Risk & Mitigation Techniques

Question 1

Why do we use the Risk Based Approach?

Answer 1

Limited Resources, it’s Flexible, ( Risks vary and change), and it’s Effective- businesses can identify where their specific risks are

Question 2

How is customer risk rating developed?

Answer 2

Using a complex mathematical model based on risk factors

Question 3

What are some common risk factors?

Answer 3

Customer, Geography, products & services, Transactional

Question 4

True or False: Every Institution develops their own risk model

Answer 4

True

Question 4

What are some High-Risk customer red flags?

Answer 4

out of pattern, shell companies, offshore accounts, unusual account activity, misrepresentation of KYC, unusual banking relationships,

Question 4

Why would a business transact with a high-risk jurisdiction?

Answer 4

1)Materials can be found in those certain areas, 2) those materials and labor are cheaper

Question 4

What are some common high-risk countries?

Answer 4

Somalia, Iran, North Korea, UAE, Syria, Russia

Question 4

What makes a jurisdiction high-risk?

Answer 4

1) By a certain organization- EU, UN, FATF,
2) Country is known for corruption
3)Known for drug trafficking
4)Country may have sanctions
5) Country may have lax tax and transparency laws

Question 5

What is a PEP?

Answer 5

Politically Exposed Person with prominent public function

Question 6

What places a PEP at risk for?

Answer 6

Money laundering, corruption, embezzlement, kickbacks, bribery, terrorist financing

Question 7

What is Embezzlement?

Answer 7

The theft or misappropriation of funds placed in one’s trust

Question 8

What is Bribery?

Answer 8

Offering, giving, soliciting or receiving of any item of value as a means of influencing the actions of an individual holding a public or legal duty

Question 9

What is a Kickback?

Answer 9

Misappropriation of funds that enriches a person of power or influence who uses that power or influence in order to make a different individual, organization, or company richer

Question 10

What is a DOMESTIC PEP?

Answer 10

Individuals who have been entrusted with prominent public functions

Question 11

What is a FOREIGN PEP?

Answer 11

Individuals who haven been entrusted with prominent public functions by a foreign country

Question 12

What is a INTERNATIONAL ORGANIZATIONAL PEP?

Answer 12

Persons who have been entrusted with a prominent function by an international organization

Question 13

What’s the difference between being Directly vs. Socially involved with a PEP?

Answer 13

Directly is thru family/ marriage/in-laws, Socially is close friend or business partner

Question 14

True or False: After someone leaves office, are they still considered a PEP?

Answer 14

True. Once a PEP, always a PEP

Question 15

What is a High-Risk Business?

Answer 15

A business that represents an elevated risk for money laundering, terrorist financing, or other financial crimes

Question 16

In what ways do HRB’s make it easy to launder money?

Answer 16

1) Cash intensive 2) Frequent foreign transfer activity 3) Trades in high value items

Question 17

What’s another risk about cash in High-Risk Business?

Answer 17

Cash leaves no paper trail & it makes it easy to comingle funds from illicit activities

Question 18

What’s a risk about Frequent Foreign Wire Activity?

Answer 18

Funds have the possibility of going to or from sanctioned country & its more difficult to know source of incoming funds

Question 19

What’s a risk about Trade in High Value Items?

Answer 19

Easy way to send large amount of funds, and documentation can be forged

Question 20

True or False: Marijuana is legal on the state AND federal level

Answer 20

False. Marijuana is only legal on the state level in some states, it is illegal on the federal level, and FINCEN has requirements on due diligence controls

Question 21

True or False: US institutions are required to file SARS on Marijuana related activity

Answer 21

True, regardless if the activity is otherwise suspicious

Question 22

What services do Money Service Businesses offer?

Answer 22

1) Cashier’s checks 2) Money Orders 3) Prepaid Cards 4) Currency Exchange 5) Money Transmission

Question 23

What are the four reasons people might use MSBs?

Answer 23

Necessity, Convenience, Pricing, Less Scrutiny

Question 24

What classifies as a MSB?

Answer 24

IF they provide more then 1,000 in sales with the same person in the same day with the same transaction, OR provide money transmission services in ANY amount

Question 25

How many days must a MSB register after establishing their business?

Answer 25

180

Question 26

All businesses defined as MSBs must register except which ones?

Answer 26

USPS and agencies of the US, or any State, or Businesses cashing checks totaling less than 1,000 dollars per person/per day

Question 27

What is the minimum filing threshold for a SAR for a MSB?

Answer 27

2,000

Question 28

What are some MSB Red Flags?

Answer 28

1) Transactions with no clear business purpose
2)Changes in cash volume
3)Changes in policies, procedures, and ownership
4)Unusual high-risk international wire activity
5) Unusual movement of funds between accounts of business and owners, both internal and external