Risk & Mitigation Techniques Flashcards
Why do we use the Risk Based Approach?
Limited Resources, it’s Flexible, ( Risks vary and change), and it’s Effective- businesses can identify where their specific risks are
How is customer risk rating developed?
Using a complex mathematical model based on risk factors
What are some common risk factors?
Customer, Geography, products & services, Transactional
True or False: Every Institution develops their own risk model
True
What are some High-Risk customer red flags?
out of pattern, shell companies, offshore accounts, unusual account activity, misrepresentation of KYC, unusual banking relationships,
Why would a business transact with a high-risk jurisdiction?
1)Materials can be found in those certain areas, 2) those materials and labor are cheaper
What are some common high-risk countries?
Somalia, Iran, North Korea, UAE, Syria, Russia
What makes a jurisdiction high-risk?
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
What is a PEP?
Politically Exposed Person with prominent public function
What places a PEP at risk for?
Money laundering, corruption, embezzlement, kickbacks, bribery, terrorist financing
What is Embezzlement?
The theft or misappropriation of funds placed in one’s trust
What is Bribery?
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
What is a Kickback?
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
What is a DOMESTIC PEP?
Individuals who have been entrusted with prominent public functions
What is a FOREIGN PEP?
Individuals who haven been entrusted with prominent public functions by a foreign country
What is a INTERNATIONAL ORGANIZATIONAL PEP?
Persons who have been entrusted with a prominent function by an international organization
What’s the difference between being Directly vs. Socially involved with a PEP?
Directly is thru family/ marriage/in-laws, Socially is close friend or business partner
True or False: After someone leaves office, are they still considered a PEP?
True. Once a PEP, always a PEP
What is a High-Risk Business?
A business that represents an elevated risk for money laundering, terrorist financing, or other financial crimes
In what ways do HRB’s make it easy to launder money?
1) Cash intensive 2) Frequent foreign transfer activity 3) Trades in high value items
What’s another risk about cash in High-Risk Business?
Cash leaves no paper trail & it makes it easy to comingle funds from illicit activities
What’s a risk about Frequent Foreign Wire Activity?
Funds have the possibility of going to or from sanctioned country & its more difficult to know source of incoming funds
What’s a risk about Trade in High Value Items?
Easy way to send large amount of funds, and documentation can be forged
True or False: Marijuana is legal on the state AND federal level
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
True or False: US institutions are required to file SARS on Marijuana related activity
True, regardless if the activity is otherwise suspicious
What services do Money Service Businesses offer?
1) Cashier’s checks 2) Money Orders 3) Prepaid Cards 4) Currency Exchange 5) Money Transmission
What are the four reasons people might use MSBs?
Necessity, Convenience, Pricing, Less Scrutiny
What classifies as a MSB?
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
How many days must a MSB register after establishing their business?
180
All businesses defined as MSBs must register except which ones?
USPS and agencies of the US, or any State, or Businesses cashing checks totaling less than 1,000 dollars per person/per day
What is the minimum filing threshold for a SAR for a MSB?
2,000
What are some MSB Red Flags?
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
