Questions Flashcards
1
Q
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.
A
B. layering and integration.
2
Q
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.
A
C. Conduct an investigation to establish whether the manager has engaged in transactions in the
accounts where the unusual activity has occurred.
3
Q
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
A. The officer should recommend that the decision as to whether or not to file an STR be subjected to
a quality assurance review.
4
Q
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
A
B. An automated account-opening platform that requires data entry prior to allowing the account to be
opened
5
Q
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.
A
C. Look at the movement of funds in all the accounts, as the customer may be using all of them to
launder money.
6
Q
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.
A
B. Ensure that responses are timely and thorough and that privileged material is not inadvertently
handed over.
7
Q
- 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
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
8
Q
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.
A
C. The major international banks meet in this group to develop global guidelines for anti-money
laundering and counter terrorist financing.
9
Q
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
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
10
Q
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
A. Creating trusts for clients
B. Buying and selling property
C. Setting up and managing a charity
11
Q
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
A. designate a compliance officer.
12
Q
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.
A
C. maintained for a foreign bank that does not have a physical presence in any country.
13
Q
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.
A
C. participating in financial or corporate transactions.
14
Q
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
A. Civil penalties
B. Termination of employment
C. Criminal penalties
15
Q
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.
A
D. Have employees refer all unusual activity to her so that she may conduct an investigation into what
needs to be reported to authorities.
16
Q
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
A
B. When the institution itself appears to be the target of a criminal investigation
17
Q
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
A. The officer, in consultation with bank counsel, should cooperate, to the extent possible, and give
permission for the relevant interviews.to take place.
18
Q
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.
A
D. the institution should identify the beneficial owner(s) of the account.
19
Q
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
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.
20
Q
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.
A
B. Report on compliance with the company’s stated requirements.
21
Q
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
A
C. Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags
22
Q
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
A. Have senior management require compliance as a condition of employment.
23
Q
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
A
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
24
Q
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.
A
C. Open an internal investigation, collect all the appropriate documentation and review it in order to
decide on whether to file an STR.
25
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.
26
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
27
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.
28
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.
29
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.
30
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.
31
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
32
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
33
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.
34
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
35
84. 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
36
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.
37
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.
38
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.
39
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.
40
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
41
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.
42
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.
43
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
44
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
45
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.
46
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.
47
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
48
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)
49
The greatest risk for money laundering is for casinos that
A. provide their customers with a wide array of gambling services.
B. operate in a non-Egmont member country.
C. allow customers with credit balances to withdraw funds by check in another jurisdiction.
D. only send suspicious transaction reports to the financial intelligence unit of the country it operates
in.
C. allow customers with credit balances to withdraw funds by check in another jurisdiction.
50
Suzy is an AML compliance officer at an institution that is looking to open treasury management
services (e.g., wires, check clearing and foreign draft issuance) for correspondent banking customers.
Which of the following should Suzy be most concerned about regarding the institution’s capabilities
concerning these customers?
A. Whether the new account systems will be able to handle customers with foreign names
B. Whether the correspondent accounts will be approved by government regulators
C. Whether the correspondent accounts will be able to provide evidence of their customers’ identities
at account opening
D. Whether the correspondent accounts will be able to be monitored by the institution’s monitoring
systems
D. Whether the correspondent accounts will be able to be monitored by the institution’s monitoring
systems
51
Which three statements are true about the Fourth EU Directive on Money Laundering?
A. It updates European Community legislation to be further in line with the Financial Action Task
Force (FATF) 40 Recommendations.
B. It repeats the definition of a politically exposed person in previous directives.
C. It repeats the customer due diligence requirements of the previous directives but adds more detail
to the requirements by, for example, including a specific requirement to identify the beneficial
owner and includes ongoing monitoring requirements.
D. It includes new definitions for correspondent relationships and senior management.
A. It updates European Community legislation to be further in line with the Financial Action Task
Force (FATF) 40 Recommendations.
C. It repeats the customer due diligence requirements of the previous directives but adds more detail
to the requirements by, for example, including a specific requirement to identify the beneficial
owner and includes ongoing monitoring requirements.
D. It includes new definitions for correspondent relationships and senior management.
52
Which three of the following is an indication of possible money laundering in an insurance industry
scenario?
A. Insurance products sold through intermediaries, agents or brokers
B. Single-premium insurance bonds, redeemed at a discount
C. Policyholders who are unconcerned about penalties for early cancellation
D. Policyholders who redeem the policy within the free look period
B. Single-premium insurance bonds, redeemed at a discount
C. Policyholders who are unconcerned about penalties for early cancellation
D. Policyholders who redeem the policy within the free look period
53
Which statement below defines a mutual legal assistance treaty?
A. It is a written request for legal or judicial assistance sent by the central authority of one country to
the central authority of another when seeking assistance from the foreign jurisdiction.
B. It is an agreement among countries allowing for mutual assistance in legal proceedings and access
to documents, witnesses and other legal and judicial resources in the respective countries, in
private sectors, for use in official investigations and prosecutions.
C. It is an agreement between two parties establishing a set of principles that govern their relationship
on a particular matter. An MOU is often used by countries to govern their sharing of assets in
international asset-forfeiture cases or to set out their respective duties in anti-money laundering
initiatives.
B. It is an agreement among countries allowing for mutual assistance in legal proceedings and access
to documents, witnesses and other legal and judicial resources in the respective countries, in
private sectors, for use in official investigations and prosecutions.
54
The Annex IV General Guide to Account Opening Consultative Document published in February 2016
by the Basel Committee lists information that should be obtained for the identification of legal persons.
Which three items are recommended?
A. Name, legal form, status and proof of incorporation of the legal person
B. Permanent address of principal place of the legal person’s activities
C. A report describing a visit, by the account officer, to the principal place of business
D. Identity of natural persons who have authority to operate the account and who exercise control of
the legal person through ownership or other means
A. Name, legal form, status and proof of incorporation of the legal person
B. Permanent address of principal place of the legal person’s activities
D. Identity of natural persons who have authority to operate the account and who exercise control of
the legal person through ownership or other means
55
Tom works as a compliance officer at ABC Bank. He is looking at the transactions of one of the bank’s
customers, Mr. Brown, the owner of a check cashing company. Over the last six months, Mr. Brown has
not made withdrawals of cash against check deposits. He also deposited two checks for $2,000 each
that were issued by a casino. When checking the KYC file, Tom sees that, when opening the account,
Mr. Brown had requested information about fees and commission that are charged by the bank. What
should arouse Tom’s suspicion the most?
A. Mr. Brown deposited checks from casinos.
B. Mr. Brown has not made cash withdrawals against check deposits.
C. Mr. Brown asked for information about commissions and fees charged.
D. Mr. Brown does not have an escrow account.
B. Mr. Brown has not made cash withdrawals against check deposits
56
Which of the following should an anti-money laundering specialist include on an internal investigation
log?
A. A government order on a customer that garnishes his wages for failure to pay child support
B. Supporting documentation and materials for denying service to a client with a bad credit rating
C. Notes pertaining to activity that is unusual but for which a suspicious transaction report has not
been filed
D. Reference to a memorandum to the company’s corporate management relating to budgetary and
similar concerns
C. Notes pertaining to activity that is unusual but for which a suspicious transaction report has not
been filed
57
```
In which stage of money laundering would you classify the use of laundered funds to purchase highvalue
assets and luxury items?
A. Integration
B. Structuring
C. Placement
D. Construction
```
A. Integration
58
A small broker-dealer has an AML compliance program that addresses procedures for filing suspicious
transaction reports and includes policies, procedures and internal controls for customer identification,
monitoring accounts and identifying money laundering red flags. Every employee of the broker dealer
is trained via the Internet in January and in July on AML issues. The board does not take the Internet
training. Instead, the compliance officer organizes a luncheon for them where an outsider comes in
and trains them. The program provides for the appointment of a compliance officer, and once a year
the compliance officer conducts an audit to test the program. In what respect does the program need
improvement?
A. The AML program should be tested by an independent person, not the compliance officer.
B. The AML program should be tested more than once per year.
C. The board should receive the same training provided to the employees.
D. Employees should not be trained via the Internet, because classroom training is better.
A. The AML program should be tested by an independent person, not the compliance officer.
59
What is the right of reciprocity in the field of international cooperation against money laundering?
A. The legal principle that financial institutions that have referred customers to other financial
institutions can share information about these customers with the other institutions
B. A rule of the Basel Committee allowing properly regulated financial institutes of another member
state of the Basel Committee to do business without additional supervision to the degree that the
other state grants the same right
C. The right of each FATF member country to delegate prosecution of a case of money laundering to
another member that is already investigating the same case
D. A rule in the law of a country allowing its authorities to cooperate with authorities of other
countries to the degree that their law allows them to do the same
D. A rule in the law of a country allowing its authorities to cooperate with authorities of other
countries to the degree that their law allows them to do the same
60
Robert is a compliance officer for a financial institution. He is looking to assess the effectiveness of
the current AML program. Which of the following should Robert consider in his assessment of the
program’s effectiveness?
A. Sales staff surveys on AML efforts, customer due diligence error rates and quality assurance testing
on STR filings
B. Customer due diligence error rates, sales staff surveys on AML efforts and percentage of products
and services monitored for suspicious activity
C. Quality assurance testing on STR filings, sales staff surveys on AML efforts and percentage of
products and services monitored for suspicious activity
D. Customer due diligence error rates, quality assurance testing on STR filings and percentage of
products and services monitored for suspicious activity
D. Customer due diligence error rates, quality assurance testing on STR filings and percentage of
products and services monitored for suspicious activity
61
In 2014, the Wolfsberg Group published its Anti-Money Laundering Principles for Correspondent
Banking. Which three of the following elements are recommended to be included in the due diligence of
a correspondent banking client?
A. The geographic risk
B. The ownership and management structure
C. The résumé of the compliance officer
D. The customer base
A. The geographic risk
B. The ownership and management structure
D. The customer base
62
The Basel Committee in Banking Supervision can be defined as a committee
A. that develops the guidance for FATF.
B. of the CEOs of the major international banks.
C. of senior members of international law enforcement who harmonize international AML/CTF laws.
D. of the G10 central bank governors, which issues guidance on subjects including customer due
diligence, risk management and cross-border wire transfers.
D. of the G10 central bank governors, which issues guidance on subjects including customer due
diligence, risk management and cross-border wire transfers.
63
In which case might a suspicious transaction report not be necessary?
A. A customer deposits money of suspicious origins and refuses to answer questions from the
financial institution’s staff.
B. A customer tries to move money that is suspected of being derived from criminal activity.
C. A customer owns a large supermarket and deposits large amounts of cash several times a day.
D. A customer’s account is showing transaction activities that are beyond his known financial
capability.
C. A customer owns a large supermarket and deposits large amounts of cash several times a day.
64
Which statement is true regarding the risk of politically exposed persons (PEPs)?
A. PEPs provide access to third parties on whom the financial institution has not conducted sufficient
due diligence.
B. PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes
or misappropriating government funds.
C. PEPs are foreign customers who inherently present additional risk as they are engaged in crossborder
transactions.
D. PEPs generally do not pose enhanced risks to an institution due to their political standing; rather,
PEPs increase the prestige of an institution.
B. PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes
or misappropriating government funds.
65
When documenting ongoing training efforts, which of the following should be documented to
demonstrate the distribution of the training to appropriate employees?
A. Whether the training was provided to the board of directors
B. The topics the training addressed
C. The names of the employees who took the training with their department name
D. Whether the employees who took the training passed the posttraining assessment
C. The names of the employees who took the training with their department name
66
Why is a payable through account vulnerable to money laundering?
A. It can be very difficult to conduct due diligence on the foreign institution customers who are
ultimately using these accounts.
B. These are concentration accounts located in a domestic branch of a foreign bank.
C. These are nested correspondent accounts at a foreign shell bank with customers with whom the
domestic bank did not exercise due diligence.
D. These are master escrow accounts on which a domestic bank generally does not conduct periodic
verification.
A. It can be very difficult to conduct due diligence on the foreign institution customers who are
ultimately using these accounts.
67
Which of the following statements is true?
A. Credit cards are not likely to be used in the layering phase of money laundering because of
restrictions in cash payments.
B. Credit cards are effective instruments for laundering money because the transactions do not create
an audit trail.
C. A launderer can launder money by prepaying his or her credit card using funds that are already in
the banking system, creating a credit balance on his account, and requesting a credit refund.
D. A launderer can use illicit funds that are already in the banking system to pay his or her credit card
bill for goods purchased, which is an example of placement.
C. A launderer can launder money by prepaying his or her credit card using funds that are already in
the banking system, creating a credit balance on his account, and requesting a credit refund.
68
With regard to exchanges of information between FIUs of different countries, what are three controlling
principles?
A. Sharing between FIUs should be permitted only if the central banks are also a party to the sharing.
B. The sharing of information should be done as freely as possible on the basis of reciprocity.
C. The exchange of information should take place as informally and as rapidly as possible.
D. Differences in the definition of offenses should not impede the free exchange of information.
B. The sharing of information should be done as freely as possible on the basis of reciprocity.
C. The exchange of information should take place as informally and as rapidly as possible.
D. Differences in the definition of offenses should not impede the free exchange of information.
69
When should a compliance officer recommend that a financial institution conduct an internal
investigation? (Choose three.)
A. When there is a suspicion that an employee is conspiring with a long-term customer to launder
money through the bank
B. When several customers open separate accounts at different branches but with the same contact
information
C. When the bank’s regulatory agency recommends changes to the AML policy
D. When a long-term employee decides to take only intermittent vacation days but not two weeks in a
row, per bank policy
A. When there is a suspicion that an employee is conspiring with a long-term customer to launder
money through the bank
B. When several customers open separate accounts at different branches but with the same contact
information
D. When a long-term employee decides to take only intermittent vacation days but not two weeks in a
row, per bank policy
70
When assessing a new product, which of the following should be considered as part of the assessment
from an AML perspective?
A. The inherent risk of the product, the control environment to mitigate the risks presented by the
product and the residual risk of the product in light of the controls
B. The control environment to mitigate the risks presented by the product, the residual risk of the
product in light of the controls and the projected profitability of the product
C. The projected profitability of the product, the control environment to mitigate the risks presented
by the product and the inherent risk of the product
D. The residual risk of the product in light of the controls, the inherent risk of the product and the
projected profitability of the product
A. The inherent risk of the product, the control environment to mitigate the risks presented by the
product and the residual risk of the product in light of the controls
71
```
The tactic in which individuals make multiple deposits in small quantities to avoid detection is called
A. paralleling.
B. integration.
C. investing.
D. structuring.
```
D. structuring.
72
What three initial actions should a financial institution take in responding to red flags that indicate that
a customer is laundering money through his or her accounts?
A. Identify and review internal transactions engaged in by the customer.
B. Perform an Internet investigation focused on the customer, including a review of court records.
C. Confront the customer about the possible abuse of his or her accounts.
D. Compare the income generated by the customer with comparable businesses in the area.
A. Identify and review internal transactions engaged in by the customer.
B. Perform an Internet investigation focused on the customer, including a review of court records.
.
D. Compare the income generated by the customer with comparable businesses in the area.
73
A new products manager wants to propose a product involving prepaid cards but the AML officer sees
some problems. What would be three risks that the AML officer might raise?
A. The new product would enable customers to move funds around the world quickly.
B. The product can be reloaded and used anonymously.
C. There might be an influx of new customers who have not been vetted seeking to use the product.
D. The cards could be used as a substitute for bulk-cash smuggling.
A. The new product would enable customers to move funds around the world quickly.
B. The product can be reloaded and used anonymously.
D. The cards could be used as a substitute for bulk-cash smuggling.
74
Identify three key aspects of delivering targeted training for different audiences and job functions.
A. Determining whether to focus on real or hypothetical case studies
B. Determining how to provide the training
C. Determining the focus of the training
D. Determining whom to train
B. Determining how to provide the training
C. Determining the focus of the training
D. Determining whom to train
75
A law enforcement representative calls up the compliance officer and urgently requests information
pertaining to a particular account in connection with an on-going terrorist financing investigation. What
should the compliance officer do?
A. Get permission from the board of directors to hand the material over to law enforcement.
B. Hand the material over to law enforcement immediately because of the urgent nature of the
request.
C. Request that the law enforcement representative provide a court order, a grand jury subpoena or
other legal process unless the bank has already filed an STR on the matter.
D. Get permission from outside legal counsel before handing the material over to law enforcement.
C. Request that the law enforcement representative provide a court order, a grand jury subpoena or
other legal process unless the bank has already filed an STR on the matter.
76
Which of the following best describes the alternative remittance system?
A. The transfer of value between countries, outside of the legitimate banking system
B. A nonelectronic data remittance system used in several foreign countries to report suspicious
activities
C. Old-fashioned reporting requirements commonly used in non-cooperative countries and territories
D. The transfer of funds between two or more financial institutions using concentration accounts
A. The transfer of value between countries, outside of the legitimate banking system
77
The compliance officer of a financial institution has just received an extensive law enforcement
subpoena focusing on the potential inadequacy of the institution’s AML program. What three steps
should the compliance officer take?
A. He or she should advise the employees to maintain the confidentiality of all STRs.
B. He or she should notify the board of directors and senior management of the financial institution of
the subpoena and its focus on the institution.
C. He or she should consider advising the institution to retain outside counsel experienced in this
area.
D. He or she should consider providing law enforcement with the results of any internal investigation
conducted by the institution.
B. He or she should notify the board of directors and senior management of the financial institution of
the subpoena and its focus on the institution.
C. He or she should consider advising the institution to retain outside counsel experienced in this
area.
D. He or she should consider providing law enforcement with the results of any internal investigation
conducted by the institution.
78
```
When drafting an AML policy, which of the following internal parties must approve the policy?
A. Executive management
B. The audit department
C. The sales team management
D. The operational staff management
```
A. Executive management
79
Which three of the following statements are included in Section 313 of the PATRIOT Act definition of
physical presence in respect to shell banks?
A. There is a fixed address.
B. It employs at least one full-time employee.
C. The majority of the board of directors must be local residents.
D. Banking records are kept at the fixed address.
A. There is a fixed address.
B. It employs at least one full-time employee.
D. Banking records are kept at the fixed address.
80
Roy, a BSA officer for a large financial institution, is reviewing a possible money laundering case. What
are three potential red flags that should concern him?
A. Multiple purchases and sales of property over a short period of time
B. High number of transactions over the Internet or by phone
C. Newly arrived customer from out of state opening a business account
D. Two or more people using the same identification
A. Multiple purchases and sales of property over a short period of time
B. High number of transactions over the Internet or by phone
D. Two or more people using the same identification
81
Which statement is true?
A. Lawyers in FATF member countries generally cannot be used to serve as formation agents to set up
trusts, front companies or shell companies.
B. Lawyers and similar professional gatekeepers are called money services businesses.
C. Lawyers generally cannot be used to act as nominee shareholders for a beneficial owner.
D. Lawyers can be abused by launderers by using the accounts they set up for them for the placement
and layering of funds.
D. Lawyers can be abused by launderers by using the accounts they set up for them for the placement
and layering of funds.
82
The Egmont Training Group published FIUs in Action: 100 Sanitized Cases. Which two of the items
noted below were listed in the report as part of the six most frequent indicators of money laundering?
A. Defensive stance to questioning
B. Use of precious stones for moving value
C. Unrealistic wealth compared to client profile
D. Significant use of prepaid cards
A. Defensive stance to questioning
C. Unrealistic wealth compared to client profile
83
Marie, a compliance officer at a financial institution, attends an annual AML-industry conference and
learns of a new regulation that will impact her current AML processes. The regulatory environment
has been relatively stable within the industry for several years but Marie is glad she attended this
conference to get news of the new requirements. What should Marie do to stay abreast of future
changes in requirements?
A. Request permission to attend future annual AML-industry conferences.
B. Ask internal auditors to provide her with notice of changes needed to the program.
C. Implement a process to determine when new regulations are published and assess them for impacts
to the AML program.
D. Conduct a risk assessment to determine if the regulations change frequently enough to implement a
process to check for changes.
C. Implement a process to determine when new regulations are published and assess them for impacts
to the AML program.
84
Over lunch with a friend from the computer operations department, a junior compliance analyst learns
that there was a problem during the previous week related to data being transmitted to the transaction
monitoring application. The friend states that because it was purely a technical computer system issue,
he was quietly proud that he was able to rectify it quickly himself during the early hours of the morning.
What action should the analyst take?
A. Congratulate his friend on his prompt action.
B. Congratulate his friend and, as soon as possible, ensure that the compliance officer is aware of the
situation.
C. Nothing because the appropriate controls are in place for such events.
D. Immediately report the situation to the regulators.
B. Congratulate his friend and, as soon as possible, ensure that the compliance officer is aware of the
situation.
85
Which of the following is the most common method of laundering money through a legal money
services business?
A. Exchanging currency and remitting money
B. Smuggling bulk cash
C. Transferring funds through payable through accounts (PTAs)
D. Exchanging Colombian pesos on the black market
A. Exchanging currency and remitting money
86
```
In which stage of money laundering would you classify depositing small amounts of cash into several
related accounts?
A. Integration
B. Structuring
C. Placement
D. Construction
```
C. Placement
87
When a financial institution is served with a search warrant by a law enforcement agency, what are
three things that the employees of the institution should do?
A. They should not release any documents until the institution’s outside counsel arrives on the scene.
B. They should cooperate fully with the law enforcement agents and remain calm and polite.
C. They should try to obtain an inventory of the materials that the law enforcement agents take from
the institution.
D. They should review the warrant to determine its scope.
B. They should cooperate fully with the law enforcement agents and remain calm and polite.
C. They should try to obtain an inventory of the materials that the law enforcement agents take from
the institution.
D. They should review the warrant to determine its scope.
88
What are three possible red flags indicating suspicious or unusual activity that might warrant an
investigation and the filing of an STR?
A. The opening of a new account without a local telephone number or utility bill available
B. Unusually high monthly balances in comparison to known sources of income
C. High level of monetary transactions through an account during the course of a month but low
beginning and ending balances
D. Multiple cash deposits made just under the reporting threshold
B. Unusually high monthly balances in comparison to known sources of income
C. High level of monetary transactions through an account during the course of a month but low
beginning and ending balances
D. Multiple cash deposits made just under the reporting threshold
89
What is nesting?
A. When a respondent bank is providing upstream correspondent services to other financial
institutions
B. When a respondent bank is providing downstream correspondent services to other financial
institutions
C. When a bank has many common customers with other local banks
D. When customers have accounts with many local banks
B. When a respondent bank is providing downstream correspondent services to other financial
institutions
90
FinCEN’s Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance, published
in 2014, listed six areas of emphasis. Which three areas 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. Leadership should be engaged.
B. Information should be shared throughout the organization.
D. The organization must have an appropriately qualified compliance officer.
91
What are the three key criteria in AML risk rating?
A. Customer type, geographic location, products and services used
B. Geographic location, customer type, employment status
C. Products and services used, customer type and prior banking relations
D. Employment status, customer type, products and services used
A. Customer type, geographic location, products and services used
92
Diane, the AML compliance officer for a large financial institution, uncovers a serious case of potential
money laundering being conducted through a number of related accounts. What three factors should
she consider in deciding whether or not to close the accounts?
A. Whether the account holder is a close associate of any of the members of the board of directors
B. Whether the alleged money laundering activity is occurring in all of the accounts or just some of the
accounts
C. The legal basis for closing the accounts
D. The reputational risk to the institution if the accounts are maintained
B. Whether the alleged money laundering activity is occurring in all of the accounts or just some of the
accounts
C. The legal basis for closing the accounts
D. The reputational risk to the institution if the accounts are maintained
93
Which three of the following statements are true?
A. Online gambling provides an excellent method of laundering because transactions are conducted
primarily through credit or debit cards and the sites are typically unregulated offshore firms.
B. An institution can know when a credit card is used for online gambling transactions because the
cards rely on codes that illustrate the type of transactions.
C Online gambling provides an excellent method of laundering because it lends itself to any type of
cash movement and there is no face-to-face contact with the customer.
D. Some banks no longer allow the use of credit cards for online gambling transactions.
A. Online gambling provides an excellent method of laundering because transactions are conducted
primarily through credit or debit cards and the sites are typically unregulated offshore firms.
B. An institution can know when a credit card is used for online gambling transactions because the
cards rely on codes that illustrate the type of transactions.
D. Some banks no longer allow the use of credit cards for online gambling transactions.
94
What is the definition of a respondent bank?
A. A bank for which another financial institution establishes, maintains, administers or manages a
correspondent account
B. A bank that provides international services to another local financial institution
C. A foreign bank that does not have a permanent staff
D. A bank that is not subject to any regulation
A. A bank for which another financial institution establishes, maintains, administers or manages a
correspondent account
95
Which of the following is the most difficult regulatory challenge facing a foreign financial institution
with a correspondent banking relationship in the U.S.?
A. USA PATRIOT Act
B. Basel Due Diligence Principles for Banks
C. FATF Guidance on Terrorist Financing
D. UN Security Council Resolution on Correspondent Banking
A. USA PATRIOT Act
96
```
The Egmont Group is supported by working groups. Which three are members of the five working
groups?
A. Operational
B. Legal
C. Examination
D. Outreach
```
A. Operational
B. Legal
D. Outreach
97
Of the following scenarios, which two are potential red flags indicating possible suspicious activity that
should be investigated further?
A. A large family with multiple accounts held in the name of different family members
B. Accounts held for a business in a branch that is located on the other side of town from where the
business is located
C. An individual who holds multiple accounts under the same name
D. A company that has multiple accounts, one for each of their various subsidiary businesses
B. Accounts held for a business in a branch that is located on the other side of town from where the
business is located
C. An individual who holds multiple accounts under the same name
98
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, because it is too high risk because the customers cannot be seen to verify
their identities.
B. Require all customers to send a copy of valid photo identification to the institution.
C. Ensure that the institution has a reliable third-party source that will enable verification of the
customers.
D. Allow customers to enter required information but require all customers to come to the institution
in person for verification.
C. Ensure that the institution has a reliable third-party source that will enable verification of the
customers.
99
Which of the following statements is true?
A. The Egmont Group membership comprises national FIUs.
B. The Wolfsberg Group membership comprises central bank governors of the G10.
C. The European Union recommends legislation to be passed in the member countries.
D. The Basel Committee levies fines on the member countries for non-compliance with AML laws.
A. The Egmont Group membership comprises national FIUs.
100
What are three of the recommended ways to respond to a law enforcement inquiry?
A. Cooperate with the law enforcement inquiry as much as possible.
B. Respond to all formal requests for information as promptly and thoroughly as possible, unless there
is a valid objection that can and should be made.
C. Ensure that all communication, written and oral, is funneled through a centralized place.
D. Guard against unwarranted publicity by resisting all inquiries and requests whenever possible.
A. Cooperate with the law enforcement inquiry as much as possible.
B. Respond to all formal requests for information as promptly and thoroughly as possible, unless there
is a valid objection that can and should be made.
C. Ensure that all communication, written and oral, is funneled through a centralized place.
101
Which of the following should a national legislature consider when criminalizing money laundering in
line with the CFATF 19 Recommendations? (Choose three.)
A. Defining money laundering based on the model laws issued by the Organization of American States
B. Permitting forfeiture in all cases following conviction
C. Indicating whether it is relevant that a predicate offense may have been committed outside the
local jurisdiction
D. Requiring money laundering offenses to prove that the offender has actual knowledge of a criminal
connection to the funds
A. Defining money laundering based on the model laws issued by the Organization of American States
B. Permitting forfeiture in all cases following conviction
C. Indicating whether it is relevant that a predicate offense may have been committed outside the
local jurisdiction
102
The FATF 40 Recommendations are grouped into seven topics. Identify three of those topics from the
list below.
A. Terrorist Financing and Financing of Proliferation
B. Powers and Responsibilities of Competent Authorities and Other Institutional Measures
C. Money Laundering and Confiscation
D. Financial and Non-Financial Institution Preventative and Detection Measures
A. Terrorist Financing and Financing of Proliferation
B. Powers and Responsibilities of Competent Authorities and Other Institutional Measures
C. Money Laundering and Confiscation
103
Suzy, the AML compliance officer for a large financial organization, is asked by her board of directors
to review how best to protect the confidentiality of STRs submitted by the organization and the
confidential information contained therein. What are three things she should consider?
A. Ensure that employees know how to retrieve STRs by the name of the customer quickly and
efficiently.
B. Ensure training of employees so that they do not inadvertently inform, or tip off, the targeted
customer of the filing.
C. Ensure strong record-keeping procedures to segregate information pertaining to STRs and to
maintain their confidentiality.
D. Ensure that procedures are in place to promptly and appropriately respond to requests for copies
of filed STRs.
B. Ensure training of employees so that they do not inadvertently inform, or tip off, the targeted
customer of the filing.
C. Ensure strong record-keeping procedures to segregate information pertaining to STRs and to
maintain their confidentiality.
D. Ensure that procedures are in place to promptly and appropriately respond to requests for copies
of filed STRs.
104
The compliance officer reads about a large potential fraud case in the morning newspaper. When the
officer gets to the bank, the officer uncovers the fact that the potential fraud case involves an important
customer of the bank. After doing an internal investigation, the officer determines that there is no
suspicious activity in the customer’s accounts. What should the officer do next?
A. The officer should notify the board of directors of the nature and results of the internal
investigation.
B. The officer should document the nature and results of the internal investigation and keep the
documentation in an appropriate file.
C. The officer should file an STR in case the customer’s accounts could assist law enforcement in its
formal criminal investigation.
D. The officer should file an STR in order to justify the time spent on the internal investigation and to
avoid being second-guessed by the bank examiners.
B. The officer should document the nature and results of the internal investigation and keep the
documentation in an appropriate file.
105
Which two activities are typically associated with the black market peso exchange (BMPE) money
laundering system?
A. Converting illicit drug proceeds from dollars or euros to Colombian pesos
B. Converting illicit drug proceeds from Colombian pesos to dollars or euros
C. Facilitating purchases by Colombian importers of goods manufactured in the United States or
Europe through peso brokers
D. Facilitating purchases by European or U.S. importers of goods manufactured in Colombia through
peso brokers
A. Converting illicit drug proceeds from dollars or euros to Colombian pesos
C. Facilitating purchases by Colombian importers of goods manufactured in the United States or
Europe through peso brokers
106
What is the reasoning behind implementing a risk-based anti-money laundering approach?
A. It will keep the regulators focused on money laundering controls in sectors beyond banks.
B. Institutions can best use their limited resources to focus on matters where the money laundering
risks are highest.
C. A quantitative approach will generate better results than a qualitative approach.
D. It allows the institution to focus on selling products that have a better return on investment.
B. Institutions can best use their limited resources to focus on matters where the money laundering
risks are highest.
107
Which three of the following statements are true in respect to the Fourth EU Anti-Money Laundering
Directive?
A. Member countries can decide when and if they incorporate it into their local laws.
B. It repeals and replaces the Third EU Directive on Anti-Money Laundering.
C. Each member country must hold beneficial ownership information in a central registry and it must
be made available to competent authorities.
D. The definition of a PEP is expanded to include domestic persons.
B. It repeals and replaces the Third EU Directive on Anti-Money Laundering.
C. Each member country must hold beneficial ownership information in a central registry and it must
be made available to competent authorities.
D. The definition of a PEP is expanded to include domestic persons.
108
```
According to the European Union’s Fourth Directive, the threshold for entities obliged to report
suspicious transactions decreased to
A. $5,000 euros.
B. $10,000 euros.
C. $15,000 euros.
D. $20,000 euros.
```
B. $10,000 euros.
109
A customer wants to establish a sizable relationship with a financial institution. The AML officer is not
comfortable with the client’s explanation for the source of the funds, but the client manager vouches for
the client and is eager to open the relationship quickly. What should the AML officer do to validate the
client’s sources of funds?
A. Accept the client manager’s approval of the client.
B. Allow the account to be opened but be sure to monitor the account activity.
C. Perform a background investigation to determine whether the client’s source of funds is credible.
D. Decline the account.
C. Perform a background investigation to determine whether the client’s source of funds is credible.
110
A new customer approaches a bank to open a commercial account. The customer provides an address
for the account located across the city from the branch. When asked by the account representative if
the customer requires any additional banking services, the customer responds that she is also interested
in opening a personal investment account. The account representative refers the customer to the
broker-dealer. The customer tells the firm representative she has never had a brokerage account before
and has a few questions about how an investment account works. The customer asks how deposits
can be made into her account, if there are any reporting requirements, and how to go about moving
balances out of the account using wire transfers. No questions are asked about fees associated with
these transactions. Which three items would be considered suspicious?
A. The customer asks many questions about the brokerage account but none of them is related to
investing.
B. The customer is opening a commercial account and at the same time a personal investment
account.
C. The address of the account holder and the branch where the customer came to open the account
are not close to each other.
D. The customer appears unconcerned about the fees.
A. The customer asks many questions about the brokerage account but none of them is related to
investing.
C. The address of the account holder and the branch where the customer came to open the account
are not close to each other.
D. The customer appears unconcerned about the fees
111
The FATF has consistently noted the use of casinos in money laundering schemes in its annual
typologies reports. One laundering technique involving casinos is
A. asking for winners’ checks to be made out in the name of third persons or without a payee.
B. abusing casinos by circumventing its gatekeepers.
C. prepaying a casino token or chip by using funds that are already in the casino system, creating a
debit balance.
D. extensive gambling via multiple games throughout the casino.
A. asking for winners’ checks to be made out in the name of third persons or without a payee.
112
The money laundering reporting officer of a financial institution should
A. report everything that comes his or her way from anyone in the organization.
B. report everything that comes his or her way from senior management or Board of Directors.
C. review all available information and file a suspicious transaction report in respect of any unusual or
potentially suspicious activity.
D. report only what the reporting officer’s superior agrees should be reported.
C. review all available information and file a suspicious transaction report in respect of any unusual or
potentially suspicious activity.
113
What are three practical tips in interviewing employees with regard to an unusual or suspicious
transaction they have witnessed?
A. Interview the employees as soon after the occurrence as possible in order to ensure that their
memories are fresh.
B. Try to put the employees at ease during the interview and start with relatively easy,
noncontroversial questions before getting into more sensitive matters.
C. Use open-ended questions for the employees in order to ensure that the questions do not dictate
what the expected answer is.
D. Control the interview as much as possible in order to attempt to resolve the matter quickly and
uncover the wrongdoer.
A. Interview the employees as soon after the occurrence as possible in order to ensure that their
memories are fresh.
B. Try to put the employees at ease during the interview and start with relatively easy,
noncontroversial questions before getting into more sensitive matters.
C. Use open-ended questions for the employees in order to ensure that the questions do not dictate
what the expected answer is.
114
```
What are three specific sources of funds for financing terrorism?
A. Kidnapping for ransom
B. Trafficking in humans and arms
C. Contributions to charities
D. Wiring funds internationally
```
A. Kidnapping for ransom
B. Trafficking in humans and arms
C. Contributions to charities
115
Jack, the AML officer for a financial institution, is confronted with reports that several bank employees
have been assisting suspected money launderers. What three things should Jack consider doing to
follow up on these reports?
A. Determine whether the employees have been unduly promoted within the bank.
B. Determine whether the employees are living a lavish lifestyle.
C. Determine whether the employees may have been assisting the customers in hiding the ultimate
beneficiaries of their accounts.
D. Determine whether the employees are involved in an excessive number of unresolved exceptions.
B. Determine whether the employees are living a lavish lifestyle.
C. Determine whether the employees may have been assisting the customers in hiding the ultimate
beneficiaries of their accounts.
D. Determine whether the employees are involved in an excessive number of unresolved exceptions.
116
Which statement is true?
A. Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal
oversight by local authorities and weak procedures to inspect goods.
B. Cuckoo smurfing is a significant money laundering technique identified by the Financial Action
Task Force, wherein a form of structuring uses nested accounts with shell banks in secrecy havens.
C. In its 40 Recommendations, the FATF issued a list of designated categories of offense that asserts
crimes for a money laundering prosecution.
D. E-cash is not attractive to the money launderer because it cannot be completely anonymous and
does not allow for large amounts to be transported quickly and easily.
A. Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal
oversight by local authorities and weak procedures to inspect goods.
117
Identify three methods of money laundering in the real estate business.
A. Using large amounts of cash to purchase property
B. Disguising the beneficial ownership
C. Using an unlicensed agent
D. Generating rental income
A. Using large amounts of cash to purchase property
B. Disguising the beneficial ownership
C. Using an unlicensed agent
118
Rick is the AML compliance officer for a small bank that had AML difficulties and is operating under a
deferred prosecution agreement with the federal government. The FBI approaches Rick and requests
that the bank maintain an account the FBI is examining so that the FBI can monitor continuing activity.
What two things should Rick do?
A. Ask that the request be submitted in writing.
B. Ensure that the request is from someone with the appropriate authority.
C. Ask the board of directors to approve keeping the account open after an internal investigation.
D. Keep the account open in order to avoid incurring any further disfavor with the federal government.
A. Ask that the request be submitted in writing.
B. Ensure that the request is from someone with the appropriate authority.
119
What three factors should a prosecutor take into consideration when deciding whether to bring
criminal charges against a financial institution?
A. Whether the institution has a criminal history
B. Whether the institution cooperated with the law enforcement investigation
C. Whether the institution discovered and self-reported the potential criminal violation
D. Whether the institution is a very large institution and its prosecution will make good headlines for
the law enforcement agency
A. Whether the institution has a criminal history
B. Whether the institution cooperated with the law enforcement investigation
C. Whether the institution discovered and self-reported the potential criminal violation
120
Identify three key roles of regional FATF-style bodies.
A. Writing the FATF 40 Recommendations
B. Publishing periodic typology reports
C. Actively participating in identifying AML technical assistance needs
D. Assisting in the FATF mutual evaluation process
B. Publishing periodic typology reports
C. Actively participating in identifying AML technical assistance needs
D. Assisting in the FATF mutual evaluation process
