ACAMS Flash Cards - Chapter 1|56 Questions with Verified Answers,100% CORRECT

ACAMS Flash Cards - Chapter 1|56 Questions with Verified Answers What is money laundering - CORRECT ANSWER The taking of criminal proceeds and disguising their illegal source in order to use the funds for legal or ill ...

ACAMS Flash Cards - Chapter 1|56 Questions with Verified Answers What is money laundering - CORRECT ANSWER The taking of criminal proceeds and disguising their illegal source in order to use the funds for legal or illegal acts Give an example of the second stage in the money laundering cycle - CORRECT ANSWER Electronically moving funds from one country to another; moving funds form one financial institution to another; and converting the cash placed into the system into monetary instruments Give and example of the third stage of money laundering - CORRECT ANSWER Purchasing Luxury assets like property, artwork, jewelry or high-end automobiles, and investing in business enterprises Give an example of the first stage of money laundering - CORRECT ANSWER Co-mingling illegitimate funds with legitimate ones, making foreign exchange transactions with illegal funds and depositing small amounts of cash into various accounts Individual Accountability What does the Yates memo say? - CORRECT ANSWER Issued by the then Deputy Attorney General Sally Yates of the Department of Justice, reminds prosecutors that criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing "One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing." What are some indicators of money laundering using electronic transfer of funds? - CORRECT ANSWER Funds transfers to or from a financial secrecy haven; Large incoming fund transfers from a foreign client with little or no explanation or apparent reason; and fund transfers that have no apparent link to legitimate business What is the risk with remote-deposit capture? - CORRECT ANSWER Enables a money launderer to deposit checks without having to visit the bank and risk detection What are some of the money laundering risks pertaining to the use of payable though accounts (PTAs)? - CORRECT ANSWER PTAs with foreign institutions licensed in offshore centers with each bank supervision PTAs where the respondent bank (the foreign bank) fails to conduct adequate CDD PTAs where the sub-account holders have currency deposit and withdrawal privileges What is a money laundering risk pertaining to the use of concentration accounts? - CORRECT ANSWER The fact that the customer identifying information may not be included, making the audit trail difficult or impossible to follow concentration accounts - CORRECT ANSWER A deposit account used to aggregate funds from several locations into one centralized account. Used by institutions to process and settle internal bank transactions. Typically used for fund transfers, private banking transactions, trust and custody accounts, and international transactions. These accounts have been under scrutiny by U.S. authorities due to the possibility of money laundering. For example, it may be difficult to trace the money trail if funds are being collected in one central source and if customer-identifying information is being separated from the transaction - this may open the door for abuse. - CORRECT ANSWER Concentration accounts What is a PEP? - CORRECT ANSWER A person who has or has had a prominent government or quasi-public position in a country. What is the primary risk in dealing with a PEP? - CORRECT ANSWER The source of funds may be from corruption What is structuring? - CORRECT ANSWER Taking a large cash deposit and breaking it into smaller amounts to be deposited into separate banks, separate accounts or on separate days in order to avoid currency transaction reports Which money laundering stage are credit cards most likely to be used and what is an example of money laundering through the use of credit cards? - CORRECT ANSWER Likely to be used in the layering or integration stages of money laundering Example: Overpaying a credit card balance and then asking for a refund. Receiving a check from the reputable credit card company makes it look like the funds received are legitimate What are some of the risks posed by Third-Party Payment Processors? - CORRECT ANSWER Multiple financial institution relationships whereby the suspicious activity cannot be seen in its entirety by one institution engaging in ACH transactions from overseas whereby the suspicious transactions get hidden by the large number of other transactions The possibility of the return rates stemming from unauthorized transactions are higher than average What are some ways money service businesses can be used for money laundering? - CORRECT ANSWER Cashing checks without obtaining adequate proof of identity failing to file Currency Transaction Reports when required transmitting funds overseas without sufficient due diligence What are some of the aspects associated with securities broker-dealers that increase the risk of money laundering? - CORRECT ANSWER Its international nature the speed of their transactions the ease of converting holdings into cash without significant loss of principal the large volume of wires used the competitive, commission-driven environment the practice of maintaining securities accounts in the name of nominees or trusts Weak AML programs What are some red flags associated with casinos and gambling? - CORRECT ANSWER Paying off gambling debts in cash just under the reporting requirements purchasing chips, but engaging in minimal gambling and then cashing the chips back in using the gambling house for banking-like financial services, including wiring funds overseas betting on both red and black spaces in roulette purchasing chips with cash just under the reporting requirements What were two of the key findings by FATF in its report on "Money Laundering/Terrorist Financing Risks and Vulnerabilities Associated with Gold" issued in July, 2015? - CORRECT ANSWER The fact that gold is an extremely attractive vehicle for laundering money due to the fact that it is relatively compact and easy to transport the fact that the gold market is a target for criminal activity because it is lucrative and holds its value regardless of the form it takes List ways in which a travel agency could be used to launder money - CORRECT ANSWER Purchasing an expensive airline ticket and then asking for a refund paying for travel tours with multiple wires just under the reporting threshold creating false bookings though tour operator networks to justify significant payments from foreign travel groups name various ways that a gatekeeper could assist in a money laundering scheme - CORRECT ANSWER Creating and managing corporate vehicles or other complex legal arrangements buying or selling property as a cover for transfers of illegal funds performing financial transactions, including making deposits, withdrawing funds, engaging in foreign exchange operations, buying or selling stock and sending international wires Setting up or managing a charity What is the primary concern with regard to the use of gatekeepers - CORRECT ANSWER the fact that they can be used to enhance secrecy and to keep hidden the beneficial owner of an account or transaction List reason why real estate can be an attractive method of ML, according to the 2015 report by the Australian Transaction Reports and Analysis Centre (AUSTRAC) - CORRECT ANSWER It can be purchased with cash the UBO can be disguised it is a relatively stable and reliable investment the value can be increased through renovation and improvements What are two of the most common ML techniques involved with trade-based money laundering? - CORRECT ANSWER Over and under invoicing In summary form, how does the black market peso exchange (BMPE) work in ML? - CORRECT ANSWER the drug trafficker sell drugs for US dollars in the US and, in order to avoid smuggling the US dollars back to Mexico, the trafficker gives the proceeds to a 'peso broker." The broker finds businesses in Mexico that want to buy goods in the US. The the broker buys the US goods with US dollars and has the goods shipped to Mexico. The business in Mexico pays the broker in Mexico in pesos and the broker then gives the pesos - minus a fee - to the drug traffickers What are some of the ML risks pertaining to the use of pre-paid bank cards or reasons why they are attractive to money launderers? - CORRECT ANSWER anonymous card holders anonymous funding high value limits global access to cash through ATMs lax offshore jurisdictions issuing the cards cards being a substitute for bulk-cash smuggling What are some of the risks listed by FATF in its 2010 report titled "Guidance for a Risk-Based Approach, Prepaid Cards, Mobile payments and Internet Based Payment Services"? - CORRECT ANSWER According to FATF, risks include, anonymity; geographic reach; alternative to physical cross-border transportation; easy access to cash; and the fact that several entities are required to issue prepaid cards - the program manager, issuer, acquirer, payment network, distributor and agents - that may be hard to all supervise or monitor What is one of the primary concerns with regard to the use of virtual currencies? - CORRECT ANSWER the fact that beneficial ownership information may be difficult to obtain What are some emerging risks for terrorist financing? - CORRECT ANSWER Self-Funding by foreign terrorist fighters; terrorists raising funds through the use of social media; new payment products and services; and exploitation of natural resources What is the concept of willful blindness? - CORRECT ANSWER the deliberate avoidance of knowledge of the facts or "purposeful indifference" and is the equivalent of actual knowledge What are the two main reasons correspondent banking is vulnerable to ML? - CORRECT ANSWER By their nature, they create a situation in which a financial institution carries out financial transactions on behalf of customers of another institution. This indirect relationship means that the correspondent bank provides services for individuals or entities for which it has neither verified the identities nor obtained any first-hand knowledge the amount of money that flows through correspondent accounts can pose a significant threat to financial institutions, as they process large volumes of transactions for their customers' customers. This makes it more difficult to identify the suspect transactions, as the financial institution generally does not have the information on the actual parties conducting the transaction to know whether they are unusual What is a concentration account - CORRECT ANSWER Internal accounts established to facilitate the processing and settlement of multiple or individual customer transactions with the bank, usually on the same day. These accounts are also known as special-use, omnibus, settlement, suspense, intraday, sweep or collection accounts. They are frequently used to facilitate transactions for private banking, trust and custody accounts, funds transfers and international affiliates. Describe microstructuring - CORRECT ANSWER Designing a transaction to evade triggering a reporting or record keeping requirement is called 'structuring." Microsturctinr is essentially the same as structuring, except that it is done at a much smaller level. Instead of taking $18,000 and breaking it into two deposits, the microstructure might break it into 20 deposits of approx $900 each. This level of structuring makes it extremely difficult to detect. How can the early redemption method on insurance policies be use to launderer money? - CORRECT ANSWER One indicator of possible ML is when a potential policyholder is more interested in the cancellation terms of a policy than the benefits of the policy. The launderer buys a policy with illicit money and then tells the insurance company that he changed his mind and does not need the policy. After paying a penalty, the launderer redeems the policy and receives a clean check from a respected insurer. Dealers in high value items How can art and antiques dealers and auctioneers mitigate their money laundering risks? - CORRECT ANSWER 1. Require all are vendors to provide names and addresses. Ask that they sign and date a form that states that the item was not stolen and that they are authorized to sell it 2. Verify the identities and addresses of new vendors and customers 3. If there is reason to believe an item might be stolen, immediately contact the Art Loss Register 4. Look critically when a costumer asks to pay in cash 5. Be aware of ML regulations 6. Appoint a senior staff member to whom employees can report suspicious activities Describe several ways commodity futures and options accounts may be susceptible to ML - CORRECT ANSWER 1. Withdrawal of assets through transfers to unrelated accounts or to high-risk countries 2. Frequent additions to or withdrawals from accounts 3. Checks drawn on, or wire transfers from, accounts of third parties with no relation to the client 4. Clients who request custodial arrangements that allow them to remain anonymous 5. Transfers of funds to the adviser for management followed by transfer to accounts at the other institution in a layering scheme 6. Investing illegal proceeds for a client 7. Movement of funds to disguise their origin Trust Company and Service Providers Describe the type of services to third parties that any person or business provides on a professional basis to participate in the creation, administration, or management of corporate vehicles - CORRECT ANSWER 1. Acting as a formation agent of legal persons 2. Acting as (or arranging for another person to act as) a director of secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons 3. Providing a registered office, business address or correspondence for a company, a partnership or any other legal person or arrangement 4. Acting as (or arranging for another person to act as) a trustee of an express trust 5. Acting as (or arranging for another person to act as)a nominee shareholder for another person According to a 2001 report, "Money Laundering in Canada: An Analysis of RCMP Cases" what are the four related reasons to establish or control a shell company for money laundering purposes? - CORRECT ANSWER 1. Shell companies accomplish the objective of converting the cash proceeds of crime into alternative assets 2. Through the use of shell companies, the launderer can create the perception that illicit funds have been generated form a legitimate source 3. Once a shell company is established, a wide range of legitimate and/or bogus business transactions can be used to further the laundering process 4. Shell companies can also be effective in concealing criminal ownership. Nominees can be used as owners, directors, officers or shareholders What is the significance of a trust account, whether offshore of onshore, in the context of money laundering - CORRECT ANSWER This cannot be understated. It can be used a a part of the first step in converting illicit cash into less suspicious assets; it can help hide criminal ownership of funds or other assets; and it is often an essential link between different money laundering vehicles and techniques, such as real estate, shell and active companies, nominees and the deposit and transfer of criminal proceeds. Money Laundering involves - CORRECT ANSWER taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activiites. Formed in 1989 - CORRECT ANSWER Financial Action Task Force (FATF) Financial Action Task Force (FATF) is an - CORRECT ANSWER inter-government body comprising the group of Seven industrialized nations to set standards and foster international action against money laundering. The United Nations 2000 Convention Against Transnational Organized Crime, also known as the "Palermo Convention," defines money laundering as: 1. - CORRECT ANSWER The conversion or transfer of property, knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his or her actions. The United Nations 2000 Convention Against Transnational Organized Crime, also known as the "Palermo Convention," defines money laundering as: 2. - CORRECT ANSWER The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that it is derived from a criminal offense. The United Nations 2000 Convention Against Transnational Organized Crime, also known as the "Palermo Convention," defines money laundering as: 3. - CORRECT ANSWER The acquisition, possession or use of property, knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime. Willful Blindness - CORRECT ANSWER the deliberate avoidance of knowledge of the facts or purposeful indifference. Stage one of Money Laundering: Placement - CORRECT ANSWER Placement - CORRECT ANSWER The physical disposal of cash or other assets derived from criminal activity. During this phase, the money launderer introduces the illicit proceeds into the financial system. Often, this is accomplished by placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international - CORRECT ANSWER Placement Examples of placement transactions include: - CORRECT ANSWER Blending of funds, Foreign Exchange, Breaking up amounts, Currency Smuggling, Repayment of legitimate loans. Layering - CORRECT ANSWER The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds. This stage involves converting the proceeds of the crime into another form and creating complex layers of financial transactions to obfuscate the source and ownership of funds. - CORRECT ANSWER Layering Integration - CORRECT ANSWER Supplying apparent legitimacy to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transactions. The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces - CORRECT ANSWER economic and trade sanctions Third Party Payment Processors TPPPs - CORRECT ANSWER bank customers that provide payment-processing services to merchants and other business entities