Chapter 2

Question 1

Four Elements of a KYC Programs

Answer 1

• Customer Identification
• Risk Management
• Customer Acceptance
• Monitoring

Question 2

Three Lines of Defense in Bank’s AML efforts

Answer 2

• The line of business
• The AML compliance function
• The audit function

Question 3

First European Union Directive Key Features

Answer 3

Required the members to enact legislation to prevent their domestic financial systems from being used for money laundering.

Question 4

Key features of the Second EU Directive.

Answer 4

• It extended the scope of the First Directive beyond drug-related crimes.
• It explicitly brought bureaux de change and money remittance offices under AML coverage.
• It clarified that knowledge of criminal conduct can be inferred from objective factual circumstances.
  It provided a more precise definition of money laundering to include the conversion or transfer of property with knowledge that it is derived from criminal activity or from participation in that activity
• It widened the businesses and professions that are subject to the obligations of the Directive. (Gatekeepers)

Question 5

Key Features of the Third EU Directive

Answer 5

• defining money laundering and terrorist financing as separate crimes.
• extending customer identification and suspicious activity reporting obligations to trusts and company service providers, life insurance intermediaries, and dealers selling goods for cash payments of more than 15,000 euros.
• detailing a risk-based approach to customer due diligence.
• protecting employees who report suspicions of money laundering or terrorist financing.
• obligating member states to keep comprehensive statistics regarding the use of and results obtained from suspicious transaction reports.
• requiring all financial institutions to identify and verify the beneficial owner of all accounts held by legal entities or persons

Question 6

Changes in the Fourth EU Money Laundering Directive

Answer 6

• Natural or legal persons trading in goods will be covered to the extent that they make or receive cash payments of EUR 10,000 or more ( decreased from EUR 15,000)
• The scope of obliged entities was enlarged from just casinos to all “providers of gambling
services.”
• Customer due diligence is to be applied for transfers of funds exceeding 1,000 euros.
• Tax crimes relating to direct and indirect taxes are included in the broad definition of criminal activity, in line with the revised FATF Recommendations.
• An explanation of “financial activity on an occasional or very limited basis” was included.
• The European Commission must submit a report every 2 years on the findings of the risk assessment of ML and TF affecting the internal market.

Question 7

Section 311 does what?

Answer 7

Provides the U.S. Treasury Department with the authority to apply graduated, proportionate measures against a foreign jurisdiction, a foreign financial institution, a type of international transaction or a type of account that the Treasury Secretary determines to be a “primary money laundering concern.”

Question 8

Section 312 does what?

Answer 8

Requires due diligence and, in certain situations, enhanced due diligence for foreign correspondent accounts (which includes virtually all account relationships that institutions can have with a foreign financial institution) and private banking for non-U.S. people

Question 9

Section 313 does what?

Answer 9

Prohlbits U.S. banks and securities brokers and dealers from maintaining correspondent accounts for foreign, unregulated shell banks that have no physical presence anywhere.

The section also 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.

Question 10

Office of Foreign Assets Control does what?

Answer 10

OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals.

Question 11

The Wolfs berg Group consists of what and does what?

‘

Answer 11

An association of 13 global banks that aims to develop financial services
industry standards and guidance related to know your customer anti-money laundering and counter- terrorist financing policies.

No enforcement powers.

Question 12

Three important Documents for The Wolfsberg Group?

Answer 12

Anti-Money Laundering Principles for Private Banking

The suppression of the financing of terrorism guidelines

AML Principles for Correspondent Banking.

Question 13

Without due diligence, banks can be subjected to what type of risks?

Answer 13

• Reputational
• Operational
• Legal
• Concentration

Question 14

What EU Directive defined ML and TL as separate crimes?

Answer 14

Third

Question 15

Which EU directive required financial institutions to identify and verify BO.

Answer 15

Third

Question 16

Which EU directive extending customer identification and suspicious activity reporting obligations to T&CSP, life insurance intermediaries, and dealer selling goods for cash payments of more than EUR 15,000?

Answer 16

Third

Question 17

Which EU directive detailed a risk based approach to customer due diligence?

Answer 17

Third

Question 18

Which EU Directive changed the threshold for entities obliged to report suspicious transactions decreased from EUR 15,000 to EUR 10,000.

Answer 18

Fourth

Question 19

Which EU Directive enlarged the scope of obliged entities from just casinos to all providers of gambling services?

Answer 19

Fourth

Question 20

EU directive that required CDD for transfers of funds exceeding EUR 1,000?

Answer 20

Fourth

Question 21

Goal of the Egmont Group?

Answer 21

Provide a forum for FIUs around the world to improve cooperation in the fight against ML and TF and to foster the implementation of domestic programs in the field.