ACAMS Test Review 202 Questions with Verified Answers,100% CORRECT

ACAMS Test Review 202 Questions with Verified Answers Identify the seven topics of international incorporated into the FATF 40 recommendations in 2012? - CORRECT ANSWER AML/CFT policies & procedures. Money Launderi ...

ACAMS Test Review 202 Questions with Verified Answers Identify the seven topics of international incorporated into the FATF 40 recommendations in 2012? - CORRECT ANSWER AML/CFT policies & procedures. Money Laundering & confiscation. Terrorist financing & financing of proliferation. Financial & non-financial institution preventative measures. Transparency & beneficial ownership of legal persons & arrangements. Powers & responsibilities of competent authorities & other institutional measures. International cooperation. According to the Egmont Group, What is the definition of a Financial Intelligence Unit (FIU)? - CORRECT ANSWER A central, national agency responsible for receiving & permitted, requesting, analyzing & disseminating to the competent authorities, disclosures of financial information, Concerning suspected proceeds of crime & potential financing of terrorism, Required by national legislation or regulation in order to combat money laundering & terrorism financing. According to the Wolfberg Anti-Money Laundering Principles for Private Banking in 2000, what are situations for private banking that require further due diligence? - CORRECT ANSWER Public official, including individuals holding, or having held, positions of public trust, as well as their families and close associates. High Risk Countries, including countries "identified by credible sources as having inadequate Anti-Money Laundering standards or representing high-risk for crime and corruption". High Risk Activities, involving clients and beneficial owners whose source of wealth "emanates from activities known to be susceptible to Money Laundering. Describe 4 types of risk associated with money laundering faced by a financial institution? - CORRECT ANSWER Reputational Risk, is the potential that adverse publicity regarding an organizations business practices and associations, weather accurate or not, will cause a loss of public confidence in the integrity of the organization. Operational Risk is potential for loss resulting from inadequate internal processes, personnel or systems or from external events. Legal Risk is the potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties generating losses increased expenses for an organization or even the closure of the organization. Concentration Risk is the potential for loss resulting from too much credit or loan exposure to one borrower or group of borrowers. Describe the elements that should be addressed in a global approach to KYC identified in the Basel Committee's October 2004 paper called "Consolidated KYC Risk Management? - CORRECT ANSWER Risk Management. Customer acceptance & identification policies. Ongoing monitoring of higher risk accounts. Identify, in general, who should approve policies and procedure? - CORRECT ANSWER In writing, & must be approved by appropriate levels of management. In general, institution-level policies should be approved by the board, while business unit procedures can be approved by business unit management. Where does the ultimate responsibility for the AML compliance program rest with? - CORRECT ANSWER The board of directors. Members must set the tone from the top by openly voicing their commitment to the program, ensuring that their commitment flows through all service areas and lines of business, and holding responsible parties accountable for compliance. Why is the Risk-Based approach more preferable then a prescriptive approach in the area of Anti-Money Laundering and Counter-Terrorism Financing? - CORRECT ANSWER Flexible, as Money Laundering & terrorist financing risk vary across jurisdictions, customers, products & delivery channels, & over time. Effective, as companies are better equipped than legislators to effectively assess & mitigate the particular Money Laundering & terrorist financing risks they face. Proportionate, because a risk=based approach promotes common sense & intelligent approach to fighting Money Laundering & terrorist financing as opposed to a "check the box" approach. It also allows firms to minimize the adverse impact of Anti-Money Laundering procedures on their Low-Risk customers. What are the basic elements of financial institution's Anti-Money Laundering program? - CORRECT ANSWER A system of internal policies, procedures & controls. A designated Compliance Officer with day-t0-day oversight over the AML Program. An ongoing employee training program. An independent audit function to test the AML Program. How does the scope of the European Union's 3rd Money Laundering Directive differ from the 2nd Money Laundering Directive? - CORRECT ANSWER It specifically includes the category of trust and company service providers. It covers all dealers trading in good trade in cash over 15,000 Euros. The definition of financial institution includes certain insurance intermediaries. How did the European Union's 2nd Directive on Prevention on the Use of the Financial System for the purpose of Money Laundering 2001 expand the scope of the 1st Directive? - CORRECT ANSWER Beyond Drug-Related crime. The definition of "Criminal Activity" was expanded to cover not just drug trafficking, but all serious crimes, including corruption & fraud against the financial interest of the European Community. Identify and describe the three sections of the USA Patriot Act concerning due diligence U.S. financial institutions need to perform for relationships with foreign Correspondent Banking Customers? - CORRECT ANSWER Section 312- Requires institutions must set up risk based due diligence to mitigate the Money Laundering Risks posed by foreign financial institutions. Section 313- Which prohibits U.S. Financial Institutions from opening or maintaining Correspondent Accounts for foreign Shell Banks. Section 319- Which requires U.S. Financial institutions to maintain records with the names & address of the owners of foreign banks for which they maintain Correspondent Accounts. According to the Basel Committee on Banking Supervision's paper entitled "Compliance and the Compliance Function in banks," What are the responsibilities of the Board Of Directors for Compliance? - CORRECT ANSWER Approve the Bank's Compliance Policy, including a formal document establishing a permanent & effective compliance function. At least once a year, the board or a committee of the board should assess the extent to which the bank is managing it's compliance risk effectively. According to the Egmont Group's "Principle for information Exchange Between Financial Intelligence Units for Money Laundering and Terrorism Financing Cases," What are the permitted uses of information? - CORRECT ANSWER May be used only for the specific purpose for which the information was sought or provided. The requesting FIU may not transfer information shared by a disclosing FIU to a 3rd party, nor make use of the information in an administrative, investigative, prosecutorial, or judicial purpose without the prior consent of the FIU that disclosed the information. According to the Wolfsberg Statement on AML Screening, Monitoring, ad Searching (2009), what are the most appropriate and effective overall monitoring frameworks? - CORRECT ANSWER A dedicated automated transaction monitoring system. System, generated exception reports. Manual "line of business" incident reports. Scheduled periodic reviews/sampling. Event, driven reviews (e.g., following issuance of new typologies) According to the Basel Committee on Banking Supervision's paper entitled "Customer Due Diligence for Banks." How are sound KYC procedures relevant to the safely and soundness of banks? - CORRECT ANSWER They help to protect banks' reputation and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for a victim of financial crime and suffering consequential reputational damage. They constitute an essential part of Sound Risk Management. (e.g. by providing the basis for identifying, limiting and controlling risk exposures in assets and liabilities, including assets under management) What is a country's extraterritorial reach? - CORRECT ANSWER The extension of one country's policies and laws to the citizens & institutions of another. U.S. Money Laundering laws contain several provisions that extend its prohibitions & sanctions into other countries. Ex., can apply to a Non-U.S. Citizen if the "conduct" occurs "in part" in the U.S. Describe a Financial Intelligence Unit FIU? - CORRECT ANSWER A central governmental office that obtains information from financial reports, processes it & then discloses it to an appropriate government authority, include receiving, analyzing & disseminating information &, sometimes, investigating violations & prosecuting individuals indicated in the disclosures. In 2009, FATF began to publicly identify high risk jurisdictions. What made the named jurisdictions high risk? - CORRECT ANSWER The named countries had strategic deficiencies in their AML/CFT regimes. Identify several situations that may require a financial institution to initiate internal investigation? - CORRECT ANSWER A report of examination from the regulator. Information from 3rd parties, such as customers. Information derived from surveillance or monitoring systems. Information from employees or a company hotline. Receipt of a governmental subpoena or search warrant. Government investigators are asking questions of institution employees, business associates, customers or even competitors. The filing of a civil lawsuit against the institution or a customer of the institution. According to the 1999 U.S. Customs "trade advisory" titled "The Black Market Peso Exchange," What are the 3 red flags as indicators of BMPE? - CORRECT ANSWER Payment made in cash by 3rd party with no connection to transaction. Payment made by wire transfers from 3rd parties unconnected to transaction. Payment made with checks, bank drafts or money order not drawn on the account of the purchaser. How should a financial institution monitor the receipt of a subpoena, summons, or other government request? - CORRECT ANSWER Institution should do more than just produce the records of information being sought. Ensure that is reviewed by senior management, an investigations group or counsel to determine how best to respond to the inquiry and to determine if the inquiry or the underlying activity might pose a risk to the institution. This will also assist with regard to the institution's own internal investigation What is a concentration account? - CORRECT ANSWER Internal account established to facilitate the processing and settlements of multiple or individual customer transactions within the bank, usually on the same day. (Special-Use, Omnibus, Settlement, Suspense, Intraday, Sweep or Collection Accounts.) Are frequently used to facilitate transactions for private banking, trust & custody accounts, funds transfers & international affiliates. What characteristics of the charities or Non-Profit Organizations make them particularly vulnerable to misuse for terrorist financing? - CORRECT ANSWER Enjoying the public trust. Having access to considerable sources of funds. Being Cash-Intensive. Frequently having a global presence, exposed to terrorist activity. Little or no regulations and/or having few obstacles to their creation. How does having a lawyer as a trustee on an account at a financial institutions create vulnerabilities to Money Laundering at an institution? - CORRECT ANSWER This enables lawyers to conduct transactions & to administer the affairs of a client. Sometimes, the illicit money is placed in a law firm's general trust account in a file set up in the same of the client, a nominee, or a company controlled by the client. What is the significance of a trust account, whether offshore or onshore, in the context of Money Laundering? - CORRECT ANSWER Cannot be understated: It can be used as part of the 1st step in converting illicit cash into less suspicious assets, it can help hid 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 & transfer of criminal proceeds. How can are and antiques dealers and auctioneers mitigate their Money Laundering risks? - CORRECT ANSWER Require all art vendors to provide names & addresses. Ask that they sign form. Verify the identities and addresses. If there is believe an item might be stole, contact the Art Loss Register private database of stolen art. Look critically when a customer asks to pay in cash. Be aware of Money Laundering regulations. Appoint a senior staff member to whom employees can report suspicious activities. Describe a Ponzi Scheme? - CORRECT ANSWER A Money Laundering system named after Charles Ponzi, and Italian immigrant who spent 10 years in jail in the U.S. for a scheme that defrauded 40,000 people out of $15,000,000. The use of new investors' money to pay off prior investors. Involve fake, Non-Existent investment schemes in which the investors are tricked into investing on the promise of unusually attractive returns. What is the broad objective of the UNODC model legislation on Money Laundering and financing of terrorism? - CORRECT ANSWER Global Programme is to strengthen the ability of Member States to implement Measures against Money-Laundering and the financing of terrorism and to assist them in detecting, seizing and confiscating illicit proceeds, as required pursuant to United Nations instruments and other globally accepted standards, by providing relevant and appropriate technical assistance upon request What are the 7 elements of a Sound Customer Due Diligence CDD program? - CORRECT ANSWER Full ID of customer and business entities, Including source of funds. Development of transaction & activity profiles of each customer's anticipated activity. Definition & acceptance of the customer in the context of specific products & services. Assessment & transaction monitoring based on the risks presented. Investigation & examination of unusual customer or account activity. Documentation of findings What steps should the independent audit take to evaluate the bank's ability to identify unusual activity? - CORRECT ANSWER Reviewing policies, procedures, and processes for suspicious activity monitoring. Evaluating the system's methodology for activity or filtering criteria. Evaluating the system's to generate monitoring reports. Determining whether the system's filtering criteria are reasonable How can senior management show its commitment to compliance with Anti-Money Laundering laws and regulations? - CORRECT ANSWER Establishing a strong compliance plan that is approved by board of directors & and is fully implemented. Insisting that it be kept informed of compliance efforts, audit reports & any compliance failures, with corrective measures instituted. Communicating compliance expectations to the institution personnel. Including regulatory compliance within the job descriptions and job performance evaluations of institution personnel. Implementing procedures, processes & controls to ensure compliance with the AML program. Conditioning employment on regulatory compliance Identify the factors a prosecutor many consider when determining whether or not to bring a case against an institution involving Money Laundering-Related Charges? - CORRECT ANSWER The institution has a criminal history. The institution has cooperated with the investigation. The institution discovered & self-reported the Money Laundering-related issues. The institution has had a comprehensive & effective AML program. The institution has taken timely and effective remedial action. There are civil remedies available that can serve as punishment. Deterring wrongdoing by others is need and will be served by prosecution. Identify several types of internal reports financial institutions may use to discover Money-Laundering and terrorist financing? - CORRECT ANSWER Daily cash activity in excess of the country's reporting threshold. Daily cash activity just below the country's reporting threshold. Cash activity aggregate over a period of time (e.g., individual transactions over a certain amount, or totaling more than a certain amount over a 30 day period) to identify possible structuring. Wire transfer reports/logs (with filters using amount and geographical factors) Money instrument logs/reports Check kiting/ drawing on uncollected funds (significant debit/credit flows). Significant change reports. New account activity reports. How can the early redemption method on insurance policies be used to launder money? - CORRECT ANSWER 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 & then tells the insurance company that he has changed his mind & does not need the policy. After paying a penalty, the launderer redeems the policy & receives a clean check from a respected insurer What is 1 of the most important aspects of Due Diligence for a bank when establishing a relationship with a money remitter? - CORRECT ANSWER Ensuring the money remitter is properly licensed What factors may contribute to the vulnerabilities of Private Banking with regard to Money Laundering? - CORRECT ANSWER Perceived High Profitability. Intense competition. Powerful clientele. The high level of confidentiality associated with Private Banking. The close relationship of trust developed between relationship managers & their clients. Commission-Based Compensation for relationship managers. A culture of secrecy & discretion developed by the relationship managers for their clients. The relationship managers becoming client advocates to protect their clients. What are the 2 main reasons Correspondent Banking is vulnerable to Money Laundering? - CORRECT ANSWER Correspondent Banking relationships create a situation in which a financial institution catties 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. Describe the 3 phases of Money Laundering? - CORRECT ANSWER Placement- The physical disposal of cash or other assets derived form criminal activity. Layering- Separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds. Integration- Re-Entry of the funds into the economy in what appears to be normal business or personal transactions. If an institutions decides to file an STR, What should they do as soon as possible? - CORRECT ANSWER Notify the investigators or prosecutors What type of documents would a financial institution have could assist a financial investigator in tracking money movements? - CORRECT ANSWER Through a bank, a broker-dealer, Money Services Business or Casino. Ex. banks maintain signature cards, which are collected a t eh opening of an account, account statements, deposit tickets, checks and withdrawal items & credit & debit memorandums. Banks also keep records on loans, cashier's checks, certified checks, traveler's checks & money orders. They exchange currency, cash 3rd-Party checks, & conduct wire transfers, as do most Money Service Businesses. Banks also keep safe deposit boxes & issue credit cards Describe a typical suspicious or unusual transaction reporting process within a financial institution? - CORRECT ANSWER Procedures to identify potential suspicious transactions. A formal evaluation of each instance, & continuation of unusual transactions. Documentation of the suspicious transaction reporting decision, whether or not filed with the authorities. Procedures to periodically notify senior management or the board of directors of suspicious transaction filings. Employee training on detecting suspicious transactions. ABC Bank was served with a subpoena compelling the production of certain documents on a personal checking account. Describe the steps the bank should consider taking upon receipt of the subpoena? - CORRECT ANSWER The institution should have its senior management and/or counsel review the summons or subpoena. If there are no grounds for contesting the summons or subpoena, the institution should take all appropriate measures to comply with the summons or subpoena on a timely & complete basis. Failure to do so can result in adverse action & penalties for the institution. Also, the financial institution should not notify the customer who is being investigated. If the government asks the bank to keep certain accounts open, such a request should be obtained in writing under proper letterhead & authority form the government Identify the 4 ways that good technology can equip organizations with improved defenses in the fight against financial crime? - CORRECT ANSWER Transaction Monitoring- Scanning & analyzing data for potential Money Laundering activity. Watch list filtering- Screening new accounts, existing customers, beneficiaries & transaction counterparties against terrorist, criminal & other blocked persons watch lists. Automation of regulatory reporting- Filing Suspicious Transaction Reports STR's, Currency Transaction Reports CTR's, or other regulatory reports with the government. A detailed audit trail- Demonstrates compliance efforts to regulators. Identify the 3 GateWays that assist with the AML cooperation between countries? - CORRECT ANSWER Mutual Legal Assistance Treaties Financial Intelligence Units FIU The Supervisory Channel What is Memorandum Of Understanding MOU? - CORRECT ANSWER An agreement between 2 parties establishing a set of principles that govern their relationship on a particular matter. Is often used by counties to govern their sharing of assets in international asset-forfeiture cases or to set our their respective duties in Anti-Money Laundering initiatives. Financial Intelligence Units FIU's with the task of receiving & analyzing Suspicious Transaction Reports STR's on an ongoing basis & maintaining close links with police & customs authorities, share information among themselves informally in the context of investigations, usually on the basis of MOU. The Egmont Group of FIU's has established a model for such MOU's. Unlike the Mutual Legal Assistance Treaty, tis gateway is ordinarily used not for obtaining evidence, but for obtaining intelligence that might lead to evidence Describe Know Your Customer KYC? - CORRECT ANSWER Refers to Anti-Money Laundering policies & procedures used to determine the true identity of a customer & the type of activity that is "normal & expected", & to detect activity that is "unusual" for a particular customer. Many experts believe that a sound KYC program is 1 of the best tools in an effective Anti-Money Laundering program What is a Mutual legal Assistance Treaty MLAT? - CORRECT ANSWER An agreement among countries allowing the Mutual Assistance in legal proceedings & access to documents & witnesses & other legal & judicial resources in the respective countries, in private & public sectors, for use in official investigations & prosecutions What is an International Business Company IBC? - CORRECT ANSWER A variety of offshore corporate structures, alternated called "Exempt Companies," Which are dedicated to business use outside the incorporating jurisdiction, rapid formation, secrecy, broad powers, low cost, low to zero taxation, & minimal filing & reporting requirements Describe a Cross-Border Transfer? - CORRECT ANSWER Any Wire Transfer in which the originator & beneficiary institutions are located in different jurisdictions. Also refers to any chain of wire transfers that has a leas 1 Cross-Border element In maintaining & auditing your compliance program, each formal assessment should consider which of the following? - CORRECT ANSWER Are employees being trained adequately? Do the internal compliance procedures match those required in your jurisdiction? Are employees using the procedures as required? Are the proper procedures in place? According to FATF Recommendations, countries should? - CORRECT ANSWER Render Mutual Legal Assistance, Notwithstanding the absence of dual criminality. Where dual criminality is required consider the required, consider the requirement satisfied for all like categorized & denominated offenses. Provisions of the Patriot Act include? - CORRECT ANSWER US Institution cannot maintain correspondent accounts with foreign shell banks. Foreign banks file rigorous information disclosure duties to their US correspondents. US institutions must review "certificate" information for completeness and accuracy. US institutions take "reasonable steps" to ensure that correspondent accounts provided to foreign banks are not being used to provide banking services indirectly for foreign shell banks. US institutions maintain the name and address of an agent in the US designated to accept service of legal process for the foreign bank's records regarding the correspondent account. US Secretary and Attorney General have the authority to issue a summons or subpoena to any foreign bank that maintains a corresponded account in the US and the request records relating to that account even if maintained outside US borders. Money Laundering red flags include? - CORRECT ANSWER Unusually high monthly balances in comparison to know sources of income. Multiple deposits made under reportable thresholds. The timing of deposits. Unusually large deposits, deposits in round numbers, or deposits in repeated amounts that are not attributable to legitimate sources on income. A lack of account activity. Checks written in unusually large amounts (in relation to the suspect's known practice) Due to hard lessons learned in recent years, which of the following would be appropriate in guarding against "the enemy within? - CORRECT ANSWER Periodic fingerprint employee. Background check for promotion. Background screening for new hire. Credit checks. Check terrorist "watch list". Verification of SSN, education and employment. Which of the following can be components of Enhanced Due Diligence? - CORRECT ANSWER Business operations; financial statements major customers & suppliers. Location of business. Anticipated transaction activity. Purpose of the account, owners, occupation, source of funds, source of wealth. According to the FATF Recommendations, countries should? - CORRECT ANSWER Render mutual legal assistance, notwithstanding the absence of dual criminality. Where dual criminality is required consider the required, consider the requirement satisfied for all like categorized & denominated offenses. A "Payable-Through Account" PTA is a master correspondent account established at a domestic bank by a foreign bank. The Home-Country Customers of the foreign bank, which is called the "Master Accountholder" are permitted to conduct a wide range of banking transactions through the PTA typically those customers, called "sub-accountholders", can write checks make deposits & withdrawals, & wire funds through the PTA almost as if they were direct, local customers of the US bank. The sub-accountholders, who can number in the hundreds & who rarely have direct contact with the domestic US banks, are given checks by which to draw funds on the PTA. In 1 US case the regulator found that the domestic bank had failed to adequately supervise the PTAs. To implement effective internal control & operating systems concerning PTAs, to establish "Know Your Customer" procedures for Sub-Accountholders & to maintain adequate staffing. The regulator ordered the bank to take 15 "affirmative action" steps before it could accept any new PTAs Among those steps were? - CORRECT ANSWER Preparing a "Risk Assessment" about each PTA. Obtaining a signed document from each Sub-Accountholder subjecting the subaccount to state & federal laws & regulations in spite of any banking secrecy laws of any other jurisdiction. Preparing a "PTA Action Plan" that examiners the adequacy of its capabilities to monitor PTAs & plans to improve them. Obtaining detailed information from the master account holder about the way it is supervised by its home country agencies. Conducting periodic verification of the information provided by the foreign bank. Developing a policy regarding termination of PRA accounts where information it receives is materially inaccurate or incomplete. To assure that you AML compliance program provides adequate training, what types of training & to which groups should it be available? - CORRECT ANSWER Investigation & monitoring staff. Senior management, including the Board of Directors. Remedially, as needed. Audit & compliance staff. New hire training. Routine refresher training. New hires. One of the steps in developing an AML programs is the assessing of risk. Which of the following banking functions are considered high risk? - CORRECT ANSWER Letter of Credit. Payable-Through Accounts PTAs. Official Bank Checks. Private Banking. Wire Transfer Services. Check Cashing for Non-Customers. Which of the following is true about FIUs? - CORRECT ANSWER FIU's offer an official gateway for communication between themselves & other bodies set up the fight Money Laundering & other financial crimes. FIU are authorized to investigate Money Laundering crime. FIU share information amongst themselves informally in the context of investigations, usually on the basis of Memoranda Of Understanding MOU. FIU have the task of receiving & analyzing suspicious transaction reports & maintaining close links with police & customs officials. This gateway is not normally used to obtaining evidence, but for obtaining intelligence that might lead to evidence. Based on the section as it originally appears in the USA Patriot Act, the purpose of the Section 314 is to? - CORRECT ANSWER Encourage regulatory & law enforcement authorities to share with & inquire of financial institutions information regarding individuals, entities, & organizations engaged in, or reasonable suspected based on credible evidence, of engaging in terrorist acts or Money Laundering activities. Elements of a sound KYC program include? - CORRECT ANSWER Investigation & examination of unusual customer or account activity. Staff training. Definition & acceptance of customer in context of institutions' products & services. Assessment & grading of risk that the customer or account presents. Appropriate internal & external reporting. Documentation of findings. Full identification & verification of customer & business entities. Development of transaction & activity profiles of the customer's anticipated activity. Account & transaction & activity profiles of the customer's anticipated activity. Auditing of the KYC program. Full identification & verification & verification of sources of funds & wealth. Directive 2001/97/EC broadened the? - CORRECT ANSWER Definition of financial institutions to include insurance companies, money transmitters, currency exchanges & investment firms. Definition of Money Laundering & the associated predicate offenses. Coverage of the directive to include real estate real estate agents, external auditors, accountants & tax advisors, & lawyers when planning or executing real estate transactions or money movement on behalf of their clients. Coverage of the Directive to include art dealers, auctioneers & other dealers in High-Value goods when payment in cash exceeds 15,000 Euros. IBC stands for "International Business Company" -a term used to define a variety of offshore corporate structures, also exempt companies. Which of the following are common characteristics of IBCs? - CORRECT ANSWER Dedication to business use outside the incorporation jurisdiction. Rapid formation & low cost. Minimal filing & reporting requirements. Examples of Ponzi schemes include? - CORRECT ANSWER The prime bank guaranty program. High yield promises. Bank debenture program. Roll program. There are many online banking products & features that make them attractive to the Money Launderer. Among them which of the following? - CORRECT ANSWER The speed, security & anonymity of internet payment systems. Lack of clear policies for record retention in the E-Commerce environment. The volume of electronic payment in E-Space. The Cross-Border nature of the internet. Money Laundering laws rely on a geographic presence for jurisdiction. In E-Space, there are no clear supervisory, regulatory, enforcement or prosecutorial powers. Difficulties in KYC Enhanced Due Diligence EDD, customer & 3rd-Party identification. Which of the following would be true in an AML program? - CORRECT ANSWER The Board has the ultimate responsibility of the program, must openly voice their commitment to the program, & ensure their commitment flows through the entire organization. The Board Should be responsible for the oversight of the program. The Board should routinely converse with regulators & auditors about their commitment to the program, their understanding of the law, & knowledge of how their institution operates. The Board is responsible for ensuring that corrective action is taken for all program shortcomings identified by regulator or auditor examination. Which of the following is the most common method of laundering money through a legal money services business? - CORRECT ANSWER Purchasing structured money instruments. In general, the 3 phases of Money Laundering are said to be? - CORRECT ANSWER Placement Layering Integration What is Bust-Out Schemes? - CORRECT ANSWER Are popular in creating large bankruptcy frauds where businesses secure increasing loans in excess of the actual value of the company or property & then run with the money. Leaving the lender to foreclose & take a substantial loss. Which 2 activities are typically associated with the Black Markey Peso Exchange BMPE Money Laundering system? - CORRECT ANSWER Converting illicit drug proceeds from dollars or Euros to Colombian Pesos. Facilitating purchases by Colombian importers of goods manufactured in the US or Europe through peso brokers. What is the Right of Reciprocity in the field of in the field of international cooperation against Money Laundering? - CORRECT ANSWER 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. The greatest risk for Money Laundering is for casinos that? - CORRECT ANSWER Allow customers with credit balances to withdraw funds by check in another jurisdiction. Which statement is true regarding the risk of Politically Exposed Persons PEPs? - CORRECT ANSWER PEP's have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds. Dirty money, derived from criminal activities of Belgian Criminal A, is sent to a foreign bank account of Corporation B. Then in Belgium, a new investment Company C is incorporated. Criminal A is appointed as a director of Company C. Company C borrows money from the foreign Company B & buys real estate in Belgium. The real estate is rented to 3rd Parties. Director (Criminal) A also rents an apartment in the building. With the funds generated by the rent, Company C pays off the loan to Corporation B, & the salary of Director A. Criminal A now converted his dirty money in legal funds. This Laundering method is commonly referred to as what? - CORRECT ANSWER Loan Bank 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 she is also interested in opening a personal investment account. The account representative refers the customer to their broke-dealer. The customer tells the firm representative she has never had a brokerage account before & has a few questions about how an investment account works. The customers asks how deposits can be made into her account, if there are any reporting requirements, & how to go about moving balances out of the account using wire transfers. No questions are asked about fees associated with these transactions. Which 3 items would be considered suspicious? - CORRECT ANSWER The Customer asks many questions about the brokerage account, but non of them are related to investing. The address of the account holder & the branch where the customer came to open the account are not close to each other. That the customer appears unconcerned about the fees. International trade in goods & services can be used as either a cover for Money Laundering or as the Laundering mechanism itself. What is MOST important for the launderer when engaging in this method? the ability? - CORRECT ANSWER To Over-Or Under-Invoice the goods. Which of the following statements is true? Correspondent Banking is MOST vulnerable to Money Laundering when the correspondent account is? - CORRECT ANSWER Maintained for a foreign bank that does not have a physical presence in any country. Which statement is true about Lawyers? - CORRECT ANSWER Can be abused by launderers by using the accounts they set up for them for the Placement & Layering of funds. The 3rd EU Money Laundering Directive of 2005 applies to which of the following firms? - CORRECT ANSWER Auditors. Estate agents based in the EU. According to the EU Directives of 2001, an independent legal professional is obligated to report suspicion of Money Laundering in a client relationship when? - CORRECT ANSWER Participating in financial or corporate transactions. Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a Correspondent Banking relationship in the U.S.? - CORRECT ANSWER USA Patriot Act. Which were the Basel Committee's 2 main motivations to encourage strong Know Your Customer programs in it's paper "Customer Due Diligence for Banks? - CORRECT ANSWER Protect the safety & soundness of banks. Protect the integrity of banking systems. What is the definition of a predicate offense? - CORRECT ANSWER Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of Money-Laundering. What is considered a beneficial owner of an account? A person or entity? - CORRECT ANSWER That is ultimately entitled to the funds in the account, even though his name may not appear on the account. A bank in Italy holds a business account for a Italian company that sells gold throughout Europe & the Western Hemisphere. The bank knows the purpose of this account is to receive payment for sales. A review of the account shows a pattern of wire transfers coming from Payable-Through Accounts. There is also a pattern of purchases of gold bullion held in Swiss banks. The MOST important factor in assessing whether Money Laundering is a threat is that the? - CORRECT ANSWER Payments come from 3rd-Party accounts. Which of the following should a national legislature consider when criminalizing Money Laundering in like with the CFATF 19 Recommendation? - CORRECT ANSWER Do not limit the number of specific predicate offenses for Money Laundering, Criminalize conspiracy or association to engage in Money Laundering. Indicate whether it is relevant that a predicate offense may have committed outside the local jurisdiction. Which 3 statements are true about the 3rd EU Directive on Money Laundering of 2005? it? - CORRECT ANSWER Was Proposed in order to update European Community legislation in line with the Financial Action Task Force FATF 40 Recommendation. Repeats the main Customer Due Diligence requirements of the 1st & 2nd Directives, but adds more detail to the requirements by, for ex., including a specific requirement to identify the beneficial owner if one exists & includes ongoing monitoring requirements. Requires firms to apply the Customer Due Diligence requirements to existing customers at appropriate times on a risk sensitive basis. The FATF 40 Recommendations say that countries should? - CORRECT ANSWER Not approve establishment or accept the continued operation of Shell Banks. Among the principles for information exchange between FIU for Money Laundering cases, issued by the Egmont Group on June 13, 2001, we find which of the following? - CORRECT ANSWER Information exchanged between FIU's may be used only for the specific purpose for which the information was sought or provided. In which stage of Money Laundering would you classify depositing small amounts of cash into several related accounts? - CORRECT ANSWER Placement. In which stage of Money Laundering would you classify the use of laundered funds to purchase high value assets & luxury items? - CORRECT ANSWER Integration. In most laws criminalizing Money Laundering, it is stated that? - CORRECT ANSWER Employees of financial institution who intentionally ignore clear signs of Money Laundering may be punished with imprisonment an / or fines. The tactic in which individuals make multiple deposits in small quantities to avoid detection is called? - CORRECT ANSWER Structuring. In which case might a Suspicious Transaction Report STR not be necessary? - CORRECT ANSWER A customer who owns a large supermarket & deposits large amounts of cash several times a day. As part of their role in fighting Money Laundering, financial institutions should? - CORRECT ANSWER Designate a compliance officer. What could happen to compliance officer if they do not comply with the Anti-Money Laundering laws & regulations? - CORRECT ANSWER Loss of job. Prison, penalties & fines. Negative reputation to their employer. What is willful blindness defined as? - CORRECT ANSWER Deliberate avoidance of knowledge of the facts or ignoring obvious Money Laundering red flags. In Anti-Money Laundering terminology a "Red Flag" is? - CORRECT ANSWER A warning sign used to bring attention to potentially suspicious, risky transactions or activities. The reporting officer of a financial institution should? - CORRECT ANSWER Review available information related to the customer, transactions, profile history & file a STR for only those customers where a Suspicion of Money Laundering exists. Which of the following statements is true? - CORRECT ANSWER A launderer can launder money by prepaying his credit card using funds that are already in the banking system, creating a credit balance on his account, & requesting a credit refund. Why is a Payable Through Account vulnerable to Money Laundering? - CORRECT ANSWER These are master correspondent accounts that allow the customers of the foreign bank to do a wide range of transactions. What is the reasoning behind implementing a "Risk-Based Anti-Money Laundering approach? - CORRECT ANSWER Institutions can best use their limited resources to focus on matters where the Money Laundering risks are highest. According to the FATF 40 Recommendations, "Designated Non-Financial businesses & professions" include? - CORRECT ANSWER Casinos. Real estate agents. Dealers in precious stones. According to the FATF 40 Recommendation, the Threshold for identifying occasional customers at financial institutions is? - CORRECT ANSWER EURO / US $15,000 Tom works as a compliance officer at ABC Bank, he is looking at the transactions of 1 of the bank's customers, Mr. Brown, the owner of a check cashing company. Over the last 6 months, Mr. Brown has not made withdrawals of cash against check deposits. He also deposited 2 checks for US $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 detailed information about fees & commission that are charged by the bank. What should arouse Tom's Suspicion the most? Mr. Brown? - CORRECT ANSWER Did not make withdrawals of cash against check deposits. A small Broker-Dealer has an AML compliance program that addresses procedures for filing STR & includes policies, procedures a& internal controls for customer identification, monitoring accounts & identifying Money Laundering red flags. Every employee of the broker dealer is trained via the internet in January & in July on AML issues. The board doesn't take the internet training. Instead, the compliance officer organizes a luncheon for them where an outsider comes in & trains them. The program provides for the appointment of a compliance officer, & once a year the compliance officer conducts an audit to test the program. In what respect does the program need improvement? - CORRECT ANSWER The AMl program should be tested by an independent person, not the compliance officer. Susan works as a senior Money Laundering reporting officer at XYZ Bank. She is taking a closer look at the activity of several customers. What would arouse her suspicion the Most? - CORRECT ANSWER A customer involved in investment management who guarantees a very high rate of return, will above what other competitors can offer. Which of the following best describes the "Alternative Remittance System"? - CORRECT ANSWER The transfer of values between countries, outside of the legitimate banking system. An AML compliance officer was reviewing customers at XYZ Bank & 1 of the customers Mr. Sam Tropicana attracted her attention. Through a period of several months, cash deposits & withdrawals were transacted through his account with amounts ranging between US $7,500 & US $17,000. In addition, Sam deposited 2 checks, issued by a casino into his account for US $32,000 each. When opening the account, Sam stated that he operated an import / export company. Which of the following additional items should arouse the suspicion of an Anti-Money compliance officer the most? - CORRECT ANSWER Sam conducted large cash transactions for his import / export business. Which 3 of the following statements are true? - CORRECT ANSWER Online gambling provides an excellent method of laundering because transactions are conducted primarily through credit or debit cards & the sites are typically unregulated offshore firms. 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. Some banks no longer allow the use of credit cards for online gambling. What are the 3 key goal of an Anti-Money Laundering program? - CORRECT ANSWER Prevent & detect Money Laundering & terrorist financing. Report suspicious activity to proper authorities if the laws or regulations require. Train all pertinent employees. An Anti-Money Laundering specialist is employed by a large bank. An account owner is well known to the specialist & the account has been open at the bank for several years. The specialist noticed that financial instruments have been deposited in a suspicious manner over the last 4 months, leading him to file 2 STR on the account. Recently, suspicious activity involving High-Risk countries has been detected over the last few days. Various law enforcement agencies have called to discuss the STR's with the specialist. The specialist has asked the agents whether they think the relationship with the customer should be terminated. These agents advised that this a business decision for the bank to make. The specialist has kept the legal advisers & upper management apprised of the activity & has provided them copies of the STR's. Which of the following should the specialist recommend? - CORRECT ANSWER Terminate the relationship with this account owner if possible. The FATF has consistently noted the use of casinos in Money Laundering schemes in its annual typologies reports. 1 Laundering technique involving casinos is? - CORRECT ANSWER Asking for winners' checks to be made out in the name of 3rd persons or without a payee. Which of the following should an Anti-Money Laundering specialist include on a internal investigation log? - CORRECT ANSWER Notes pertaining to activity that is unusual but for which a STR has not been filed. What are 3 key criteria in AML risk rating? - CORRECT ANSWER Customer type. Geography location. Products & services used. A financial institution is looking to establish an online account of opening service. The institution plans to offer this product to new & 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 identify? - CORRECT ANSWER Ensure that the institution has a reliable 3rd party source that will enable verification of the customer. Which of the following controls would most effectively minimize the need to correct failures to collect required customer information in the account opening process? - CORRECT ANSWER An automated account opening platform that requires data entry prior to allowing the account to be opened. When conducting training for AML purposes for account opening staff, Which of the following addresses the most important aspects to consider in the training? - CORRECT ANSWER What the employees need to do. The importance of AML efforts. The penalties for Non-Compliance. When drafting and AML policy, which of the following internal parties is most important to have approve the policy? - CORRECT ANSWER Senior Management. Suzy is an AML compliance officer at an institution that is looking to open treasury management services (e.g., wires, checks clearing, foreign draft issuance) for correspondent banking customers. Which of the following should Suzy be most concerned about regarding the institution's capabilities regarding these customers? - CORRECT ANSWER Whether the Correspondent Accounts will be able to be monitored by the institution's monitoring systems. John is an AML compliance officer at a financial institution that is looking at an electronic KYC tool to facilitate the account opening process. Which of the following aspects would be most useful for John to consider when assessing vendors providing the tools? - CORRECT ANSWER How well can the vendor work with the institution's existing account systems & account opening processes. 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 fund, but the client manager is vouching for the client & is eager to open the relationship quickly. What should the AML officer do to validate the client's sources of funds? - CORRECT ANSWER Perform background investigation to determine whether the client''s source of funds is credible. 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 & an individual brokerage account. The compliance officer believes the customer may be embezzling funds form his business. Which is the best path for her to follow up on her suspicions? - CORRECT ANSWER Look at the movement of funds in all the accounts, as the customer may be using all of them to launder money. About an hour before closing time, a construction worker comes to a financial institution & wants to provide cash in exchange for sending money abroad. It is the middle of summer & the customer indicates that he's been outside for the bulk of the day & needs to send money to a family member who is in another country. Which of the following would be considered the biggest concern with the customer & his request? - CORRECT ANSWER The customer is not able to provide a reasonable response as to the source of the funds. 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? - CORRECT ANSWER Check with the account officer to see if the customer has indicated a change in his investment strategy. A financial institution branch manager who has been in place for over 10 years has not taken a vacation for almost 4 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? - CORRECT ANSWER Determine whether the manager has engaged in transactions in the accounts where the unusual activity has occurred. An AML compliance officer is looking to establish a suspicious activity reporting process at her small institution. Which of the following would be the best course of action? - CORRECT ANSWER Have employees refer all unusual activity to her so that she conduct an investigation into what needs to be reported to authorities. 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 do? - CORRECT ANSWER Cooperate fully with the authorities, as permitted by law. A compliance officer is looking to improve a compliance program or a financial institution that operates in several countries. The institution has developed a consistent customer due diligence CDD requirement for all customers of the institution that exceed each of the individual countries' requirements. When looking to provide management reporting on the CDD compliance efforts of the institution, which of the following would make most sense? - CORRECT ANSWER Report on compliance with the company's stated requirements. Establishing compliance as a key responsibility for every employee of a financial institution is best performed how? - CORRECT ANSWER By having Senior Management require compliance as a condition of employment. An institution that offers mortgages notices the national FIU has issued several advisories about reporting mortgage fraud. A compliance officer has noticed that the level of mortgage fraud reporting has increased as a result of conducting Post-Account opening source of funds verification. The FIU has noted that loans with unverified income have been noted as a significant concern. What should the AML compliance officer do? - CORRECT ANSWER Speak to the mortgage unit about revising the income verification process to do this earlier in process, as suggested by the FIU. Robert is a compliance officer for a financial institution. Robert 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? - CORRECT ANSWER Customer Due Diligence CDD error rates. Quality assurance testing on STR filing. Percentage of products. Services monitored for suspicious activity. Joe, the compliance officer for a small bank, has noticed that new regulations now require reporting on Cross-Border Transactions that exceeds a certain threshold. What is appropriate set of steps for Joe to take to prepare his bank for the new requirements? - CORRECT ANSWER Providing training to impacted associates, work with technology partners to capture all Cross-Borders Transaction for reporting & implement a testing plan to be sure appropriate transactions are captured & reported. When documenting ongoing training efforts, which of the following should be documented to demonstrate the distribution of the training to appropriate employees? - CORRECT ANSWER The names & areas of the employees who took the training. When assessing a new product, which of the following should be considered as part of the assessment from an AML perspective? - CORRECT ANSWER The Inherent-Risk of the product. The control environment to mitigate the risks presented by the product. The residual risk of the product in light of the controls. Marie, a compliance officer at a financial institution, attends an annual AML-industry conference & 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? - CORRECT ANSWER Implement a process to determine when new regulations are published & assess them for impacts to the AML program. 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? - CORRECT ANSWER Develop a report containing metrics that reflect the effectiveness of various key program elements. A financial institution's internal audit department has found an issue with an AML process involving the AML compliance officer's efforts to conduct sufficient account monitoring on certain products offered by the institution. The AML compliance officer should do which of the following? - CORRECT ANSWER Develop & follow an action plan to premeditate the issue & report to audit on the progress made on the issue. A financial institution has determined that opening accounts for certain type of customers is not worthwhile, as the cost of implementing controls is too great for the revenue earned from the customers. Which of the following options is the most effective way to enforce such a decision? - CORRECT ANSWER Implement automated account opening controls to prevent the account opening for the prohibited customer types & provide employee training. A longtime customer of the bank comes into the bank a number of times over a series of weeks & deposits large amount of money &, the next day, asks for the money to be wired to a 3rd world country. This behavior is not in keeping with his normal business practices. What should the compliance officer recommend? - CORRECT ANSWER Collect the appropriate documentation & review it with the purpose of filing & STR. After collecting & reviewing all of the appropriate documentation in preparation for the filing of an STR. What should the compliance officer do with the documentation? - CORRECT ANSWER Should maintain the documentation in a separate file in case law enforcement asks for the supporting documentation for the STR. After receiving an STR, the relevant law enforcement agency requests permission to interview the bank personnel who are familiar with the underlying transaction. What should the compliance officer recommend? - CORRECT ANSWER Should confer with bank counsel as to whether to request subpoenas from law enforcement. What are 3 factors a prosecutor should take into consideration in deciding whether to bring criminal charges against a financial institution? - CORRECT ANSWER Weather the institution has a criminal history. Whether the institution cooperated with the law enforcement investigation. Weather the institution discovered & Self-Reported the potential criminal violation. The compliance officer is trying to put together a set of procedures for handling the documentation that supports the filing of an STR. What should the compliance officer recommend to be part of these procedures? - CORRECT ANSWER Segregate the documents that support each STR & ensure that they are available for inspection at the request of law enforcement. The compliance officer is trying to put together a set of procedures for handling the review of potentially suspicious transactions. What should the compliance officer recommend be part of these procedures? - CORRECT ANSWER That the institution make it the responsibility of all employees to identify suspicious activity. The compliance officer is trying to put together a set of procedures for handling the decision of whether or not to file a STR. What should the compliance officer recommend to be part of these procedures? - CORRECT ANSWER Should recommend that the decision as to whether or not to file a STR be centralized to ensure uniformity. Of the following scenarios, which 2 are potential red flags indicating possible suspicious activity that should be investigated further? - CORRECT ANSWER Accounts held for a business in a branch that is located on the other side of town from where the business is located. An individual who holds multiple accounts under the same name. In conducting a criminal investigation, what are 3 things that the law enforcement investigator should do? - CORRECT ANSWER The criminal investigator should make every effort to "Follow The Money" in the transaction to determine where it came from & where it went. The criminal investigator should identify the potential unlawful activity involved, referred in some countries as the "Specified Unlawful Activity". The criminal investigator should document the underlying activity & transaction. Typically, when should a financial institution file a STR? - CORRECT ANSWER Whenever they detect unusual or suspicious transaction. When a bank receives a subpoena for information about a specific account, what 2 steps should the compliance officer take? - CORRECT ANSWER Should ensure that the staff research & collect all documents responsive to the subpoena. Should Ensure that an independent review is conducted of the account & the transactions in the account. A law enforcement representative calls up the compliance officer & urgently requests information pertaining to a particular account in connection with an On-Going terrorist financing investigation. What should the compliance officer do? - CORRECT ANSWER Request the law enforcement representative provide a court order or grand jury subpoena unless the bank has already filed an STR on the matter. In conducting a criminal investigation, what are 3 things that the law enforcement investigators should do? - CORRECT ANSWER Conduct Computer-Based searches on the individuals & entities involved. Review any previously filed STR's on the individuals & entities involved. Analyze the financial transactions & activity of the subject & try to determine if there is anything that is High-Risk or is out of the ordinary. 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? - CORRECT ANSWER The officer should document the nature & results of the internal investigation & keep the documentation in an appropriate file. What are 3 developments that should cause a financial institution to conduct an internal investigation? - CORRECT ANSWER When the institution receive a grand jury subpoena with regard to transactions that have occurred within several accounts at the institution. Wen several employees of the institution alert senior management or the compliance officer that there are some suspicious transactions within an account. When a small local business starts engaging in overseas activity involving numerous, unexplained wire transfers. What are 3 possible red flags indicating suspicious or unusual activity that might warrant an investigation & the filing of an STR? - CORRECT ANSWER Unusually high monthly balances in comparison to known sources of income. High level of monetary transactions through an account during the course of a month, but low beginning & ending balances. Multiple cash deposits made just under the reporting threshold. What is a advantage of having an outside counsel perform an internal investigation on behalf of the financial institution? - CORRECT ANSWER The outside counsel can bring an impartial & legal perspective to the review. What are the 3 classic gateways for international cooperation & sharing? - CORRECT ANSWER Mutual Legal Assistance Treaties MLAT's. Exchange of information between Financial Intelligence Units FIU's. Exchange of information between supervisory agencies. What are 3 of the recommended ways to respond to a law enforcement inquiry? - CORRECT ANSWER Cooperate with the law enforcement inquiry as much as possible. Respond to all formal requests of info as promptly & thoroughly as possible, unless there is a valid objection that can & should be made. Ensure that all communication, written & oral, is funneled through a centralized place. What 3 steps should be taken when there is a criminal investigation that is targeting the bank itself? - CORRECT ANSWER The senior management & the Board of Directors should be notified & kept apprised of the progress of the investigation. The bank relevant employees of the bank should be notified of the existence of the investigation & should be given instructions as to what to do & how to act. 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? - CORRECT ANSWER To ensure that responses are timely and thorough & that privileged material is not inadvertently handed over. When a financial institution is served with a search warrant by a law enforcement agency, what are 3 things that the employees of the institution should do? - CORRECT ANSWER Cooperate fully with the law enforcement agents & remain calm & polite. Try to obtain an inventory of the materials that the law enforcement agents take from the institution. They should review the warrant to determine its scope. When should a financial institution consider retaining an experienced outside counsel to assist it? - CORRECT ANSWER When the institution itself appears to be the target of a criminal investigation. When should a compliance officer recommend that a financial institution conduct an internal investigation? - CORRECT ANSWER When there is a suspicion that an employee is conspiring with a Long-Term customer to launder money through the bank. When a series of customers open separate accounts at different branches, but with the same contact information. When a long term employee decides to take only intermittent vacation days, but not 2 weeks in a row, per bank policy. What are 3 practical tips in interviewing employees with regard to an unusual or suspicious transaction that they have witnesses? - CORRECT ANSWER Interview the employees as soon after the occurrence as possible in order to ensure that their memory are fresh. Put the employees at ease during the interview & start with relatively easy, Non-Controversial, questions before getting into more sensitive matters. Use Open-Ended questions for the employees in order to ensure that the questions do not dictate what the expected answer is. With regard to exchanges of information between FIU's of different countries, What are 3 controlling principles? - CORRECT ANSWER Sharing of information should be done as freely as possible on the basis of reciprocity. Sharing should be on the basis of requests & also spontaneously. Differences in the definition of offenses should not impede the free exchange of information. What is a Bank Secrecy? - CORRECT ANSWER Refers to laws & regulations in countries that prohibit banks from disclosing information about an account or even revealing its existence, without the consent of the account holder. 1 of FATF's 40 Recommendations states that countries should ensure that secrecy laws do not inhibit the implementation of the FATF Recommendations. What is a Correspondent Banking? - CORRECT ANSWER The provision of banking services by 1 bank the Correspondent Bank to another bank the Respondent Bank. Interest-Bearing accounts in a variety of currencies ex. international wire transfers of funds, check clearing services, Payable-Through accounts & foreign exchange services. What is a Egmont Group of Financial Intelligence Unit? - CORRECT ANSWER In 1995, a number of national FIU's began working together in an informal organization... The goal of the group is to provide a forum for FIU's to improve support to their national Anti-Money Laundering programs & develop protocols for information sharing. What is Enhanced Due Diligence EDD? - CORRECT ANSWER Additional examination & cautionary measures aimed at identifying customers & confirming that their activities & funds are legitimate. What is Financial Action Task Force FATF? - CORRECT ANSWER Seven industrial nations to foster the establishment of national & global measures to combat Money Laundering. It is an international Policy-Making body that sets AML standards & Counter-Terrorist Financing measures worldwide. What is Financial Intelligence Unit FIU? - CORRECT ANSWER A central governmental office that obtains information from financial reports, processes it & then discloses it to an appropriate government authority in support of a national AML effort. Receiving, analyzing & disseminating info & sometimes, investigating violations & prosecuting individuals indicated in the disclosures. Definition of Kingston Declaration on Money Laundering? - CORRECT ANSWER In 1992, the US, UK, France, Canada & the Netherlands spearheaded a gathering of 17 Caribbean nations in Jamaica. At its conclusion, the nations issued he Kingston Declaration on Money laundering , which expressed solidarity with the 1988 United nations Convention on Illicit Trafficking in Narcotic Drugs. The declaration also agreed to implement the FATF 40 Recommendation & the 19 Recommendations issued at the 1990 Aruba meeting that created the CFATF. What is a Loan Back Method of Money Laundering? - CORRECT ANSWER A criminal puts the illicit funds in an offshore entity that he owns & then "loans" them back to himself or a company he owns. This is hard to determine who actually controls offshore accounts in some countries. This process allows the launder to "clean" illicit money & to generate tax benefits by deducting purported interest payments. What is a Memorandum of Understanding MOU? - CORRECT ANSWER An agreement between 2 parties establishing a set of principles that govern their relationship on a particular matter. What is a Office of Foreign Assets Control OFAC? - CORRECT ANSWER Office within the U.S. Department of the Treasury that administers & enforces economic & trade sanctions against targeted foreign countries, Terrorism-Sponsoring organizations, terrorists, International narcotics traffickers, goals. What is a Payable-Through-Account? - CORRECT ANSWER Transaction account opened at a depository institution by foreign financial institution through which the foreign institution's customers engage, either directly or through Sub-Accounts, in banking activities & transactions in the country where the account was opened. What is a Wolfsberg Group? - CORRECT ANSWER named after the castle in Switzerland where its 1st working session was held, is an association of global financial institution, including Banco Santander, Bank of Tokyo-Mitsubishi, Barclays... & others... In 2000, along with Transparency International & experts worldwide, the institutions developed global AML guidelines for international private banks. Since then, it has issued several other guidelines on Correspondent Banking & Terrorist Financing, among others. What are some examples of Placement stage of money laundering cycle? - CORRECT ANSWER Breaking up large amounts of cash into smaller sums & depositing them directly into a bank account. Transporting cash across boarders to deposit in foreign financial institutions, or to buy High-Value goods, artwork, antiques & precious metals. What are some examples of Layering stage of money laundering cycle? - CORRECT ANSWER Sending wire transfers. Traveler's checks. Reselling High-Value goods. Investing in real estate. Placing money in investing like stocks, bonds or life insurance. What are some examples of Integration stage of money laundering cycle? - CORRECT ANSWER Invest the funds in real estate. Financial ventures. Luxury assets Correspondent Banking is vulnerable to money laundering for 2 main reasons? - CORRECT ANSWER 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 1st-Hand knowledge. The amount of money that flows through Correspondent Accounts can pose a significant threat to financial institutions. Vulnerabilities of Private banking with regard to money laundering includes? - CORRECT ANSWER Perceived high profitability. Intense competition. Powerful clientele. The high level of confidentiality. Close relationship between managers & their clients. Commission-Based compensation for managers. Culture of secrecy & discretion managers to clients. Managers advocates to protect their clients. What 2-step must be met for a jurisdiction to become member of FATF? - CORRECT ANSWER Fundamental criteria of membership. Technical & other criteria. FATF focus on? - CORRECT ANSWER Spreading the AML message worldwide. Monitoring implementation of the FATF Recommendations among FATF members. Reviewing Money-Laundering trends & countermeasures. 40 Recommendation highlights are? - CORRECT ANSWER Risk-Base approach. Designated categories of offenses. Terrorist financing & financing of proliferation. Knowledge & criminal liability. European Union Directives on Money-Laundering 1st, 2nd, 3rd ? - CORRECT ANSWER 1st prevention of the use of the financial system fro the purpose of money laundering. 2nd required stricter money laundering controls across the continent. 3rd prevention of the use of the financial system for the purpose of money laundering & terrorist financing based on elements of the FATF revised 40 recommendation. What is the goal of the Egmont group of Financial Intelligence Unit FIU? - CORRECT ANSWER To provide a forum for FIUs around the world to improve cooperation in the fight against money laundering & financing of terrorism & to foster the implementation of domestic programs. What is the Wolfsberg Group? - CORRECT ANSWER Is an association of 11 global banks that aims to develop financial services industry standards & related products for KYC, AML & Counter terrorist financing policies. What is the Wolfsberg principles? - CORRECT ANSWER Reporting to management of Money-Laundering issues. AML training. Retention of relevant documents. Deviations from policy. Creation of an AML department & an AML policy. The Wolfsberg recommendations include? - CORRECT ANSWER Providing official lists of suspected terrorist on a globally coordinated basis by relevant authorities. Including adequate information in the lists to help institutions search customer databases efficiently. Providing prompt feedback to institutions following circulation of the official lists. Providing information on the manner, means & methods used by terrorists. Developing government guidelines for business sectors & activities identified as high-risk for terrorism financing. Developing uniform global formats for funds transfers that assist in the detection of terrorism financing. What is Office of Foreign Assets Control OFAC? - CORRECT ANSWER Administers & enforces economic & trade sanctions based on U.s. foreign policy & national security goals against targeted foreign countries, terrorist, international narcotics traffickers & those engaged in activities related to the proliferation of weapons of mass destruction. Egmont Group what is it and important documents? - CORRECT ANSWER Informal networking group of FIU. Statement of purpose. Principles for information exchange between FIU for Money-Laundering cases. Best practices for the exchange of information between FIU. What is a Customer Identification Program CIP ? - CORRECT ANSWER Must be included within the institution's AML compliance program & must include at a minimum, policies, procedures & processes for the following: Identifying info. Complying with recordkeeping requirements. Checking new accounts against prescribed government lists. Providing adequate notice about customer ID requirements. Covering the institution's reliance on other financial institutions or 3rd parties. Determine whether & when suspicious transaction reports should be filed. Conducting a risk analysis of customers for account opening purposes, which consider the types of accounts offered. Opening new accounts for existing customers. Obtaining the approval of the board directors. Conducting audit & training programs to ensure that the CIP is adequately incorporated. Verifying that all new accounts are checked on a timely basis against prescribed government lists for suspected terrorists. What are some Red Flags or indicators of Money Laundering? - CORRECT ANSWER ATM Usage. Moving Customers: A customer who moves frequently. Opening Deposits or Investments: Sources of funds. Out-Of-Market Windfalls: Sounds too good to be true. Credit Balances: Over pay on their credit line. Common Address, Phone Numbers, IP Addresses & Other Data: Suspicious or fraudulent purposes. What is memoranda of Understanding MOU? - CORRECT ANSWER The Egmont Group of FIUs has established a model for such MOUs. Unlike the MLAT, this gateway is not ordinarily used for obtaining evidence, but for obtaining intelligence that might lead to evidence. What is Bank Secrecy Act BSA Compliance Program? - CORRECT ANSWER The development of internal policies procedures & controls; the designation of a compliance officer; ongoing employee training; & an independent audit function to test the program. What is Bearer Share? - CORRECT ANSWER Negotiable instruments that accord ownership in a corporation to the person who is in physical possession of the bearer share certificate. What is Black Market Peso Exchange BMPE? - CORRECT ANSWER Is an example of a complex method of trade-based money Laundering. The BMPE originally was driven by Colombia's restrictive policies on currency exchange. This system operates through brokers who purchase narcotics proceeds in the US from the cartels & transfer pesos to the cartels from within Colombia. Egmont Group of Financial Intelligence Units? - CORRECT ANSWER In 1995, a number of national FIUs began working together in an informal organization the Egmont. The goal of the group is to provide a forum for FIUs to improve support to their national AML programs & to develop protocols for information sharing. What is the Kingston Declaration on Money Laundering? - CORRECT ANSWER United Convention on illicit Trafficking in Narcotic Drugs. The declaration also agreed to implement the FATF 40 Recommendations & the 19 Recommendations issued at the 1990 Aruba