Module 1 (Part 3)

Question 1

What are another vehicle for money laundering after trade based money laundering

Answer 1

letters of credit

Question 2

what are letters of credit

Answer 2

a credit instrument issued by a bank that guarantees payments on behalf of its customer to a third party when certain conditions are met

Question 3

why are letters of credit used

Answer 3

They are commonly used to finance export because exporters want assurance that the ultimate buyer of its goods will make payment, and this is given by the buyers purchase of a bank letter of credit

Question 4

how is a letter of credit used

Answer 4

it is forwarded to a correspondent bank in the jurisdiction in which payment is to be made.

Question 5

when is the letter of credit drawn on

Answer 5

when the goods are loaded for shipping, received at importation point, clear customs, and are delivered

Question 6

how can letters of credit be used to facilitate ML

Answer 6

by transferring money from a country with lax exchange controls, thus assisting in creating the illusion that an import transaction is involved

Question 7

what is a form of trade based money laundering

Answer 7

black market peso exchange

Question 8

what is this process

Answer 8

money in the US derived from illegal activity is purchased by Colombian peso brokers and deposited in US bank accounts that the brokers have established

Question 9

what do the brokers then do

Answer 9

sell checks and wire transfers drawn on those accounts to legitimate businesses

Question 10

what do the legitimate businesses then do

Answer 10

use them to purchase goods and services in the US

Question 11

what is the first step of the 6 step example

Answer 11

Columbian carte sells drugs to US market for US dollars

Question 12

step 2

Answer 12

to launder the US dollars cartel contacts immediately call peso broker

Question 13

3

Answer 13

Broker takes cartel’s US dollars in exchange for Columbian pesos

Question 14

4

Answer 14

broker’s US employees place the dollars in the US banking system

Question 15

5

Answer 15

Broker offers the US dollars to a Columbian importer in exchange for Columbian pesos

Question 16

6

Answer 16

Importer uses the drug US dollars to buy US goods, which are shipped to Columbia

Question 17

Jennifer wants to send a $5k money transfer, but knowing that in her country there is a threshold of $3k for the recording of funds transfers, she sends a $2,500 money transfer and asks her friend to send another $2,500 money transfer. What is this process known as

Answer 17

Structuring

Question 18

True or False - In the “reverse flip” money laundering method, a criminal provides an associate with a specific amount of illegitimate money. The associate then provides a “mortgage” back to the trafficker for the same amount with all the necessary documentation. This creates an illusion that the trafficker’s funds are legitimate.

Answer 18

False - this is known as the loan back

Question 19

True or false - the practice of issuing numerous invoices for the same shipment of goods, thus allowing the money launderer the opportunity to make numerous payments and justify them with the invoices is known as “Ghost Shipping”

Answer 19

False - this is multiple invoicing

Question 20

What is topic 2

Answer 20

Risks associated with new payment products and services

Question 21

Why are prepaid cards attractive to criminals

Answer 21

They are portable, valuable, exchangeable, and anonymous

Question 22

How do prepaid cards work

Answer 22

they require the consumer to pay in advance for future purchases of goods and services. Each payment is subtracted from the balance of the card of product until the total amount is spent

Question 23

What is the joint money laundering steering group’s guidance on E-money guidance’s definition of electronic money

Answer 23

a prepaid means of payment that can be used to make payments to multiple persons, where the persons are distinct legal or natural entities.

Question 24

What are the 4 inherent risks of prepaid cards

Answer 24

1. Non Face-to-face relationships and anonymity
2. Geographical reach
3. Access to cash
4. Segmentation of Services

Question 25

For prepaid cars when can anonymity occur

Answer 25

when the card is purchased, registered, loaded, reloaded or used

Question 26

What type of cards are risky for geographical reach

Answer 26

open loop

Question 27

what is risky

Answer 27

open loop prepaid cards usually permit payments at domestic and foreign points of sales through global payment networks

Question 28

How is there access to cash

Answer 28

Use of ATM networks for prepaid cards that allow funding in one country and cash withdrawals in another

Question 29

What is the deal with segmentation of services

Answer 29

prepaid cards usually require several parties to execute transactions including the program manager, issuer, acquirer, payment network, distributor and agents

Question 30

What is virtual currency

Answer 30

a medium of exchange that operates in the digital space

Question 31

what are the two things that can be done with virtual currency

Answer 31

converted to fiat

be a substitute for real currency

Question 32

what is fiat

Answer 32

government-issued currency

Question 33

There are three categories of participants within the VC eco system according to FinCEN, what are they?

Answer 33

User

Exchanger

Administrator

Question 34

what is a user

Answer 34

a person that obtains VC to purchase goods and services

Question 35

What is an exchanger

Answer 35

a person engaged as a business in the exchange of VC for real currency, funds, or other VC

Question 36

What is an administrator

Answer 36

a person exchanged as a business in issuing VC, and who has the authority to redeem such VC

Question 37

what should be noted about administrators or exchangers

Answer 37

they may be identified as MSBs engaging in money transmission