thresholds. Offshore secrecy haven could be classified as high risk regions.

Answer 533

The correct answer is B...it's the responsibility of all employees to identify suspicious activity...even if we disseminate red flags to all departments within a bank, if the employees don't identify and report the activity (under the impression that it's not their responsibility and don't want to get muddled up in it) then it won't be of any use to the institution.

Answer 534

USA Patriot Act could be the right answer. FATF has peer pressure or name shaming methods and UN has some difficulties even though as question demanding most difficulty “A” is the answer. I guess Basel does not issuing any kind of similar pressures to any territory.

Answer 535

BCD!! point A cannot be found from Balance sheet or any financial statements!! banks don't also cross check statements of another bank of last 6 months to check from which clients they receive money and where are those clients located. We need to know the turnover of the firm to anticipate the discrepancy of the income earned and actual earnings. OR My methodology to remember is (3P's) People (Customer), Place (Jurisdiction), Product (Offered). So the correct options are A, B & C. There was some confusion with regards to options A and D. When conducting risk assessments, the first thing an institution (in this case the bank) should look at is what type of customers they will be dealing with and their location. The reason being, different customer types present different risk levels and so does their location i.e a person in Panama posses a higher risk to the institution than a person in let's say Finland Similarly, PEPs are riskier as compared to regular customers. So basically, the risk faced by an institution greatly depends on the type of customers they will be serving as well as their location. Once an institution has conducted the full risk assessment, they can proceed with drafting the AML Policies and procedures. Actually, clients should be our number one priority when conducting risk assessments because that will help the institution draft AML policies based on the risks they posses. You can think of it in this way, would an insurance company face the same risks as an exchange house? Even if they earn the same revenue, the customer types each business is serving is different hence, the risk and AML policies are different.

Answer 536

As per recommendations of FDIC, pre employment background screening should be done before hiring. Page 180, chapter 3, 6th edition

Answer 537

Earning 50 percent of profit at a short span time is unusual which is followed by a immediate cash withdrawal. Withdrawal request will be approved based on the plausible explanation of the below 1.an analysis of the trading pattern, does the trading strategy used is reasonable enough to make a profit of 50% of investment amount and followed by an immediate withdrawal request 2.why the withdrawal request has been made via an e wallet, does this request is within applicable policy on the institution 3.does the institution had made enough CDD on e wallet of the client 4.geographical reach of the e wallet Firstly it’s not mentioned whether he has made this profit in short span or not. So initially checks should be on date of registration of $ 2000 and date on which profit was made. Secondly ensure withdrawal request is under time frame. Then finally it’s better to make STR report to ensure it’s good profits and made in good faith.

Answer 538

D. Hold the transaction and investigate the company before releasing the funds.

Answer 539

A. The charity frequently withdraws cash from the bank

Answer 540

C. Review parameter settings based on the latest risk assessment

Answer 541

D. Whether the institution can continue to meet its regulatory obligations with the accounts open

Answer 542

D. Using illicit funds that had previously been deposited to purchase a luxury vehicle

Answer 543

B. Transactions are processed by a US person

Answer 544

B. The customer has multiple bank accounts at several locations

Answer 545

B. Close some or all correspondent or payable-through accounts

Answer 546

C. The compliance officer receives the query regarding the movement of funds D. The customer's stated investment goal is not reflective of account activity

Answer 547

C. A high level of account activity with very low levels of securities transactions. We can remove A because it says "on a regular basis". And the question asks for the highest risk of ML.

Answer 548

C. Perform further investigation, if appropriate report the activity to the authorities and consider terminating the relationship

Answer 549

A. Identifying the unlawful activity and any specified unlawful activity. B. Tracing the source and ownership of illegal money through all appropriate accounts. C. Determining whether to freeze or seize the accounts through which the illegal money is flowing.

Answer 550

B. A customer in country A makes frequent wire transfers to a single customer in country B that are slightly under the legal reporting threshold.

Answer 551

A. The transactions are to, or go through, a blocked entity B. Those that are by, or on behalf of, a blocked individual or entity D. Those that are in connection with a transaction in which a blocked individual or entity has an interest

Answer 552

6 (All). if you are US person or entity, regardless of wherever you are located at you are subject to US economic sanctions. Matter of fact, you can be living illegally in USA, or on a VISA, as long as you are on US soil, regardless of your status, you are subject to economic sanctions.

Answer 553

The key update is the removal of the UAE from the list of jurisdictions under increased monitoring (FATF Grey List).

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