Aml Flashcards
1
Q
What is money laundering?
A
The taking of criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal acts.
2
Q
What are the three stages in the money laundering cycle?
A
- Placement
- Layering
- Integration
3
Q
Give an example of the first stage of money laundering.
A
Commingling illegitimate funds with legitimate ones.
4
Q
Give an example of the second stage of money laundering.
A
Making foreign exchange transactions with illegal funds.
5
Q
Give an example of the third stage of money laundering.
A
Purchasing luxury assets like property, artwork, or high-end automobiles.
6
Q
What does the Yates memo say?
A
Criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing.
7
Q
What are some indicators of money laundering using electronic transfers of funds?
A
- Electronically moving funds from one country to another
- Moving funds from one financial institution to another
- Converting cash into monetary instruments
8
Q
What is remote deposit capture and what risk is associated with it?
A
A product allowing customers to scan a check for deposit; risk is enabling money laundering without bank visit.
9
Q
What are some money laundering risks related to payable through accounts (PTAs)?
A
- PTAs with foreign institutions licensed in offshore centers
- PTAs where the respondent bank fails to conduct adequate customer due diligence
- PTAs with sub-account holders having currency deposit and withdrawal privileges
10
Q
What is a money laundering risk concerning concentration accounts?
A
Customer-identifying information may not be included, making the audit trail difficult to follow.
11
Q
What is a PEP and what is the primary risk in dealing with a PEP?
A
A politically exposed person; primary risk is that the source of funds may be from corruption.
12
Q
What is structuring?
A
Taking a large cash deposit and breaking it into smaller amounts to avoid currency transaction reports.
13
Q
Which money laundering stage(s) are credit cards most likely to be used and what is an example?
A
Layering or integration stages; example: overpaying a credit card balance and requesting a refund.
14
Q
What are some risks posed by Third-Party Payment Processors (TPPPs)?
A
- Multiple financial institution relationships
- Engaging in ACH transactions from overseas
- Higher than average return rates from unauthorized transactions
15
Q
How can Money Services Businesses be used for money laundering?
A
Cashing checks without adequate proof of identity; failing to file Currency Transaction Reports.
16
Q
What aspects associated with securities broker-dealers increase the risk of money laundering?
A
- International nature
- Speed of transactions
- Ease of converting holdings into cash
- Volume of wires used
- Weak AML programs
17
Q
What are some red flags associated with casinos and gambling?
A
- Paying off gambling debts in cash under reporting requirements
- Purchasing chips and cashing them back with minimal gambling
- Using gambling houses for banking-like services
18
Q
What were two key findings by FATF in its report on money laundering risks associated with gold?
A
- Gold is compact and easy to transport
- The gold market is lucrative and holds its value
19
Q
List ways a travel agency could be used to launder money.
A
- Purchasing expensive airline tickets and requesting refunds
- Paying for tours with multiple wires just under reporting thresholds
- Creating false bookings to justify payments
20
Q
What is the primary concern regarding gatekeepers in money laundering?
A
They can enhance secrecy and conceal the beneficial owner of an account or transaction.
21
Q
Name various ways a gatekeeper could assist in a money laundering scheme.
A
- Creating corporate vehicles
- Buying or selling property as a cover
- Performing financial transactions for illegal funds
22
Q
List reasons why real estate can be an attractive method of money laundering.
A
- Can be purchased with cash
- Disguised beneficial ownership
- Stable investment
- Value increased through renovations
23
Q
What are two common techniques involved with trade-based money laundering?
A
- Over invoicing
- Under invoicing
24
Q
How does the black market peso exchange (BMPE) work in laundering money?
A
A drug trafficker sells drugs for US dollars, gives proceeds to a peso broker who finds businesses in Mexico to buy goods in the US.
25
What are some risks related to pre-paid bank cards for money laundering?
* Anonymous card holders
* High value limits
* Global access to cash
* Lax offshore jurisdictions
26
What is one primary concern with virtual currencies?
Beneficial ownership information may be difficult to obtain.
27
What are some emerging risks for Terrorist Financing?
* Self-funding by foreign terrorist fighters
* Fundraising through social media
* New payment products and services
28
What is the concept of willful blindness?
Deliberate avoidance of knowledge of facts or purposeful indifference.
29
What are the two main reasons correspondent banking is vulnerable to money laundering?
* Indirect relationships without verified identities
* Large volumes of transactions making it difficult to identify suspect transactions
30
What is a concentration account?
Internal accounts for processing multiple customer transactions, also known as omnibus or settlement accounts.
31
Describe microstructuring.
Breaking large cash deposits into smaller amounts to avoid triggering reporting requirements.
32
How can the early redemption method on insurance policies be used to launder money?
Buying a policy with illicit money, then canceling and redeeming it for a clean check.
33
How can art and antiques dealers mitigate their money laundering risks?
* Require vendor identities
* Verify new vendors
* Report suspicious activities
34
Describe several ways commodity futures and options accounts may be susceptible to money laundering.
* Withdrawals to unrelated accounts
* Frequent additions/withdrawals
* Anonymous custodial arrangements
35
What services do trust and company service providers offer?
* Acting as formation agents
* Providing registered office addresses
* Acting as trustees or nominee shareholders
36
What are the four related reasons to establish or control a shell company for money laundering purposes?
* Convert cash proceeds of crime
* Create perception of legitimate funds
* Facilitate bogus business transactions
* Conceal criminal ownership
37
What is the significance of a trust account in money laundering?
Trust accounts can obscure the beneficial ownership of assets, whether offshore or onshore.
38
Why are bearer bonds and bearer stock certificates prime vehicles for money laundering?
They allow for anonymous ownership and transfer without the need for registration.
39
What is the most basic difference between terrorist financing and money laundering?
Terrorist financing funds activities that may not be illegal, whereas money laundering disguises illegal proceeds.
40
What general characteristics of terrorist financing can a financial institution look at?
* Unusual transaction patterns
* Use of cash or informal value transfer systems
41
What is the significance of a trust account in the context of money laundering?
It can convert illicit cash into less suspicious assets, hide criminal ownership, and link various money laundering vehicles and techniques.
## Footnote
Trust accounts can be offshore or onshore and play a crucial role in money laundering schemes.
42
Why are bearer bonds and bearer stock certificates prime vehicles for money laundering?
They belong to the 'bearer,' allowing ownership to be disguised easily upon physical transfer without a registry of owners.
## Footnote
This anonymity provides significant opportunities to obscure legitimate ownership.
43
What is the most basic difference between terrorist financing and money laundering?
Terrorist financing uses funds for illegal political purposes without necessarily being derived from illicit proceeds, whereas money laundering involves proceeds from illegal activities.
## Footnote
The aim of money laundering is to enable the funds to be used legally.
44
What general characteristics of terrorist financing should financial institutions monitor?
* Use of an account as a front for suspected terrorists
* Name appears on a suspected terrorists list
* Frequent large cash deposits in non-profit organizations
* High volume of transactions
* Lack of clear relationship between banking activity and business nature
## Footnote
These characteristics help avoid becoming conduits for terrorist financing.
45
Why are hawalas attractive to terrorist financiers?
They are not subject to formal government oversight and do not keep detailed records in a standard form.
## Footnote
Some hawaladars may keep ledgers, but they often use idiosyncratic shorthand and maintain records only briefly.
46
What characteristics of charities make them vulnerable to misuse for terrorist financing?
* Enjoying public trust
* Access to considerable sources of funds
* Cash-intensive operations
* Global presence in high-risk areas
* Little or no regulation
## Footnote
These factors can facilitate the exploitation of charities for funding terrorism.
47
Describe the three phases of money laundering.
* Placement: disposing of cash from criminal activity
* Layering: separating illicit proceeds from their source
* Integration: reintroducing funds into the economy as legitimate
## Footnote
These phases help criminals obscure the origins of illicit funds.
48
What are the four types of risk associated with money laundering faced by a financial institution?
* Reputational risk
* Operational risk
* Legal risk
* Concentration risk
## Footnote
Each type of risk can lead to significant financial and operational consequences.
49
Identify and describe the three sections of the USA Patriot Act concerning due diligence for foreign correspondent banking.
* Section 312: Risk-based due diligence for foreign financial institutions
* Section 313: Prohibition of U.S. institutions from maintaining accounts for foreign shell banks
* Section 319(b): Record-keeping of foreign bank owners for correspondent accounts
## Footnote
These sections aim to mitigate money laundering risks in correspondent banking relationships.
50
What factors contribute to the vulnerabilities of private banking regarding money laundering?
* Perceived high profitability
* Intense competition
* Powerful clientele
* High confidentiality levels
* Close relationships between managers and clients
* Commission-based compensation
* Culture of secrecy
## Footnote
These factors create an environment conducive to money laundering activities.
51
What is one of the most important aspects of due diligence for a bank when establishing a relationship with a money remitter?
Ensuring the money remitter is properly licensed.
## Footnote
Licensing is crucial to ensure compliance with regulations and mitigate risks.
52
How can the free-look period be used to launder money?
It allows investors to back out of a policy after signing, enabling money launderers to obtain an insurance check representing cleaned funds.
## Footnote
This process can be exploited, although more companies are implementing AML programs to detect such activities.
53
How does having a lawyer as a trustee create vulnerabilities to money laundering?
Lawyers can hold assets in trust for clients, allowing illicit funds to be placed in a law firm's general trust account.
## Footnote
This arrangement can obscure the true ownership of funds and facilitate money laundering.
54
Identify three ways money laundering can occur through vehicle sellers.
* Structuring cash deposits below reporting thresholds
* Trading in vehicles to create complex transaction layers
* Accepting third-party payments from high-risk jurisdictions
## Footnote
Vehicle sales can provide a means to integrate illicit funds into the legitimate economy.
55
What are the economic effects of money laundering?
* Loss of control over economic policy
* Economic distortion and instability
* Loss of tax revenue
* Risks to privatization efforts
* Reputation risk for the country
* Social costs
## Footnote
These effects can undermine both national and global economies.
56
What are the three important tasks that FATF focuses on?
* Spreading the anti-money laundering message
* Monitoring implementation of FATF Recommendations
* Reviewing money laundering trends and countermeasures
## Footnote
These tasks are crucial for international cooperation and effectiveness in combating money laundering.
57
According to FATF's 40 Recommendations, what are the five elements of countermeasures against money laundering and terrorist financing?
* AML/CFT policies and procedures
* Money laundering and confiscation
* Terrorist financing and financing of proliferation
* Preventative measures for financial and non-financial institutions
* Transparency and beneficial ownership of legal persons
## Footnote
These elements form the foundation of effective AML/CFT strategies.
58
Describe FATF’s Recommendation 15 (2012) on new technologies.
Countries and financial institutions should assess risks associated with new products, practices, and technologies before launch and implement measures to mitigate identified risks.
## Footnote
This recommendation emphasizes the importance of adapting AML measures to evolving financial landscapes.
59
What are the six principles set forth in the Basel Committee’s Statement of Principles on money laundering prevention?
* Customer identification
* Compliance with laws
* Conformity with ethical standards
* Cooperation with law enforcement
* Staff training
* Record keeping and audits
## Footnote
These principles guide banks in preventing their systems from being exploited for money laundering.
60
Identify the seven specific customer identification issues as identified in the Basel Committee’s paper on Customer Due Diligence for Banks.
* Trust accounts
* Corporate vehicles with nominee shareholders
* Introduced businesses
* Client accounts by professional intermediaries
* Politically exposed persons
* Non-face-to-face customers
* Correspondent banking
## Footnote
These issues are critical for effective customer identification and risk management.
61
What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee’s paper?
* Customer identification
* Risk management
* Customer acceptance
* Monitoring
## Footnote
These elements are essential for a robust KYC framework.
62
Describe the global approach to KYC identified in the Basel Committee’s paper.
* Risk management
* Customer acceptance and identification policies
* Ongoing monitoring of higher-risk accounts
## Footnote
A global approach ensures consistency and thoroughness in KYC practices across institutions.
63
How does the scope of the European Union’s Third Money Laundering Directive differ from the Second Directive?
It includes trust and company service providers and dealers trading in cash over 15,000 Euros, expanding the definition of financial institutions.
## Footnote
This increase in scope reflects a broader understanding of money laundering risks.
64
How is a private banking account defined under Section 312 of the USA Patriot Act?
An account with a minimum aggregate deposit of $1 million for non-U.S. persons, managed by a bank employee as a liaison.
## Footnote
This definition highlights the specific regulatory focus on high-value accounts.
65
What was the primary way in which the European Union’s Second Directive expanded the scope of the First Directive?
It extended the definition of 'criminal activity' beyond drug-related crimes to include all serious crimes like corruption and fraud against the financial interests of the EU.
## Footnote
This expansion allows for a more comprehensive approach to combating money laundering.
66
According to Section 312 of the USA Patriot Act, what three measures must the due diligence program for foreign correspondent accounts address?
* Determining if enhanced due diligence is necessary
* Assessing money laundering risk
* Applying risk-based procedures and controls
## Footnote
These measures are essential for effective risk management in correspondent banking relationships.
67
What are the designated thresholds for transactions under FATF Recommendations 10, 22, and 23?
* €15,000 for occasional customers [Recommendation 10]
* €3,000 for casinos [Recommendation 22]
* €15,000 for dealers in precious metals [Recommendations 22-23]
## Footnote
These thresholds trigger enhanced scrutiny under AML regulations.
68
What do FATF Recommendations 20-21 (2012) state about suspicious transaction reporting?
Financial institutions must report suspected criminal activity and are protected from liability for such reports.
## Footnote
This protection encourages reporting without fear of repercussions.
69
What situations in private banking require further due diligence according to the Wolfsberg Anti-Money Laundering Principles?
* Public officials and their associates
* High-risk countries
* High-risk activities related to money laundering
## Footnote
These situations necessitate a more thorough examination to mitigate risks.
70
Identify the seven topics of international standards incorporated into the FATF 40 Recommendations.
* AML/CFT policies
* Money laundering and confiscation
* Terrorist financing
* Preventative measures
* Transparency of legal persons
* Powers of competent authorities
* International cooperation
## Footnote
These topics form the backbone of global AML/CFT efforts.
71
What is FATF’s Recommendation 1 (2012) on the risk-based approach?
Countries should identify, assess, and understand the risks of money laundering and terrorist financing, and take appropriate measures to mitigate those risks.
## Footnote
This recommendation emphasizes a proactive stance in combating these risks.
72
What made the jurisdictions identified by FATF as high risk in 2009 high risk?
They were identified by credible sources as having inadequate anti-money laundering standards or representing high-risk for crime and corruption.
## Footnote
This identification helps focus international efforts on the most vulnerable areas.
73
What are the criteria for becoming a FATF Member?
Criteria include a commitment to implement the FATF Recommendations and an ability to demonstrate effective measures against money laundering and terrorist financing.
## Footnote
Membership signifies a country's dedication to combating financial crime.
74
Does the Basel Committee prohibit the use of numbered accounts?
No, the Basel Committee does not prohibit the use of numbered accounts, but they are subject to strict customer due diligence requirements.
## Footnote
Numbered accounts can pose risks if not managed properly.
75
What must EU member countries do with the EU Directives?
Implement the directives into national law and ensure compliance with their provisions.
## Footnote
This implementation is crucial for harmonizing AML efforts across the EU.
76
What was considered a predicate offense for money laundering?
Any serious crime, including drug trafficking, corruption, and fraud, can be considered a predicate offense for money laundering.
## Footnote
This broad definition allows for comprehensive enforcement of AML laws.
77
What made the named jurisdictions high risk according to FATF?
The named countries had strategic deficiencies in their AML/CFT regimes.
## Footnote
AML/CFT refers to Anti-Money Laundering and Counter-Financing of Terrorism.
78
What are the criteria for becoming a FATF Member?
The jurisdiction should be strategically important, enhance FATF’s geographic balance, provide a written commitment at the political level, and launch the mutual evaluation process within three years of being invited. Membership is granted if the mutual evaluation is satisfactory.
79
Does the Basel Committee prohibit the use of numbered accounts?
No, numbered accounts should not be prohibited but be subjected to exactly the same KYC procedures as other customer accounts.
80
What must EU member countries do with the EU Directives?
EU members must transpose the Directives into law.
81
What was considered a predicate offense for money laundering under the First EU Money Laundering Directive?
The First Directive confined predicate offenses for money laundering to drug trafficking as defined in the 1988 Vienna Convention.
82
What is the revised threshold for reporting suspicious transactions under the Fourth EU Money Laundering Directive?
The threshold decreased from EUR 15,000 to EUR 10,000.
83
What are three high-level principles that apply to both FATF and FATF-Style Regional Bodies?
* Role: FSRBs identify and address AML/CFT technical assistance needs.
* Autonomy: They are free-standing organizations with common goals.
* Reciprocity: They recognize each other's work and mechanisms.
84
What are the nine FATF-Style Regional Bodies?
* Caribbean Financial Action Task Force (CFATF)
* Asia/Pacific Group on Money Laundering (APG)
* MONEYVAL
* Eurasian Group (EAG)
* ESAAMLG
* GAFILAT
* GIABA
* MENAFATF
* GABAC
85
Which FATF-Style Regional Body issued its own set of 19 recommendations specific to the region?
The Caribbean Financial Action Task Force (CFATF) issued its own set of 19 recommendations.
86
What international organization developed the first model legislation specifically designed to combat money laundering?
The Organization of American States (OAS) via CICAD.
87
What is OFAC?
OFAC is the Office of Foreign Assets Control, a division of the U.S. Department of Treasury that administers and enforces economic and trade sanctions.
88
What does the Wolfsberg Group indicate should be done for approval and ongoing review of higher risk correspondent bank relationships?
Approval and periodic review shall be subject to a higher level of approvals by business and Compliance, with annual minimum reviews.
89
Why is it important to continue to update and revisit risk assessments?
Risk is dynamic and needs to be continuously managed due to changes in the political and economic environment.
90
What does FATF recommend considering when assessing risk?
* Customer risk factors
* Country or geographic risks
* Product, service, transaction or delivery channel risk factors
91
What are some factors an institution should consider when assessing the dynamic risk of its customers?
* Unusual activity
* Receipt of law enforcement inquiries
* Transactions violating economic sanctions
* Significant volumes of unexpected activity
92
What are some sources of identifying countries that pose heightened geographic risk?
* US State Department's International Narcotics Control Strategy Report
* Transparency International's Corruption Perceptions Index
* FATF's Mutual Evaluation Reports
93
What are some examples of internal controls outside of policies and procedures?
* Management reports
* Built-in safeguards
* Approval requirements for transactions exceeding prescribed amounts
94
What factors should be considered when determining the sophistication of a compliance function within an institution?
The institution’s nature, size, complexity, regulatory environment, and specific risk associated with products, services, and clientele.
95
Why is it critical that the Compliance Officer have good communications skills?
To effectively articulate matters of importance to senior management and escalate significant changes that may present risk.
96
What controls should a Compliance Officer consider over an AML duty that has been delegated?
Establishing risk-based quality assurance reviews and monitoring activities to ensure compliance functions are performed appropriately.
97
What are some target audiences for AML/CFT training?
* Customer-facing staff
* Operations personnel
* AML/CFT compliance staff
* Senior management and board of directors
* Independent testing staff
98
Why is it important to have a test at the end of a training session?
To evaluate how well the training is understood with a mandatory passing score.
99
When should an institution conduct training?
Training should be ongoing and conducted regularly, including immediate sessions after audits or significant regulatory changes.
100
According to FATF, when should an institution conduct CDD?
* Establishing business relationships
* Carrying out occasional transactions
* Suspicion of money laundering or terrorist financing
* Doubts about previously obtained customer identification data
101
According to FATF, when should an institution conduct enhanced due diligence on a customer?
When there are circumstances where the risk of money laundering or terrorist financing is higher.
102
What are some examples of enhanced due diligence for higher risk customers?
* Source of funds and wealth
* Identifying information on individuals with control over the account
* Occupation or type of business
* Financial statements
* Banking references
103
What is the purpose of customer due diligence (CDD)?
To assess the risk of money laundering or terrorist financing associated with a customer.
## Footnote
CDD involves gathering and verifying customer information to establish a relationship and monitor transactions.
104
What should be established and verified before a bank carries out transactions?
The identity of the customer.
## Footnote
This is in accordance with FATF Recommendation 10.
105
What are the three primary categories of economic sanctions?
* Targeted Sanctions
* Sectoral Sanctions
* Comprehensive Sanctions
106
What is the Office of Foreign Assets Control’s (OFAC) list of sanctions persons known as?
The Specially Designated Nationals and Blocked Persons (SDN) list.
107
When should institutions conduct economic sanctions screening?
Before a financial institution starts doing business with a new customer or engaging in certain transactions.
108
What are some limitations on screening customers against lists of Politically Exposed Persons (PEPs)?
* No unique identifier like date of birth or address
* Lists may not provide all relevant information for identification
109
What is the risk-based approach in anti-money laundering (AML) more preferable than a prescriptive approach?
It is flexible, effective, and proportionate.
## Footnote
This approach allows institutions to adapt to varying risks rather than follow a one-size-fits-all method.
110
What are the basic elements of a financial institution's anti-money laundering program?
* A system of internal policies, procedures, and controls
* A designated compliance officer
* An ongoing employee training program
* An independent audit function
111
Who is responsible for the anti-money laundering compliance program?
The board of directors.
112
What types of customers might be considered high-risk for money laundering?
* Politically Exposed Persons (PEPs)
* Customers from high-corruption countries
* Cash-intensive businesses
113
What are the seven elements of a sound customer due diligence (CDD) program?
* Full identification of customer
* Development of transaction profiles
* Definition and acceptance of customer
* Assessment and grading of risks
* Monitoring based on risks
* Investigation of unusual activity
* Documentation of findings
114
What are the four general levels of risk when categorizing customers?
* Prohibited
* High-Risk
* Medium-Risk
* Low- or Standard-Risk
115
What are some characteristics of a successful anti-money laundering compliance training program?
* Meets legal standards
* Satisfies internal policies
* Mitigates risk of involvement in money laundering
116
What should the independent audit review regarding Suspicious Transaction Reporting (STR) systems?
* Evaluation of research and referral processes
* Review of policies and procedures for unusual activity
117
What is a search warrant?
A court's permission for law enforcement to search premises and seize items.
## Footnote
It is issued based on probable cause established in an affidavit.
118
What steps should a bank take upon receiving a subpoena?
* Review by senior management or counsel
* Compliance on a timely basis
* Do not notify the customer being investigated
119
What are the four ways that good technology can improve defenses against financial crime?
* Transaction monitoring
* Watch list filtering
* Automation of regulatory reporting
* Detailed audit trails
120
Fill in the blank: A Know Your Employee (KYE) program allows an institution to understand an employee's _______.
[background, conflicts of interest, and susceptibility to money laundering complicity]
121
What are some internal reports financial institutions may use to discover money laundering?
* Cash activity reports
* Wire transfer logs
* New account activity reports
122
What should be included in a typical suspicious transaction reporting process?
* Identification of suspicious transactions
* Formal evaluation
* Documentation of decisions
* Notification of management
123
Identify the factors a prosecutor may consider when determining whether to bring a case against an institution for money laundering.
* Criminal history
* Cooperation with investigations
* Self-reporting of issues
* Effectiveness of AML program
124
What is the role of senior management when a financial institution receives a government request?
Review the requests and ensure a complete and timely response.
125
What types of banking functions are considered high-risk?
* Private banking
* Offshore international activity
* Wire transfer functions
126
What should outside counsel do when reviewing a search warrant?
Understand its scope and obtain a copy of the warrant
## Footnote
Counsel should also request the affidavit supporting the search warrant.
127
What is the purpose of obtaining a copy of the affidavit related to a search warrant?
To learn more about the purpose of the investigation
## Footnote
The affidavit may not be provided to all parties but can be accessible to financial institutions.
128
What should be done while agents record an inventory of seized items?
Remain present and keep track of the records taken by agents.
129
What type of information can a financial institution gather during a government investigation?
Reports from regulators, information from third parties, surveillance data, employee information, subpoenas, and civil lawsuits.
130
What instructions should employees receive during a government investigation?
Do not produce corporate documents directly; inform senior management or counsel about requests.
131
What is the main purpose of conducting an internal investigation?
To learn the nature and extent of potential wrongdoing and minimize liability.
132
What factors should a bank consider when deciding to close an account under investigation?
* Legal basis for closing the account
* Institution's policies and procedures
* Seriousness of the underlying conduct
* Written request from law enforcement
133
What should an institution do as soon as it decides to file a Suspicious Transaction Report (STR)?
File the STR as soon as possible.
134
What types of documents can assist a financial investigator in tracking money movements?
* Signature cards
* Account statements
* Deposit tickets
* Checks
* Withdrawal items
* Credit and debit memorandums
135
Why is it important to interview knowledgeable employees quickly during an investigation?
To ensure their memories are fresh and to direct management to relevant documents.
136
What steps should be taken to maintain attorney-client privilege in written reports?
* Mark every page as confidential
* Number copies
* Maintain a list of recipients
* Collect copies after a set period
137
What are the steps commonly taken to obtain mutual legal assistance?
* Send a commission rogatoire
* Local investigator checks for information
* Request permission to remove evidence
* Central authority sends evidence
138
What are the gateways that assist with AML cooperation between countries?
* Mutual Legal Assistance Treaties
* Financial Intelligence Units
* The Supervisory Channel
139
What do FATF Recommendations 36-40 pertain to?
International aspects of money laundering and terrorist financing investigations.
140
What are bearer negotiable instruments?
Monetary instruments in bearer form, including checks and money orders.
141
What is a Memorandum of Understanding (MOU)?
An agreement establishing principles governing a relationship between two parties.
142
What is a commission rogatoire?
A written request for legal assistance sent between countries.
143
What is a country’s extraterritorial reach?
The extension of one country’s laws to citizens and institutions of another.
144
Describe a Financial Intelligence Unit (FIU).
A central office that processes financial reports and supports national anti-money laundering efforts.
145
What is an International Business Company (IBC)?
An offshore corporate structure dedicated to business outside the incorporating jurisdiction.
146
Describe Know Your Customer (KYC).
Policies to determine a customer's true identity and detect unusual activity.
147
What is a Mutual Legal Assistance Treaty (MLAT)?
An agreement allowing mutual assistance in legal proceedings among countries.
148
Define physical cross-border transportation of currency.
Transportation of currency or bearer negotiable instruments across borders.
149
Define a red flag.
A warning signal indicating a potentially suspicious situation.
150
What are remittance services?
Businesses that transfer funds through the banking system to another account.
151
Describe a Ponzi Scheme.
A scheme that uses new investors' money to pay off earlier investors.
152
What is a safe harbor for reporting suspicious activity?
Legal protection for reporting suspicions in good faith.
153
Define smurfing.
Using multiple transactions to evade reporting thresholds.
154
Describe a tax haven.
Countries offering special tax incentives to foreign investors.
155
What is tipping off?
Notifying a suspect about an ongoing investigation.
156
Describe a trustee.
A person or entity that holds and manages assets in a trust.
157
What is hawala?
A funds exchange system facilitating cross-border movement of money.
158
Describe willful blindness.
Deliberate avoidance of knowledge of facts in legal cases.
159
What are the responsibilities of the board of directors for compliance according to the Basel Committee?
* Oversee management of compliance risk
* Approve compliance policy
* Assess compliance risk management annually
160
What is the responsibility of a bank's board of directors regarding compliance risk?
The board is responsible for overseeing the management of the bank’s compliance risk and should approve the bank’s compliance policy.
161
How often should the board assess the bank's management of compliance risk?
At least once a year.
162
Define 'willful blindness' in the context of money laundering cases.
Deliberate avoidance of knowledge of the facts or purposeful indifference.
163
What is the legal significance of willful blindness in money laundering transactions?
It is equivalent to actual knowledge of the illegal source of funds or intentions of a customer.
164
What are sound KYC procedures relevant to in banking?
They are relevant to the safety and soundness of banks.
165
List two key benefits of sound KYC procedures according to the Basel Committee.
* Protect banks’ reputation
* Constitute an essential part of sound risk management
166
Fill in the blank: The board should establish a _______ compliance function.
[permanent and effective]
167
True or False: The board can delegate the responsibility of assessing compliance risk entirely to management.
False.
168
What does effective management of compliance risk help to reduce?
The likelihood of banks becoming a vehicle for or a victim of financial crime.
169
What is an essential part of sound risk management as per the Basel Committee?
Identifying, limiting, and controlling risk exposures.
