Chapter 3

Question 1

Why is it important for organizations to continue to update and revisit their aml risk assessment

Answer 1

• environment in which each organization operates its subject to continue change
• externally, political changes of jurisdiction on whether economic sanctions are posed or removed can affect a countries risk rating
• internally respond to market and customer demands emerging requiring other companies, introducing new products and services and implementing new delivery systems
  -combination of these changes make it critical that ML risk model is subject to regular review
• Some countries, there is legislative obligation for such reviews to be undertaken on a regular basis

Question 2

According to FATF, what categories of risk factors warrant enhance due diligence measure

Answer 2

-customer risk factors ( non resident, cash intensive business, complex ownership structure)
- Country or geographic risk (in adequate email systems, subject to sanctions, countries involved with funding or supporting terrorist activities)
- product, service, transaction, or delivery channel risk factor ( private banking, anonymous transactions, payment received from unknown through parties)

Question 3

As a financial organization develops transaction history with its customers, what factors should lead it to consider modifying the risk rating of a customer

Answer 3

-unusual activity, such as alerts, cases, and suspicious activity filings
-receipt of law enforcement inquiries as subpoenas
-Transactions that violate economic sanctions programs
-Significant volumes of activity where it would not be expected

Question 4

What are some sources for identifying high risk countries?

Answer 4

-US state department annual international cottage control, strategy report, rating more than 100 countries on their ML controls
-Transparency international yearly, corruption perceptions index which rates more than 100 countries are perceived corruption
-FATF identifies jurisdictions with weak AML regimes and issues country specific mutual evaluation reports
-US certain domestic jurisdictions are you evaluated based on whether they fall within government identified high risk geographic location in such as high intensity drug trafficking areas(Hidta’s) and high intensity financial crime areas (hifca’s)

Question 5

In addition to policies and procedures, what are examples of internal controls with AML programs

Answer 5

-Rely on a variety of internal controls, including management reports, automated review systems and utilization of multiple reviewers
-the internal technology or tools the financial organization uses to ensure ML program is functioning as intended, and within the predefined perimeters
-Alert, compliance department to identify potential outliers and deviations from normal policy that may need to be reviewed

Question 6

What factors should be considered when determining the level of sophistication of an organizations compliance program

Answer 6

-should be based upon the organizations, nature, size, complexity, regulatory environment, and the specific risk associated with his products, services, and customers
-No two organizations will have exactly the same compliance structure because the risk facing each organization are different as identified in the respective risk assessments

Question 7

Why is it important for an organization aml compliance officer to have good communication skills?

Answer 7

-Vital to the success of the organization AML program
-compliance officer must be able to communicate at all levels of the organization from front line associates to CEO and board of directors. Needs to be careful of articulating matters of importance to senior executive management. Compliance officer must be able to analyze, interpret changes, determine what effect they could have the organization and suggest an action plan when appropriate.

Question 8

Describe an AML compliance officers accountability

Answer 8

Regardless of the ways and organization delegates its various ML task, it’s designated compliance officer is responsible for executing the AML program. More and more often, various regulators are seeking enforcement actions against not only the organization, executive management team, and board directors for AML violations, but also the compliance officer as well.

Question 9

What are some of the target audiences for training?

Answer 9

-Most areas are financial organizations should receive AML training
-In some countries, training programs must extend beyond full and part time employees to include contractors, consultants, students, apprentice, placements, and second years from other branches necessaries

This includes customer facing staff, operations personnel, compliance staff, senior management, board of directors, and independent testing staff

Question 10

Why are tests important in the AML training?

Answer 10

Test evaluate how well the training is understood with a mandatory passing score

Question 11

When should financial organizations conduct training?

Answer 11

-Ongoing and on regular schedule
-existing employees should at least attend an annual training session. New employee should receive appropriate training with respect to their job function, and within reasonable periods after joining or transferring to a new job situations may arise that demand immediate session or enhance training.
-Changes in software, systems, procedures, or regulations are additional triggers for training sessions, as well as specific illicit financial activity that affects as specific business line or department.

Question 12

According to FATF recommendation 10, when should financial organizations undertake customer due diligence measures

Answer 12

-Establishing business relationships
-caring out occasional transactions under certain circumstances
-When there is suspicion of money laundering or terrorist financing
- when financial organization has doubts about veracity or adequacy of previously attained customer identification data

Question 13

According to FATS recommendation 10, when should financially organization conduct enhance due diligence on a customer

Answer 13

-When there are circumstances in which the risk of ML/tf is higher, Edd measures should be taken. These include customer risk factors, country, or geographical risk factors, and product, services, transaction, and delivery channel risk factors

Question 14

What are examples of information obtained when financial organizations conduct enhanced due diligence on high-risk customers?

Answer 14

-source of funds and wealth
-Identifying information on individuals with control over account such as signatory or guarantor
-Occupation or type of business
-Financial statements
-banking references
-Residency
-Proximity of customers residence, place an employment and place of business to the bank
-Description of the customers primary trade area and whether international transactions are expected
-description of the business operations, the anticipated volume of currency and total sales
-list of major customers and suppliers
-Explanations for changes in account activity

Question 15

According to FATF recommendation 10, when should of a customer be established and verified?

Answer 15

Bank should not establish banking relationship or carry out any transactions until identity of the customer has been satisfactory established and verified in accordance with this recommendation

Question 16

How should global financial organization address performance of a customer due diligence across its various operations

Answer 16

-Should aim to reply their customer acceptance policy, procedures for customer, identification, process from monitor high risk accounts and risk management framework on a global basis to all of their offices, branches, and subsidiaries
-Organization should clearly communicate these policies and procedures through ongoing training and regular communications and conduct monitoring and testing to compliance of the policies and procedures

Question 17

What is the name of the office of foreign assets controls sanctions list

Answer 17

Specially, designated national and blocked Person list

Question 18

When should financial organization conduct sanction screening

Answer 18

Before financial organization starts doing business with new customer engaging in certain transactions. It should review the various country sanctions program requirements and publish list of known or suspected terrace, necrotic, traffickers, and other criminals for potential matches

Question 19

What is the limitation of using public available sources of information to identify publicly exposed persons and their associations

Answer 19

List do not provide all relevant information related to peps that would assist in identifying them
-Do not include unique, identifiers, such as date of birth or address which possess significant operational constraints, particularly at large retail, financial organization

Question 20

What are the basic elements or four pillars of an infective aml program?

Answer 20

-System of internal policies, procedures, and controls (first line of defence)
-designated compliance function with compliance officer (second line of defence)
-Ongoing employee training program
-Independent audit function to test overall effectiveness of the AML program (third line of defence)

Question 21

What are the responsibilities of financial organizations Aml compliance officer?

Answer 21

-responsible for managing all aspects of the AML compliance program
-includes but not limited to, designing and implementing program, making necessary changes and updates, sharing information about the program, assesses a failures to key staff members, constructing AML related content for staff training programs and managing the organizations occurrence to applicable AML laws and regulations, including staying current on legal and regulatory developments in the field

Question 22

What are the components of an effective AML training program?

Answer 22

Explains the relevant AML laws and regulations and covers organizations policies and procedures used to mitigate money laundering risk
-Training should emphasize the importance of AML efforts and educate employees about what to do if they encounter potential money laundering

Question 23

What are the basic questions to ask when developing AML compliance training program

Answer 23

-who to train
- What training topics
- How to train
-When to train
-Where to train

Question 24

What is involved in the independent audits review of case management and suspicious activity reporting systems

Answer 24

Should include an evaluation of the research and referral of unusual transactions and review of policies, procedures, and processes for referring, unusual and suspicious activity from all business lines to the personnel responsible for investigating it

Question 25

What steps should the independent audit take to evaluate the ability of transaction monitoring software to identify unusual activity

Answer 25

-Review policies, procedures, and processes for suspicious activity monitoring
-Review the process for ensuring the completeness, accuracy and timeliness of data applied by the source transaction process system
-Evaluate the methodology for establishing and analyzing expected activity and filtering criteria
-Evaluate the appropriatness of the monitoring reports
-Compare transaction monitoring typologies with AML risk assessment for reason

Question 26

What banking functions and products are considered high risk

Answer 26

-private banking.
-Offshore international activity
-deposit taking facilities
-Wire transfer and cash management functions
-Transactions in which the primary beneficiaries it is unknown
-Loan guarantee schemes
-Traveler checks
-official bank checks
-Money orders
-Foreign exchange transactions
-International remittances
-Payment services such as payment processors, pre-paid processes, automatic clearing houses
-Remote deposit capture
-trade financing transactions with unusual pricing features
- Payable through accounts

Question 27

What are the four levels of AML risk?

Answer 27

-prohibited- organization will not tolerate any dealings with any kind given the risk
-High risk-risk are significant but they’re not necessary prohibited
-medium risk- risk meet additional scrutiny, but they do not rise to level of high risk
- low risk- baseline risk of ML typically indicates normal expected activity

Question 28

What types of customers do supervisory authorities identify as an inherently high risk for money laundering

Answer 28

• Banks, casinos, offshore corporations
  -embassies, MSP’s, including currency exchange houses, money, remitters, Check cashiers
  Virtual currency changes, car, boat, airplane dealerships
  -Used car and truck, dealers and machine part manufacturer
  -Professional service providers, attorneys, accountants, investment brokers and other parties who act as financial liaisons for the client clients
  -travel, agencies, broker, dealers and securities, jewel, gem and precious Metal dealers
  -Import and export companies, and cash intensive businesses

Question 29

Where does the ultimate responsibility for the financial organization aml program lie

Answer 29

with the board of directors.
- Members must set the tone from the top by openly, voicing the commitment to the program, ensuring that their commitment flows through all service areas and lies of businesses and holding responsible parties accountable for compliance.

Question 30

What are the seven elements of a sound customer due diligence program?

Answer 30

-customer identification
-Profiles
-customer acceptance
-risk rating
-monitoring
-Investigation
-documentation

Question 31

Identify several types of internal reports financial organizations can use discover ML/TF

Answer 31

-Daily cash activity, exceeding the countries reporting threshold
-Daily captivity just below their reporting threshold
-activity aggregated over period of time, identified structuring
-wire transfer report/logs with filters using amounts and geographical factors
-monetary instruments/reports
-Check kitting/drawing on uncollected funds with significant debt/credit flows
-Significant change reports
-New account activity reports

Question 32

Describe the components of a typical suspicious or unusual transaction reporting process with financial organization as part of the AML program

Answer 32

-employee observations and identification
-inquiries from law-enforcement and alerts generated by transaction monitoring systems
-Formal evaluation of each instance and continuation of unusual transaction and activity
-Documentation ofthe SAR reporting decision, i.e. whether or not report was filed with authorities
-procedures to periodically notify senior management or the board of directors of sar filings
-employee training on detecting, suspicious transactions and activity

Question 33

How do drug traffickers organizations (dto) take advantage of black market peso exchanges (bmpe’s)

Answer 33

Take advantage of complex BMPE schemes involving the export of goods across the UX US/Mexico border to help move funds from the back to the country where the DTO is based.

Question 34

What is a search warrant how is it issued?

Answer 34

• grants of permission from court of law enforcement agency to certain designated premises and seize specific categories of items or documents
  -generally they’re requesting agencies required to establish the probable cause is the evidence of a crime will be located. The warrant is authorized based on information contained in an affidavit submitted by law-enforcement officer.