Questions Flashcards
In general, the three phases of money laundering are said to be: placement and A. structuring and manipulation. B. layering and integration. C. layering and smurfing. D. integration and infiltration.
B. layering and integration.
A financial institution branch manager who has been in place for over 10 years has not taken a vacation
for almost four years. The company does not allow employees to roll vacation over from year to year.
An AML compliance officer has noticed unusual activity in several accounts at the branch location.
What should the AML officer do?
A. Fire the manager for violation of bank policy.
B. Report the manager to authorities for engaging in suspicious activity.
C. Conduct an investigation to establish whether the manager has engaged in transactions in the
accounts where the unusual activity has occurred.
D. Conduct a background check to see if the manager has been convicted of criminal activity.
C. Conduct an investigation to establish whether the manager has engaged in transactions in the
accounts where the unusual activity has occurred.
The compliance officer is trying to put together a set of procedures for handling the decision of whether
or not to file an STR. What should the compliance officer include as part of these procedures?
A. The officer should recommend that the decision as to whether or not to file an STR be subjected to
a quality assurance review.
B. The officer should recommend decentralizing the decision in order to speed up the process and to
ensure that the decision is made closest to where the activity occurred.
C. The officer should recommend that STRs only be filed once they have been authorized by the board
of directors of the bank.
D. The officer should recommend that STRs only be filed once they have received a thorough legal
review.
A. The officer should recommend that the decision as to whether or not to file an STR be subjected to
a quality assurance review.
Which of the following controls would most effectively minimize the need to correct failures to collect
required customer information in the account opening process?
A. A quality review staff that checks paper applications to ensure all fields are complete
B. An automated account-opening platform that requires data entry prior to allowing the account to be
opened
C. Requiring that a manager review and approve all new account applications
D. Documenting a procedure that sets forth the steps required to open an account
B. An automated account-opening platform that requires data entry prior to allowing the account to be
opened
An AML compliance officer is investigating unusual activity that she has noticed in a customer’s
accounts. The customer has a retirement account, a savings account in trust for his son, a joint
checking account with his wife, a company checking account and an individual brokerage account. The
compliance officer believes the customer may be embezzling funds from his business. Which is the best
path for her to follow up on her suspicions?
A. Focus on the checking accounts, as the checking accounts allow the fastest movement of funds.
B. Ignore the savings and brokerage accounts, as these are not used in the placement stage of money
laundering.
C. Look at the movement of funds in all the accounts, as the customer may be using all of them to
launder money.
D. Focus on the business account, as the customer is embezzling money from the company.
C. Look at the movement of funds in all the accounts, as the customer may be using all of them to
launder money.
When a financial institution is responding to a formal criminal investigation by a law enforcement
agency, what is the primary purpose of requiring information going through a central point within the
institution?
A. Ensure that nothing damaging to the financial institution gets released.
B. Ensure that responses are timely and thorough and that privileged material is not inadvertently
handed over.
C. Ensure that the employees of the institution do not divulge information that would breach the
privacy rights of customers.
D. Ensure that there is one person who can adequately and thoroughly apprise the Board of Directors
of the progress of the investigation.
B. Ensure that responses are timely and thorough and that privileged material is not inadvertently
handed over.
- A financial institution is concerned about the possibility of the proceeds from human trafficking being
funneled through the institution. What are three things the institution should look out for?
A. Multiple wire transfers, often below the reporting thresholds, sent from foreign countries
B. Multiple, unrelated individuals sending wires to the same beneficiary
C. Accounts for foreign workers for which the employment agency is the custodian for the accounts
D. A group of four women who come into the financial institution to open separate accounts
A. Multiple wire transfers, often below the reporting thresholds, sent from foreign countries
B. Multiple, unrelated individuals sending wires to the same beneficiary
C. Accounts for foreign workers for which the employment agency is the custodian for the accounts
Which statement is true in respect to the Wolfsberg Group?
A. It is a castle in Belgium where members of national FIUs meet to monitor global AML trends.
B. This group is responsible for making international laws to combat anti-money laundering and
counter terrorist financing.
C. The major international banks meet in this group to develop global guidelines for anti-money
laundering and counter terrorist financing.
D. The governors of central banks meet in this group to discuss global trends in anti-money laundering
and counter terrorist financing.
C. The major international banks meet in this group to develop global guidelines for anti-money
laundering and counter terrorist financing.
What are three developments that should cause a financial institution to conduct an internal
investigation?
A. When the institution receives a grand jury subpoena with regard to transactions that have occurred
within several accounts at the institution
B. When several employees of the institution alert senior management or the compliance officer that
there are some suspicious transactions within an account
C. When the institution’s auditor identifies an omission in the AML policy
D. When a small local business starts engaging in overseas activity involving numerous, unexplained
wire transfers
A. When the institution receives a grand jury subpoena with regard to transactions that have occurred
within several accounts at the institution
B. When several employees of the institution alert senior management or the compliance officer that
there are some suspicious transactions within an account
D. When a small local business starts engaging in overseas activity involving numerous, unexplained
wire transfers
Identify three methods of laundering money using lawyers. A. Creating trusts for clients B. Buying and selling property C. Setting up and managing a charity D. Litigating a civil case for a client
A. Creating trusts for clients
B. Buying and selling property
C. Setting up and managing a charity
As part of their role in fighting money laundering, financial institutions should
A. designate a compliance officer.
B. depend solely on the state’s staff for combating money laundering.
C. refuse small cash deposits under the reporting threshold.
D. not open accounts for people from high-risk jurisdictions.
A. designate a compliance officer.
Which of the following statements is true? Correspondent banking is most vulnerable to money
laundering when the correspondent account is
A. maintained for foreign financial institutions that are banks.
B. not used to provide services directly to third parties.
C. maintained for a foreign bank that does not have a physical presence in any country.
D. maintained for a foreign private bank that is publicly traded and is a qualified intermediary.
C. maintained for a foreign bank that does not have a physical presence in any country.
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 the legal position for a client.
C. participating in financial or corporate transactions.
D. obtaining information associated with a judicial proceeding.
C. participating in financial or corporate transactions.
Identify three risks to financial institution employees for violations of AML laws. A. Civil penalties B. Termination of employment C. Criminal penalties D. Loss of passport
A. Civil penalties
B. Termination of employment
C. Criminal penalties
An AML compliance officer is looking to establish a suspicious activity reporting process at her small
institution. Which of the following should be incorporated into the procedures?
A. Allow employees to refer suspicious activity directly to the government authorities to file as quickly
as possible.
B. Have employees refer all unusual activity to the internal independent audit department to assess
whether the activity should be reported.
C. Have employees refer all unusual activity to senior management to ensure they are aware of all
unusual activity within the organization.
D. Have employees refer all unusual activity to her so that she may conduct an investigation into what
needs to be reported to authorities.
D. Have employees refer all unusual activity to her so that she may conduct an investigation into what
needs to be reported to authorities.
When should a financial institution consider retaining an experienced outside counsel for assistance?
A. Whenever the institution receives a subpoena from any law enforcement agency
B. When the institution itself appears to be the target of a criminal investigation
C. When law enforcement appears to be focused on the accounts of a very good and long-standing
customer of the institution
D. When the banking agencies criticize the adequacy of the institution’s AML monitoring procedures
B. When the institution itself appears to be the target of a criminal investigation
After receiving an STR regarding a customer account, the relevant law enforcement agency requests
permission to interview the bank personnel who are familiar with the underlying transaction. What
action should the compliance officer take?
A. The officer, in consultation with bank counsel, should cooperate, to the extent possible, and give
permission for the relevant interviews.to take place.
B. The officer should deny permission for any such interviews without the creation of a grand jury or a
formal court-ordered investigation.
C. The officer should only allow those employees who are comfortable to be interviewed by law
enforcement.
D. The officer should allow the employees to be interviewed only if they are given immunity by law
enforcement.
A. The officer, in consultation with bank counsel, should cooperate, to the extent possible, and give
permission for the relevant interviews.to take place.
In most money laundering international standards, it is stated that
A. financial institutions are not responsible for money laundering or suspicious transactions taking
place within their accounts until the government places the customer on a watch list.
B. informing customers that their accounts and/or transactions are the subject of an AML investigation
is not punishable.
C. the dirty money undergoing money laundering will not be confiscated because of privacy laws.
D. the institution should identify the beneficial owner(s) of the account.
D. the institution should identify the beneficial owner(s) of the account.
When a bank receives a subpoena for information about a specific account, what two steps should the
compliance officer take?
A. The compliance officer should ensure that the staff investigate and collect all documents
responsive to the subpoena.
B. The compliance officer should insist on law enforcement explaining why the subpoena was issued
and what law enforcement is looking for.
C. The compliance officer should ensure that the subpoena is reviewed by senior management and/or
counsel and be responded to in a timely manner.
D. The compliance officer should only comply with the subpoena after first getting approval from the
bank’s external legal counsel.
A. The compliance officer should ensure that the staff investigate and collect all documents
responsive to the subpoena.
C. The compliance officer should ensure that the subpoena is reviewed by senior management and/or
counsel and be responded to in a timely manner.
A compliance officer is looking to improve a compliance program for a financial institution that
operates in several countries. The institution has developed consistent customer due diligence
(CDD) requirements for all customers of the institution that exceed each of the individual country’s
requirements. When looking to provide management reporting on the CDD compliance efforts of the
institution, which of the following would make the most sense?
A. Report by each country’s compliance with the legal requirements within their country.
B. Report on compliance with the company’s stated requirements.
C. Report on compliance with each country’s requirements only for those customers that are
serviced by branches in multiple countries; all others should be reported on the company’s stated
requirements.
D. Report on the level of monitoring performed on the activity in the accounts.
B. Report on compliance with the company’s stated requirements.
What is willful blindness defined as?
A. Failing to file a suspicious transaction report for dealing with companies or financial institutions
from offshore tax havens
B. Not following customer identification procedures as set out in the institution’s procedures
C. Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags
D. Deliberate avoidance of a customer based on the assumption that his or her behavior suggested a
potential threat as money launderer and/or terrorist
C. Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags
What is the best way to establish compliance as a key responsibility for every employee of a financial
institution?
A. Have senior management require compliance as a condition of employment.
B. Have auditors conduct testing on employee compliance.
C. Point out the regulatory consequences of non-compliance in training.
D. Have the AML officer personally tell associates of their responsibilities.
A. Have senior management require compliance as a condition of employment.
What are three factors with regard to how and when to report an STR to the senior management and/or
the board of directors of a financial institution?
A. Whether the STRs filed are in excess of the previous year’s filings
B. Whether the STR raises significant issues, especially in terms of reputational risk
C. Whether the STR indicates any compliance deficiencies
D. Whether the STR is indicative of any significant AML trends
B. Whether the STR raises significant issues, especially in terms of reputational risk
C. Whether the STR indicates any compliance deficiencies
D. Whether the STR is indicative of any significant AML trends
A longtime customer of the bank comes into the bank a number of times over a series of weeks
and deposits a large amount of cash and, the next day, asks for the amount to be wired to a thirdworld
country. This behavior is not in keeping with his normal business practices. What should the
compliance officer recommend?
A. Contact the board of directors as soon as possible and inform them of this activity.
B. Immediately contact law enforcement by phone and tell them of the potential money laundering
activity.
C. Open an internal investigation, collect all the appropriate documentation and review it in order to
decide on whether to file an STR.
D. Make a note of the activity but do not file an STR to avoid the risk of losing a longtime customer.
C. Open an internal investigation, collect all the appropriate documentation and review it in order to
decide on whether to file an STR.
In anti-money laundering terminology, a red flag is
A. a warning sign indicating potentially suspicious, risky transactions or activities.
B. a general banking term used once the balance is negative or overdue.
C. the standard flag of countries not cooperative in fighting money laundering and terrorist financing.
D. an indicator that a customer is listed on an economic sanctions list.
A. a warning sign indicating potentially suspicious, risky transactions or activities.
What are the three classic gateways for international cooperation and sharing?
A. Mutual legal assistance treaties (MLATs)
B. Law enforcement’s use of grand jury subpoenas
C. Exchange of information between financial intelligence units (FIUs)
D. Exchange of information between supervisory agencies
A. Mutual legal assistance treaties (MLATs)
C. Exchange of information between financial intelligence units (FIUs)
D. Exchange of information between supervisory agencies
Which one of the following statements is correct in respect of the FATF 40 Recommendations?
Countries should
A. not allow bearer shares and legal persons that are able to issue bearer shares.
B. gather statistics on STRs; prosecutions and convictions; on property frozen, seized and confiscated;
and on mutual legal assistance, but not necessarily on other international requests for cooperation.
C. consider the feasibility of a system in which banks and other financial institutions and
intermediaries would report currency transactions without indicating a minimum fixed amount.
D. not approve the establishment or accept the continued operation of shell banks.
D. not approve the establishment or accept the continued operation of shell banks.
A customer at a brokerage firm indicated that he was primarily a conservative, long-range investor. The
customer has recently been engaging in day trading in penny stocks. What should an AML compliance
officer do in such a situation?
A. Check with the account officer to see if the customer has indicated a change in his investment
strategy.
B. Report the customer as suspicious due to investing in penny stocks.
C. Contact the customer and ask why he is engaged in high-risk day-trading activity.
D. Refer the customer to senior management for approval.
A. Check with the account officer to see if the customer has indicated a change in his investment
strategy.
Jim, an AML officer for a casino, identifies a number of potential red flags involving customers. Which
should be the most troublesome?
A. A customer purchases a number of chips, plays for a short period of time and wants to wire the
proceeds of the chips to another casino in a foreign country.
B. A customer gambles for an extended period of time and wants to convert his chips into a check
issued by the casino.
C. A customer gambles for an extended period of time and wants to convert his chips into cash by the
casino.
D. A customer asks to go into the high-stakes section of the casino but does not appear to know the
rules of the game he selects to play.
A. A customer purchases a number of chips, plays for a short period of time and wants to wire the
proceeds of the chips to another casino in a foreign country.
Trade-based money laundering requires the ability to
A. over- or under-invoice the goods.
B. sell the imported goods for as little as possible.
C. use goods that do not need to be declared.
D. avoid the use of high-value assets such as luxury cars or boats.
A. over- or under-invoice the goods.
What is the definition of a predicate offense?
A. Lawful or unlawful activity that involves willful blindness, and if there is an international element to
the crime, can lead to a suspicious activity report
B. Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the
crime of money laundering
C. An interface that is the underlying segment of a suspicious transaction monitoring system
D. A specified unlawful activity that is committed through concentration accounts deceiving
customers that are not directly related to the account
B. Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the
crime of money laundering
What is considered a beneficial owner of an account?
A. A person or entity who has direct signatory authority over an account and whose name appears on
the account
B. A person or entity who is ultimately entitled to the funds in the account, even though his or her
name may not appear on the account
C. A person or entity who is the originator and the destination of most (but not all) transactions
conducted within the account but who does not ultimately control such funds
D. A person or entity who is a gatekeeper, has the legal title to the account and typically transfers the
funds to a trust
B. A person or entity who is ultimately entitled to the funds in the account, even though his or her
name may not appear on the account
Joe, the compliance officer for a small bank, has noticed that new regulations now require reporting on
cross-border transactions that exceed a certain threshold. What are the appropriate next steps for Joe
to take to prepare his bank for the new requirements?
A. Consult with the regulators, provide training to impacted associates and work with the technology
partners to capture all cross-border transactions for reporting.
B. Provide training to impacted associates, work with technology partners to capture all cross-borders
transaction for reporting and implement a testing plan to be sure appropriate transactions are
captured and reported.
C. Work with technology partners to capture all cross-border transactions for reporting, implement a
testing plan to be sure appropriate transactions are captured and consult with the regulators.
D. Implement a testing plan to be sure appropriate transactions are captured and reported, provide
training to impacted associates and consult with the regulators.
B. Provide training to impacted associates, work with technology partners to capture all cross-borders
transaction for reporting and implement a testing plan to be sure appropriate transactions are
captured and reported.
In conducting a criminal investigation, what are three things that the law enforcement investigators
should do?
A. Conduct computer-based searches on the individuals and entities involved.
B. Review any previously filed STRs on the individuals and entities involved.
C. Analyze the financial transactions and activity of the subject and determine what is potentially
illegal.
D. Initiate a Section 314(b) request for information.
A. Conduct computer-based searches on the individuals and entities involved.
B. Review any previously filed STRs on the individuals and entities involved.
C. Analyze the financial transactions and activity of the subject and determine what is potentially
illegal
- When would a financial institution typically file an STR?
A. Whenever it is preparing to close an account
B. Whenever it detects unusual or suspicious transactions
C. Only when it is able to establish the existence of a criminal violation
D. Only when the board of directors approves the filing of the STR
B. Whenever it detects unusual or suspicious transactions
A compliance officer is looking to provide some way to report on the effectiveness of the AML program
to senior management. Which of the following would be the most appropriate means to keep senior
management informed of these efforts?
A. Develop a report containing metrics that reflect the effectiveness of various key program elements.
B. Rely on the regulatory examinations.
C. Provide a summary of all reported suspicious activity.
D. Provide detailed training to senior management on their AML obligations.
A. Develop a report containing metrics that reflect the effectiveness of various key program elements.
What three steps should be taken when there is a criminal investigation that is targeting the bank itself?
A. The senior management and the Board of Directors should be notified and kept apprised of the
progress of the investigation.
B. The bank should consider retaining experienced outside counsel to assist the bank in responding to
the investigation.
C. The bank should immediately go to the media and explain why it has done nothing wrong.
D. The relevant employees of the bank should be notified of the existence of the investigation and
should be given instructions as to what to do and how to act.
A. The senior management and the Board of Directors should be notified and kept apprised of the
progress of the investigation.
C. The bank should immediately go to the media and explain why it has done nothing wrong.
D. The relevant employees of the bank should be notified of the existence of the investigation and
should be given instructions as to what to do and how to act.
What are three initial things that a law enforcement investigator should consider in following up on an
STR submitted by a financial institution?
A. Identify potentially suspicious activity and any specified unlawful activity.
B. Trace the source and ownership of illegal money through all appropriate accounts.
C. In cross-border cases, seek international assistance.
D. Consider providing immunity to the target of the investigation to get more information quickly.
A. Identify potentially suspicious activity and any specified unlawful activity.
B. Trace the source and ownership of illegal money through all appropriate accounts.
C. In cross-border cases, seek international assistance.
Gatekeepers are defined as
A. professionals such as lawyers, accountants, notaries and foreign exchange dealers.
B. professionals such as lawyers, accountants, notaries, investment advisors and trust and company
service providers.
C. professionals such as lawyers, accountants, private bankers, investment advisors and trust and
company service providers.
D. professionals such as lawyers, accountants, notaries and fraud examiners.
B. professionals such as lawyers, accountants, notaries, investment advisors and trust and company
service providers.
Identify three key aspects of OFAC sanctions that have extraterritorial reach.
A. Restricting travel by U.S. citizens to certain countries
B. Economic and trade sanctions based on U.S. foreign policy
C. Freezing foreign assets under U.S. jurisdiction
D. Blocking people on the Specially Designated Nationals and Blocked Persons List
B. Economic and trade sanctions based on U.S. foreign policy
C. Freezing foreign assets under U.S. jurisdiction
D. Blocking people on the Specially Designated Nationals and Blocked Persons List
According to the FATF 40 Recommendations, designated nonfinancial businesses and professions
include
A. casinos, real estate agents and dealers in precious stones.
B. money service businesses, gatekeepers and issuers of electronic money.
C. dealers in precious metals, lawyers and commodity futures traders.
D. life insurance companies, real estate agents and notaries.
A. casinos, real estate agents and dealers in precious stones.
An AML compliance officer was reviewing customers at XYZ Bank and one of the customers (Mr. Sam
Tropicana) attracted her attention. During the recent months, the cash deposits and withdrawals that
were transacted through his account increased with amounts ranging between $7,500 and $17,000.
In addition, Sam deposited two checks, issued by a casino, into his account for $32,000 each. When
opening the account, Sam stated that he operated an import/export company. Which one of the
following items should cause the compliance officer to launch an investigation?
A. Sam maintained a personal account as well as the business account.
B. 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 had a recent increase in large cash transactions for his import/export business.
D. Sam had a recent increase in large cash transactions for his import/export business.
The FATF 40 Recommendations are organized into seven groups. Which three of the following are valid
group names?
A. Money Laundering and Confiscation
B. Financial and Non-Financial Institution Preventative Measures
C. Powers and Responsibilities of Competent Authorities and Other Instructional Measures
D. National Cooperation
A. Money Laundering and Confiscation
B. Financial and Non-Financial Institution Preventative Measures
C. Powers and Responsibilities of Competent Authorities and Other Instructional Measures
Jane, an investigator in the AML section of a large financial institution, is given a wide-ranging case to
investigate involving potential money laundering in a number of countries and entities. Which three
public source documents or records could aid Jane in furthering her investigation?
A. Domestic corporate filings
B. Court records
C. Police arrest records
D. Licensing and registration files
A. Domestic corporate filings
B. Court records
D. Licensing and registration files
Which were the Basel Committee’s two main motivations to encourage strong know your customer
programs in its paper Customer Due Diligence for Banks? (Choose two)
A. Mirror FATF’s KYC recommendations.
B. Meet European Union guidelines.
C. Protect the safety and soundness of banks.
D. Protect the integrity of banking systems.
C. Protect the safety and soundness of banks.
D. Protect the integrity of banking systems.
After reporting suspicious activity to the appropriate authorities, they request additional follow-up on
the reports. Which of the following actions should an AML compliance officer take?
A. Inform the customer that his or her activity has been reported as suspicious and the authorities are
asking about him or her.
B. Indicate to the authorities that you have fulfilled your regulatory duty by referring the matter to
them.
C. Give the authorities everything they request.
D. Cooperate fully with the authorities, as permitted by law.
D. Cooperate fully with the authorities, as permitted by law.
Jim, an AML expert for a large bank, is reviewing some questionable customer account activity. What
three scenarios should concern him the most in terms of possible AML red flags?
A. A customer who threatens an employee in an effort to discourage required record keeping
B. Transaction a customer has with a country whose location is unfamiliar to the AML expert
C. Corporate account that shows high velocity of cash deposits and wire transfer withdrawals always
leaving a low month-end balance
D. Employee who complains about having to file numerous reports to FinCEN
A. A customer who threatens an employee in an effort to discourage required record keeping
B. Transaction a customer has with a country whose location is unfamiliar to the AML expert
C. Corporate account that shows high velocity of cash deposits and wire transfer withdrawals always
leaving a low month-end balance
What three factors could cause a financial institution to update its existing AML program?
A. The launch of a new product
B. The acquisition of another financial institution
C. The election of a new board of directors
D. The passage of time (e.g., 12–18 months)
A. The launch of a new product
B. The acquisition of another financial institution
D. The passage of time (e.g., 12–18 months)
