Practice Questions Flashcards
An anti-money laundering specialist at a large institution is responsible for informing senior management about the status of the anti-money laundering program across the organization. Which report is the most useful?
A. The total credit exposure for non-cooperative countries and territories
B. Results of related audits and examinations
C. Details on inquiries received from law enforcement
D. Notification of management changes in the different major divisions
B
What is most valuable when using the internet as an investigative source?
A. A team of AML investigators
B. A reference list of websites known to yield credible information
C. A combination of independent thinking and technical skills
D. A powerful search engine
B
What are three risk factors a financial institution should examine with regard to a proposed new product?
A. The complexity of the product
B. The need to verify the identification of the customer
C. Whether the product is easily transferable
D. Whether other financial institutions are marketing the product
A,B and C
Which three are principles found in the document “Principles of information Exchange between Financial Intelligence Units (FIUs)”?
A. The exchange of information between FIUs should take place as informally and as rapidly as possible and with no prerequisites, while guaranteeing protection of privacy and confidentiality of the shared data
B. Differences in the definition of offenses that fall under the competence of FIUs should be before free exchange of information takes place
C. The Egmont principle of free exchange of information at the FIU level should be possible on the basis of reciprocity, including spontaneous exchange
D. It should be possible for communication between FIUs to take place directly and without intermediaries
A,C and D
A recent anti-money laundering audit revealed several regulatory reporting violations and lapses with the organization’s anti-money laundering policy. As a result, the compliance officer has created a follow-up matrix to document progress in correcting the identified deficiencies.
To whom should the compliance officer provide regular updates of corrective action to help ensure the appropriate oversight?
A. Human Resources
B. Audit management
C. Designated board committee
D. Business line managers
C
A compliance officer at a small community bank has been asked to review existing customer onboarding policies and procedures to ensure they adequately address anti-money laundering risks.
How should customer due diligence be implemented?
A. With an annual compliance review and approval of customers
B. As applicable to customers that pose higher money laundering or terrorist financing risk
C. As an ongoing activity that may vary commensurate with the risk profile of the customer
D. With a one-time event conducted at initial customer onboarding
C
Under the FATF Recommendations, when should a bank perform a risk assessment on issuing a new product to market?
A. 30 days from the official launch date
B. 90 days from the official launch date
C. During the product testing phase, but before final details on the product are defined
D. Prior to launching the product into the market to identify appropriate measures to mitigate identified risks.
D
According to the Basel Committee, banks without due diligence requirements can be subject to the following:
A. Organizational risk
B. Transactional risk
C. Legal risk
D. Confiscation risk
C
According to the Basel Committee, banks should perform the following customer due diligence measures?
- Develop customer acceptance policies and procedures describing the customers background, country of origin, and business activities.
- Establish policies and procedures to accommodate protecting the identity of private banking accounts.
- Develop clear and concise description of who is an acceptable customer.
- Establish continued monitoring of high-risk accounts for transactions of $100,000 or more.
A. 1 and 3
B. 2 and 3
C. 1 and 4
D. 3 and 4
A
Under FATF’s assessment of a jurisdiction to identify Non-Cooperative Countries and Territories (NCCTs), which of the following were criteria used during the review?
- Excessive secrecy provisions regarding financial institutions.
- Lack of efficient suspicious transactions reporting.
- Lack of resources in public and private sectors.
- Absence of a financial intelligence unit.
A. 1, 2 and 3
B. 2, 3 and 4
C. None of the above
D. All of the above
D
According to the Basel Committee, the three lines of defense in a bank’s AML efforts include?
A. Information technology, line of business and AML compliance
B. Line of business, information technology and audit
C. Audit, AML compliance and Board of Directors
D. AML compliance, line of business and audit
D
According to the Basel Committee, A critical way to mitigate money laundering risk is by using the transaction monitoring system to?
A. Conduct ongoing monitoring of customer activity, build on information from enhanced due diligence and identify high-risk wire transfers.
B. Conduct ongoing monitoring of customer activity, build on information from risk assessments and customer profiles.
C. Conduct ongoing monitoring of customer activity, build on information from enhanced due diligence and customer profiles.
D. Conduct ongoing monitoring of customer activity, build on information from risk assessments and identify high-risk wire transfers.
B
According to the Basel Committee on customer due diligence, what are the four necessary elements of a sound KYC program?
A. Customer acceptance policy, declaration of beneficial ownership, customer identification and risk management.
B. Customer acceptance policy, risk management, monitoring high-risk accounts and customer identification.
C. Declaration of beneficial ownership, customer identification, monitoring higher risk accounts and designation of PEPs as higher risk.
D. Customer retention policy, risk management, monitoring higher risk accounts and customer identification.
B
According to the EU Directives an independent legal professional is obligated to report suspicion of money laundering in a client relationship when:
A. Representing a client in a legal matter
B. Ascertaining (確定)the legal position for a client
C. Participating in financial or corporate transactions
D. Obtaining information associated with a judicial proceeding
C
The FinCEN “Advisory to US Financial Institutions on Promoting a Culture of Compliance” published in 2014 listed six areas of emphasis. Which three areas below are included in that list:
A. Leadership Should Be Engaged
B. Information Should Be Shared Throughout the Organization
C. Leadership and Staff Should Understand How Their BSA Reports are Used
D. The Organization must have an Appropriately Qualified Compliance Officer
A,B and C
According to the FATF40 Recommendations “designated non-financial businesses and professions” include:
A. Casinos, real estate agents and dealers in precious stones
B. MSBs , gatekeepers and issuers of electronic money
C. Dealers in precious metals, lawyers, commodity futures traders
D. Life insurance companies, real estate agents and notaries
A
An AML compliance officer was reviewing customers at XYZ Bank and one of the customers attracted her attention. Through a period of several months cash deposits and withdrawals were transacted through his account with amounts ranging between US7500 and US 17000. In addition, Sam deposited two checks issued by a casino into his account for USD32000 each. When opening the account he stated that he operated an import/export company. Which of the following additional items should arouse the suspicion of an anti-money laundering compliance officer the most?
A. Sam maintained a personal account as well as the business account
Bl Sam’s home telephone number was disconnected last month
C. Sam asked for a letter of credit to finance some imports from a new supplier
D. Sam conducted large cash transactions for his import/export business
D
A financial institution is looking to establish an online account opening service. The institution plans to offer this product to new and existing customers within the country. Which of the following would be the best plan of action for an AML specialist to recommend enabling the institution to verify the customer’s identity
A. do not offer the product, as it is too high risk as the customer cannot be seen to verify their identity.
B. Require all customers to send a copy of valid photo identification to the institution
C. Ensure that the institution has a reliable 3rd party source that will enable verification the customer
D. Allow customers to enter required information, but require all customers to come to the institution in person for verification
C
An employee hears a colleague on the telephone with a customer giving advice on how to ensure that a suspicious transaction report will not be filed as a result of a future transaction.
What action should the employee take?
A. Report the conversation to the local police
B. Report the conversation to the compliance officer
C. Tell the colleague that it is against policy to give such advice
D. Ignore the situation because the colleague is the relationship manager for that customer
B
A bank compliance officer has implemented enhanced monitoring rules that have identified some unusual activity that may be indicative of human trafficking.
Which Red flag should prompt additional transactional review?
A. Wire Transfer activity from countries with significant migrant populations
B. Cash deposits that occur in cities where the customer resides and conducts business
C. Cash deposits that occur in cities where the customer does not resides or conduct business
D. Cash deposits that occur in cities where the customer does not reside or conduct business followed by same-day withdrawals
D
Please refer to P266
The USA PATRIOT Act requires United States (U.S.) financial institutions to collect certain information from non-U.S. banks that hold a correspondent account.
Which two pieces of information must a non-U.S. bank provide to its U.S. correspondent to enable them to comply with this requirement? (Choose two.)
Answers
A. The name and address of all shell banks the bank maintains accounts for
B. The name and address of all beneficial owners who own 25% or more of the bank
C. Prompt notice of any suspicious activity it detects on any customer who uses the correspondent account
D. The name and address of a U.S. person who is authorized to receive service of legal process for the bank
B & D
In developing an effective AML compliance program, which of the following elements is most critical in ensuring accountability (問責) and enforcement (執法) across all levels of an organization?
A. Automated transaction monitoring
B. Periodic employee training and education programs
C. A clear AML policy and a designated AML compliance officer
D. Regular audits and risk assessments
C
A: Automated transaction monitoring systems
While automated transaction monitoring systems are important for detecting suspicious activities, they do not ensure accountability and enforcement across all levels of an organization.
B: Periodic employee training and education programs
Training and education programs are crucial for raising awareness and ensuring staff are knowledgeable, but they alone do not ensure accountability and enforcement.
C: A clear AML policy and a designated AML compliance officer
A clear AML policy and a designated AML compliance officer are essential for providing clear guidelines and ensuring there is a responsible party for enforcement, which promotes accountability.
D: Regular audits and risk assessments
Regular audits and risk assessments are important for periodically evaluating the effectiveness of the AML compliance program, but they do not alone ensure accountability and enforcement across all levels.
What is an example of the integration stage of money laundering involving a bank or another deposit-taking institution?
A. Depositing illicit funds into an account set up for a front company
B. Directing third parties to exchange illicit cash for negotiable instruments
C. Wiring illicit funds from an account at one bank to an account at another bank
D. Using illicit funds that had previously been deposited to purchase a luxury vehicle
D
The integration stage of money laundering involves placing illicit funds into the legitimate financial system to give them the appearance of legitimacy. This is the final stage of the money laundering process and involves using the funds for seemingly legitimate purposes, such as making investments, purchasing real estate or luxury goods, or paying for services.
The compliance officer at a crowdfunding website is in charge of monitoring new crowdfunding projects. Recently, the number of crowdfunding projects has significantly increased.
Which red flag indicates the highest anti-money laundering risk?
A. Those with the largest number of donors
B. Projects that get funding within days of their start
C. Projects with the highest monetary success threshold
D. Projects that start and close and are fully funded within a very short period
D
All of the options listed can potentially be red flags for anti-money laundering (AML) risks, but one stands out as the highest risk.
A. Those with the largest number of donors: While a large number of donors can be a positive sign of a popular project, it can also be a red flag if the donors are from high-risk jurisdictions or if the donors are individuals or entities with known criminal connections. However, large numbers of donors alone are not necessarily indicative of money laundering.
B. Projects that get funding within days of their start: While fast funding can be a positive sign of a popular project, it can also be a red flag if it is done through anonymous or suspicious payment methods, or if the project appears to have little value or potential for success. However, fast funding alone is not necessarily indicative of money laundering.
C. Projects with the highest monetary success threshold: This could be a red flag if the amount is extremely high and appears to be disproportionate to the project’s value or if the funding is coming from high-risk jurisdictions or individuals with criminal connections. However, a high monetary threshold alone is not necessarily indicative of money laundering.
D. Projects that start and close and are fully funded within a very short period: This option presents the highest AML risk. Projects that are fully funded within a short period, particularly if they are in high-risk sectors such as real estate or luxury goods, can be indicative of money laundering. Criminals may use crowdfunding as a way to launder money by quickly funding a project with illicit funds and then receiving the “clean” money from the project’s success. Therefore, this option presents the highest AML risk.
In summary, all of the options presented can potentially be red flags for AML risks, but option D presents the highest risk due to the potential for money laundering through quick and fully funded projects in high-risk sectors.
Which two statements in the Wolfsberg Group’s ‘Suppression of the Financing of Terrorism’ define the role financial institutions should play in the fight against terrorism? (Choose two.)
A. Financial institutions need to assist competent authorities in fighting terrorist financing through prevention, detection and information sharing.
B. Financial institutions need to continuously analyze the types of activity related to terrorist financing and develop models that in the long term will drive down terrorism.
C. Financial institutions should have financial intelligence units dedicated to the investigation of activity that would lead to the detection of terrorist financing as a means to decrease global terrorism.
D. Financial institutions should apply extra due diligence whenever they see suspicious or irregular activities, especially when customers are engaged in sectors or activities that have been identified by competent authorities as being used for the financing of terrorism.
AD
Please refer to page 172
What is a key risk associated with Correspondent Accounts according to the Basel Customer Due Diligence paper?
A. The volume and value of transactions passing through the account may not be in line with the original correspondent agreement.
B. The respondent bank’s customer acceptance and know your customer policies are ineffective.
C. The service fees are insufficient to cover the cost of managing the account.
D. It is not used on a daily basis.
B
What is the appropriate compliance control for identifying politically exposed persons (PEPs) according to the Basel Committee’s paper on Customer Due Diligence for Banks?
A. Reviewing relationships at account opening and on a periodic basis
B. Reviewing when a relationship is established
C. Determining that a local figure is a PEP
D. Requiring that the customer discloses that they are a PEP or an associate of a PEP
A
An organization uses an automated surveillance system that generates a very large volume of anti-money laundering alerts. The monthly volume of alerts has increased over the last year causing the compliance staff to fall significantly behind reviewing the alerts. As a result, the system settings are under review to determine if they are appropriate.
Which action should be included in the evaluation of system settings?
A. Compare settings to organizations within its peer group
B. Flag filters with no history of generating an alert for removal
C. Review parameter settings based on the latest risk assessment
D. Calibrate parameters based on staffing capabilities to clear alerts
C
An institution has made the decision to exit a client relationship due to anti-money laundering concerns. Prior to starting the close out process, the institution receives a written request from a law enforcement agency to keep the account open. The client is the subject of an ongoing investigation and law enforcement wants the institution to continue to monitor the account and report any suspicious activity.
What is primary consideration the institution should keep in mind when deciding whether to agree to this request?
A. The anticipated cost of complying with the law enforcement request
B. The number of suspicious transaction reports previously filed on the client
C. The fact that the institution has a solid record in complying with law enforcement requests
D. Whether the institution can continue to meet its regulatory obligations with the accounts open
D
What are two sources for maintaining up-to-date sanctions information? (Choose two.)
Answers
A. U.S. Federal Bureau of Investigation’s National Security Letters
B. U.S. Department of the Treasury Office of Foreign Assets Control
C. U.S. Department of the Treasury ג€” Section 311 ג€” Special Measures
D. Financial Action Task Force’s list of High Risk and Non-Cooperative Jurisdictions
B & C
A politically exposed person (PEP) maintains an account at a bank. Last month a money laundering analyst filed a suspicious transaction report about unusual wire deposits originated by unknown individuals in the home country of the official. Recently a negative news search revealed political corruption in the home country of the official.
To whom should this situation be escalated?
A. The board of directors
B. The line of business executive
C. The bank’s anti-money laundering officer
D. The Financial Action Task Force’s PEP Hotline
The answer to this question is option C, the bank’s anti-money laundering officer. This is because the AML officer is responsible for overseeing the bank’s AML compliance program and ensuring that it is effective in detecting and preventing money laundering and terrorist financing. Therefore, the AML officer is the appropriate person to escalate the situation to.
The AML officer can assess the risk of the situation and determine whether it is necessary to file a suspicious activity report (SAR) with the appropriate regulatory authorities. If a SAR is filed, the AML officer will work with law enforcement and regulatory authorities to investigate the matter further and take appropriate action to mitigate the risk.
The board of directors (option A) and the line of business executive (option B) may not have the expertise or knowledge necessary to make informed decisions about AML matters. They may also be removed from the day-to-day operations of the bank’s AML compliance program. Therefore, the AML officer is the appropriate person to handle this situation.
Option D, the Financial Action Task Force’s PEP Hotline, is an external resource that can be used to report PEP-related concerns to the appropriate authorities. However, it is not the first point of escalation in this situation. The bank’s AML officer should be notified first, and they can then determine whether it is necessary to report the matter to the appropriate authorities, including the FATF’s PEP Hotline.
Which two individuals are ordinarily beneficial owners of a private banking account according to the Wolfsberg Anti-Money Laundering Principles for Private
Banking? (Choose two.)
A. Those who are authorized signers on the account
B. Those who have legal title to a controlling share interest in the customer
C. Those who generally have ultimate control through ownership or other means over the funds in the account
D. Those who are the ultimate source of funds for the account and whose source of wealth should be subject to due diligence
CD
What are two requirements for monitoring and reporting suspicious activity for correspondent banking according to the Wolfsberg Principles? (Choose two.)
A. Incorporate suspicious activity monitoring into periodic reviews
B. Incorporate due diligence results such as customer risk ratings
C. Utilize downstream correspondents to investigate and report suspicious activity
D. Investigate and report suspicious activity only for the correspondent bank’s clients
AB
The Wolfsberg Principles are a set of global anti-money laundering (AML) guidelines developed by an association of international banks to promote effective AML measures and risk management in the financial industry. When it comes to monitoring and reporting suspicious activity for correspondent banking, two requirements outlined in the Wolfsberg Principles are:
A. Incorporate suspicious activity monitoring into periodic reviews: According to the Wolfsberg Principles, correspondent banks should incorporate suspicious activity monitoring as part of their periodic reviews. Periodic reviews refer to the ongoing assessment and evaluation of correspondent banking relationships to ensure compliance with AML and other regulatory requirements. By integrating suspicious activity monitoring into these reviews, correspondent banks can actively identify and assess any potential suspicious transactions or patterns. This requirement emphasizes the importance of continuously monitoring transactions and customer behavior to detect and prevent money laundering and other illicit activities.
B. Incorporate due diligence results such as customer risk ratings: Another requirement for monitoring and reporting suspicious activity in correspondent banking, as per the Wolfsberg Principles, is the incorporation of due diligence results, including customer risk ratings. Due diligence is the process of collecting and verifying information about customers, their business activities, and associated risks. Correspondent banks are expected to perform thorough due diligence on their customers and assign risk ratings based on the level of risk they pose. These risk ratings help in assessing the likelihood of suspicious activity and aid in prioritizing monitoring efforts. By incorporating customer risk ratings into their monitoring processes, correspondent banks can focus their resources on high-risk customers and transactions.
To summarize, the two requirements for monitoring and reporting suspicious activity for correspondent banking, as outlined by the Wolfsberg Principles, are:
A. Incorporating suspicious activity monitoring into periodic reviews to actively identify and assess potential suspicious transactions or patterns.
B. Incorporating due diligence results, including customer risk ratings, to prioritize monitoring efforts and focus resources on high-risk customers and transactions.
When should the anti-money laundering risk assessment be updated?
A. Every two years
B. After a merger or acquisition
C. When the board of directors changes
D. When instructed to by the Financial Action Task Force
B
A customer brings $15,000 worth of chips into a casino and plays various games. The customer redeems all the remaining chips and requests a wire transfer of the proceeds to an unrelated third party.
What are two red flags that indicate money laundering? (Choose two.)
A. Customer redeeming all remaining chips
B. Playing various games before cashing out
C. Bringing $15,000 worth of chips into the casino
D. Requesting a wire transfer to an unrelated third party
CD
Requesting a wire transfer to an unrelated third party (Option D) When a customer requests a wire transfer to an unrelated third party, it could be an indication of layering, which is the process of separating the illegal funds from their source by creating layers of transactions to make it difficult to trace the funds. This is a common technique used in money laundering, where the ultimate goal is to disguise the proceeds of illegal activities as legitimate. Therefore, requesting a wire transfer to an unrelated third party is a red flag for potential money laundering.
Bringing $15,000 worth of chips into the casino (Option C) Casinos are required to report any transactions over a certain threshold to the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act (BSA). In this case, the customer bringing $15,000 worth of chips into the casino may trigger a Currency Transaction Report (CTR) filing by the casino. Money launderers may try to avoid detection by breaking up large transactions into smaller ones to avoid reporting requirements. Therefore, bringing a large amount of chips into the casino could be a red flag for potential money laundering.
During an internal investigation in a financial institution, what is the most critical first step that should be taken when suspicious activity is identified?
A. Notify senior management immediately
B. Preserve all relevant records and evidence
C. Interview the customer involved in the suspicious activity
D. Prepare a Suspicious Activity Report (SAR)
B
Preserve all relevant records and evidence is crucial to ensure information is not lost or tempered with, and it allows for a thorough investigation. Preparing a SAR is essential but it comes after initial facts and evidence are gathered and preserved
Which emerging technology poses the greatest challenge for Anti-Money Laundering (AML) professionals in identifying and preventing illicit financial activities?
A. Cryptocurrencies and Blockchain
B. Artificial Intelligence and Machine Learning
C. Decentralized Finance (DeFi)
D. Big Data Analysis
C
Decentralized Finance (DeFi) represents a novel and rapidly growing sector of the financial market that relies on public blockchain technology to conduct financial transactions. Unlike traditional systems, DeFi eliminates intermediaries, facilitates peer-to-peer transactions and increases transaction anonymity, posing a significant challenge for AML professionals to enforce regulations and track illicit financial activities.
Cryptocurrencies and Blockchain technology provide anonymity and decentralization, making it difficult for AML professionals to trace and monitor transactions effectively
Which key element ensures the effectiveness of an Anti-Money Laundering (AML) compliance program within a financial institution?
A. A formal risk assessment process
B. Comprehensive training for all employees
C. Periodic Independent testing and audits
D. Imprementation of automated transaction monitoring systems
C
While all of these elements are important in an AML compliance program, independent testing and audits are crucial because they provide an objective evaluation of the program‘s effectiveness, ensure it is properly implemented and functioning as intended and help identify any gaps or weaknesses
A formal irsk assessment helps to identify and prioritize the area of greatest risk, ensuring that the resources are allocated effectively
While training is essential, it alone does not ensure overall effectiveness of the AML compliance program
Automated transaction monitoring systems are important, but they need to be part of a broader, well-rounded compliance program
Which of the following techniques has been identified as the key method used by terrorist organizations to transfer funds across borders?
A. Trade-based money laundering
B. Hawala Network
C. Smurfing
D. Digital currency
B
Hawala is an informal method of transferring money without physical movement. it is heavily used in terrorism financing due to its anonymity and lack of regulation
Digital currencies, such as cryptocurrencies, hae gained popularity for money laundering and terrorism financing due to their anonymity and lack of regulation, though their usage is still evolving and not as widespread as traditional methods
A United States (U.S.) bank was recently alerted by law enforcement of an increase in sale of large denomination U.S. bank notes to casas de cambio. They suspect that a Mexican syndicate is operating a money laundering scheme in the bank’s jurisdiction.
Which two steps should be taken to trace funds through the bank to assist law enforcement in their investigation? (Choose two.)
一家美國銀行最近接到執法部門的警報，表示向 casas de cambio 出售的大面額美國紙幣有所增加。他們懷疑墨西哥犯罪集團正在該銀行管轄範圍內實施洗錢計畫。
應採取哪兩個步驟透過銀行追蹤資金以協助執法部門進行調查？ （選兩個。
A. Identify the money laundering scheme and submit a suspicious transaction report
B. Identify if there is a decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank
C. Identify deposits by casas de cambio that include third-party items including sequentially numbered monetary instruments
D. Identify multiple wire transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent business relationship with that casa de cambio
CD
