ACAMS Practice Test 2 (Flash Cards) 175 Questions with Verified Answers,100% CORRECT

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ACAMS Practice Test 2 (Flash Cards) 175 Questions with Verified Answers When a financial institution is served with a search warrant by a law enforcement agency, what are three things that the empl... oyees of the institution should do? - CORRECT ANSWER - They should cooperate fully with the law enforcement agents and remain calm and polite. - They should 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. Which of the following is the most common method of laundering money through a legal money services business? - CORRECT ANSWER Exchanging currency and remitting money In general, the three phases of money laundering are said to be: placement and: - CORRECT ANSWER layering and integration. Which statement is true? A. Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal oversight by local authorities and weak procedures to inspect goods. B. Cuckoo smurfing is a significant money laundering technique identified by the Financial Action Task Force, wherein a form of structuring uses nested accounts with shell banks in secrecy havens. C. In its 40 Recommendations, the FATF issued a list of designated categories of offense that asserts crimes for a money laundering prosecution. D. E-cash is not attractive to the money launderer because it cannot be completely anonymous and does not allow for large amounts to be transported quickly and easily. - CORRECT ANSWER Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal oversight by local authorities and weak procedures to inspect goods. Which three of the following is an indication of possible money laundering in an insurance industry scenario? - CORRECT ANSWER - Single-premium insurance bonds, redeemed at a discount - Policyholders who are unconcerned about penalties for early cancellation - Policyholders who redeem the policy within the free look period Which two activities are typically associated with the black market 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 United States or Europe through peso brokers What is the right of reciprocity 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 PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds. In 2014, the Wolfsberg Group published its Anti-Money Laundering Principles for Correspondent Banking. Which three of the following elements are recommended to be included in the due diligence of a correspondent banking client? - CORRECT ANSWER - The geographic risk - The ownership and management structure - The customer base A new customer approaches a bank to open a commercial account. The customer provides an address for the account located across the city from the branch. When asked by the account representative if the customer requires any additional banking services, the customer responds that she is also interested in opening a personal investment account. The account representative refers the customer to the broker-dealer. The customer tells the firm representative she has never had a brokerage account before and has a few questions about how an investment account works. The customer asks how deposits can be made into her account, if there are any reporting requirements, and how to go about moving balances out of the account using wire transfers. No questions are asked about fees associated with these transactions. Which three items would be considered suspicious? - CORRECT ANSWER - The customer asks many questions about the brokerage account but none of them is related to investing. - The address of the account holder and the branch where the customer came to open the account are not close to each other. - The customer appears unconcerned about the fees. Trade-based money laundering requires the ability to: - CORRECT ANSWER 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? A. Lawyers in FATF member countries generally cannot be used to serve as formation agents to set up trusts, front companies or shell companies. B. Lawyers and similar professional gatekeepers are called money services businesses. C. Lawyers generally cannot be used to act as nominee shareholders for a beneficial owner. D. Lawyers can be abused by launderers by using the accounts they set up for them for the placement and layering of funds. - CORRECT ANSWER Lawyers can be abused by launderers by using the accounts they set up for them for the placement and layering of funds. Which three of the following statements are true in respect to the Fourth EU Anti-Money Laundering Directive? - CORRECT ANSWER - It repeals and replaces the Third EU Directive on Anti-Money Laundering. - Each member country must hold beneficial ownership information in a central registry and it must be made available to competent authorities. - The definition of a PEP is expanded to include domestic persons According to the EU Directives, 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 two main motivations to encourage strong know your customer programs in its paper Customer Due Diligence for Banks? (Choose two) - CORRECT ANSWER - Protect the safety and 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? - CORRECT ANSWER A person or entity who is ultimately entitled to the funds in the account, even though his or her name may not appear on the account FinCEN's Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance, published in 2014, listed six areas of emphasis. Which three areas are included in that list? - CORRECT ANSWER - Leadership should be engaged. -Information should be shared throughout the organization. - The organization must have an appropriately qualified compliance officer. Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations? (Choose three.) - CORRECT ANSWER Indicating whether it is relevant that a predicate offense may have been committed outside the local jurisdiction Which three statements are true about the Fourth EU Directive on Money Laundering? - CORRECT ANSWER - It updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. - It repeats the definition of a politically exposed person in previous directives. - It repeats the customer due diligence requirements of the previous directives but adds more detail to the requirements by, for example, including a specific requirement to identify the beneficial owner and includes ongoing monitoring requirements. Which one of the following statements is correct in respect of the FATF 40 Recommendations? Countries should: - CORRECT ANSWER Not approve the establishment or accept the continued operation of shell banks. The Egmont Training Group published FIUs in Action: 100 Sanitized Cases. Which two of the items noted below were listed in the report as part of the six most frequent indicators of money laundering? A. Defensive stance to questioning B. Use of precious stones for moving value C. Unrealistic wealth compared to client profile D. Significant use of prepaid cards - CORRECT ANSWER In which stage of money laundering would you classify depositing small amounts of cash into several related accounts? - CORRECT ANSWER - Integration - Placement In which stage of money laundering would you classify the use of laundered funds to purchase high value assets and luxury items? - CORRECT ANSWER - Integration In most money laundering international standards, it is stated that - CORRECT ANSWER The institution should identify the beneficial owner(s) of the account. 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 not be necessary? A. A customer deposits money of suspicious origins and refuses to answer questions from the financial institution's staff. B. A customer tries to move money that is suspected of being derived from criminal activity. C. A customer owns a large supermarket and deposits large amounts of cash several times a day. D. A customer's account is showing transaction activities that are beyond his known financial capability. - CORRECT ANSWER A customer owns a large supermarket and 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. Over lunch with a friend from the computer operations department, a junior compliance analyst learns that there was a problem during the previous week related to data being transmitted to the transaction monitoring application. The friend states that because it was purely a technical computer system issue, he was quietly proud that he was able to rectify it quickly himself during the early hours of the morning. What action should the analyst take? - CORRECT ANSWER Congratulate his friend and, as soon as possible, ensure that the compliance officer is aware of the situation. 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 indicating potentially suspicious, risky transactions or activities. The money laundering reporting officer of a financial institution should? - CORRECT ANSWER Review all available information and file a suspicious transaction report in respect of any unusual or potentially suspicious activity. Which of the following statements is true? A. Credit cards are not likely to be used in the layering phase of money laundering because of restrictions in cash payments. B. Credit cards are effective instruments for laundering money because the transactions do not create an audit trail. C. A launderer can launder money by prepaying his or her credit card using funds that are already in the banking system, creating a credit balance on his account, and requesting a credit refund. D. A launderer can use illicit funds that are already in the banking system to pay his or her credit card bill for goods purchased, which is an example of placement. - CORRECT ANSWER A launderer can launder money by prepaying his or her credit card using funds that are already in the banking system, creating a credit balance on his account, and requesting a credit refund. Why is a payable through account vulnerable to money laundering? - CORRECT ANSWER It can be very difficult to conduct due diligence on the foreign institution customers who are ultimately using these accounts. 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 and professions include? - CORRECT ANSWER Casinos, real estate agents and dealers in precious stones. According to the European Union's Fourth Directive, the threshold for entities obliged to report suspicious transactions decreased to? - CORRECT ANSWER $10,000 euros. Tom works as a compliance officer at ABC Bank. He is looking at the transactions of one of the bank's customers, Mr. Brown, the owner of a check cashing company. Over the last six months, Mr. Brown has not made withdrawals of cash against check deposits. He also deposited two checks for $2,000 each that were issued by a casino. When checking the KYC file, Tom sees that, when opening the account, Mr. Brown had requested information about fees and commission that are charged by the bank. What should arouse Tom's suspicion the most? - CORRECT ANSWER Mr. Brown has not made cash withdrawals against check deposits. A small broker-dealer has an AML compliance program that addresses procedures for filing suspicious transaction reports and includes policies, procedures and internal controls for customer identification, monitoring accounts and identifying money laundering red flags. Every employee of the broker dealer is trained via the Internet in January and in July on AML issues. The board does not take the Internet training. Instead, the compliance officer organizes a luncheon for them where an outsider comes in and trains them. The program provides for the appointment of a compliance officer, and once a year the compliance officer conducts an audit to test the program. In what respect does the program need improvement? - CORRECT ANSWER The AML program should be tested by an independent person, not the compliance officer. The Basel Committee in Banking Supervision can be defined as a committee: - CORRECT ANSWER Of the G10 central bank governors, which issues guidance on subjects including customer due diligence, risk management and cross-border wire transfers. Which of the following best describes the alternative remittance system? A. The transfer of value between countries, outside of the legitimate banking system B. A non-electronic data remittance system used in several foreign countries to report suspicious activities C. Old-fashioned reporting requirements commonly used in non-cooperative countries and territories D. The transfer of funds between two or more financial institutions using concentration accounts - CORRECT ANSWER The transfer of value between countries, outside of the legitimate banking system An AML compliance officer was reviewing customers at XYZ Bank and one of the customers (Mr. Sam Tropicana) attracted her attention. During the recent months, the cash deposits and withdrawals that were transacted through his account increased with amounts ranging between $7,500 and $17,000. In addition, Sam deposited two checks, issued by a casino, into his account for $32,000 each. When opening the account, Sam stated that he operated an import/export company. Which one of the following items should cause the compliance officer to launch an investigation? - CORRECT ANSWER Sam had a recent increase in large cash transactions for his import/export business. Which three of the following statements are true? A. Online gambling provides an excellent method of laundering because transactions are conducted primarily through credit or debit cards and the sites are typically unregulated offshore firms. B. An institution can know when a credit card is used for online gambling transactions because the cards rely on codes that illustrate the type of transactions. C Online gambling provides an excellent method of laundering because it lends itself to any type of cash movement and there is no face-to-face contact with the customer. D. Some banks no longer allow the use of credit cards for online gambling transactions. - CORRECT ANSWER - Online gambling provides an excellent method of laundering because transactions are conducted primarily through credit or debit cards and the sites are typically unregulated offshore firms. - 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 transactions. Which of the following statements is true? A. The Egmont Group membership comprises national FIUs. B. The Wolfsberg Group membership comprises central bank governors of the G10. C. The European Union recommends legislation to be passed in the member countries. D. The Basel Committee levies fines on the member countries for non-compliance with AML laws. - CORRECT ANSWER The Egmont Group membership comprises national FIUs. Which three of the following statements are included in Section 313 of the PATRIOT Act definition of physical presence in respect to shell banks? - CORRECT ANSWER - There is a fixed address. - It employs at least one full-time employee. - Banking records are kept at the fixed address. The FATF has consistently noted the use of casinos in money laundering schemes in its annual typologies reports. One laundering technique involving casinos is? - CORRECT ANSWER Asking for winners' checks to be made out in the name of third persons or without a payee. Which of the following should an anti-money laundering specialist include on an internal investigation log? - CORRECT ANSWER Notes pertaining to activity that is unusual but for which a suspicious transaction report has not been filed What are the three key criteria in AML risk rating? - CORRECT ANSWER Customer type, geographic location, products and services used A financial institution is looking to establish an online account opening service. The institution plans to offer this product to new and existing customers within the country. Which of the following would be the best plan of action for an AML specialist to recommend enabling the institution to verify the customer's identity? - CORRECT ANSWER Ensure that the institution has a reliable third-party source that will enable verification of the customers. 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 Jane, an investigator in the AML section of a large financial institution, is given a wide-ranging case to investigate involving potential money laundering in a number of countries and entities. Which three public source documents or records could aid Jane in furthering her investigation? - CORRECT ANSWER - Domestic corporate filings - Court records - Licensing and registration files When drafting an AML policy, which of the following internal parties must approve the policy? - CORRECT ANSWER Executive management Suzy is an AML compliance officer at an institution that is looking to open treasury management services (e.g., wires, check clearing and foreign draft issuance) for correspondent banking customers. Which of the following should Suzy be most concerned about regarding the institution's capabilities concerning these customers? - CORRECT ANSWER Whether the correspondent accounts will be able to be monitored by the institution's monitoring systems What are three specific sources of funds for financing terrorism? - CORRECT ANSWER - Kidnapping for ransom - Trafficking in humans and arms - Contributions to charities A customer wants to establish a sizable relationship with a financial institution. The AML officer is not comfortable with the client's explanation for the source of the funds, but the client manager vouches for the client and is eager to open the relationship quickly. What should the AML officer do to validate the client's sources of funds? - CORRECT ANSWER Perform a 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 and an individual brokerage account. The compliance officer believes the customer may be embezzling funds from his business. Which is the best path for her to follow up on her suspicions? - CORRECT ANSWER Look at the movement of funds in all the accounts, as the customer may be using all of them to launder money. Identify three risks to financial institution employees for violations of AML laws: - CORRECT ANSWER - Civil penalties - Termination of employment - Criminal penalties 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 four years. The company does not allow employees to roll vacation over from year to year. An AML compliance officer has noticed unusual activity in several accounts at the branch location. What should the AML officer do? - CORRECT ANSWER Conduct an investigation to establish 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 should be incorporated into the procedures? - CORRECT ANSWER Have employees refer all unusual activity to her so that she may 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 take? - CORRECT ANSWER Cooperate fully with the authorities, as permitted by law. A compliance officer is looking to improve a compliance program for a financial institution that operates in several countries. The institution has developed consistent customer due diligence (CDD) requirements for all customers of the institution that exceed each of the individual country's requirements. When looking to provide management reporting on the CDD compliance efforts of the institution, which of the following would make the most sense? - CORRECT ANSWER Report on compliance with the company's stated requirements. What is the best way to establish compliance as a key responsibility for every employee of a financial institution? - CORRECT ANSWER Have senior management require compliance as a condition of employment. The Annex IV General Guide to Account Opening Consultative Document published in February 2016 by the Basel Committee lists information that should be obtained for the identification of legal persons. Which three items are recommended? - CORRECT ANSWER - Name, legal form, status and proof of incorporation of the legal person - Permanent address of principal place of the legal person's activities - Identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means Robert is a compliance officer for a financial institution. He is looking to assess the effectiveness of the current AML program. Which of the following should Robert consider in his assessment of the program's effectiveness? - CORRECT ANSWER Customer due diligence error rates, quality assurance testing on STR filings and percentage of products and 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 exceed a certain threshold. What are the appropriate next steps for Joe to take to prepare his bank for the new requirements? - CORRECT ANSWER Provide training to impacted associates, work with technology partners to capture all cross-borders transaction for reporting and implement a testing plan to be sure appropriate transactions are 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 of the employees who took the training with their department name 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 and 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 and learns of a new regulation that will impact her current AML processes. The regulatory environment has been relatively stable within the industry for several years but Marie is glad she attended this conference to get news of the new requirements. What should Marie do to stay abreast of future changes in requirements? - CORRECT ANSWER Implement a process to determine when new regulations are published and 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. Which statement is true in respect to the Wolfsburg Group? A. It is a castle in Belgium where members of national FIUs meet to monitor global AML trends. B. This group is responsible for making international laws to combat anti-money laundering and counter terrorist financing. C. The major international banks meet in this group to develop global guidelines for anti-money laundering and counter terrorist financing. D. The governors of central banks meet in this group to discuss global trends in anti-money laundering and counter terrorist financing. - CORRECT ANSWER The major international banks meet in this group to develop global guidelines for anti-money laundering and counter terrorist financing. The FATF 40 Recommendations are organized into seven groups. Which three of the following are valid group names? - CORRECT ANSWER - Money Laundering and Confiscation - Financial and Non-Financial Institution Preventative Measures - Powers and Responsibilities of Competent Authorities and Other Instructional Measures A longtime customer of the bank comes into the bank a number of times over a series of weeks and deposits a large amount of cash and, the next day, asks for the amount to be wired to a third world country. This behavior is not in keeping with his normal business practices. What should the compliance officer recommend? - CORRECT ANSWER Open an internal investigation, collect all the appropriate documentation and review it in order to decide on whether to file an STR. Which statement below defines a mutual legal assistance treaty? - CORRECT ANSWER It is an agreement among countries allowing for mutual assistance in legal proceedings and access to documents, witnesses and other legal and judicial resources in the respective countries, in private sectors, for use in official investigations and prosecutions. After receiving an STR regarding a customer account, the relevant law enforcement agency requests permission to interview the bank personnel who are familiar with the underlying transaction. What action should the compliance officer take? - CORRECT ANSWER The officer, in consultation with bank counsel, should cooperate, to the extent possible, and give permission for the relevant interviews.to take place. The Egmont Group is supported by working groups. Which three are members of the five working groups? - CORRECT ANSWER - Operational - Legal - Outreach Gatekeepers are defined as: - CORRECT ANSWER Professionals such as lawyers, accountants, notaries, investment advisers and trust and company service providers. The compliance officer is trying to put together a set of procedures for handling the decision of whether or not to file an STR. What should the compliance officer include as part of these procedures? - CORRECT ANSWER The officer should recommend that the decision as to whether or not to file an STR be subjected to a quality assurance review. Of the following scenarios, which two are potential red flags indicating possible suspicious activity that should be investigated further? - CORRECT ANSWER - A large family with multiple accounts held in the name of different family members - Accounts held for a business in a branch that is located on the other side of town from where the business is located The FATF 40 Recommendations are grouped into seven topics. Identify three of those topics from the list below: - CORRECT ANSWER - Terrorist Financing and Financing of Proliferation - Powers and Responsibilities of Competent Authorities and Other Institutional Measures - Money Laundering and Confiscation When would a financial institution typically file an STR? - CORRECT ANSWER Whenever it detects unusual or suspicious transactions When a bank receives a subpoena for information about a specific account, what two steps should the compliance officer take? - CORRECT ANSWER - The compliance officer should ensure that the staff investigate and collect all documents responsive to the subpoena. - The compliance officer should ensure that the subpoena is reviewed by senior management and/or counsel and be responded to in a timely manner. A law enforcement representative calls up the compliance officer and urgently requests information pertaining to a particular account in connection with an on-going terrorist financing investigation. What should the compliance officer do? - CORRECT ANSWER Request that the law enforcement representative provide a court order, a grand jury subpoena or other legal process unless the bank has already filed an STR on the matter. In conducting a criminal investigation, what are three things that the law enforcement investigators should do? - CORRECT ANSWER - Conduct computer-based searches on the individuals and entities involved. - Review any previously filed STRs on the individuals and entities involved. - Analyze the financial transactions and activity of the subject and determine what is potentially illegal. 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 and results of the internal investigation and keep the documentation in an appropriate file. What are three developments that should cause a financial institution to conduct an internal investigation? - CORRECT ANSWER - When the institution receives a grand jury subpoena with regard to transactions that have occurred within several accounts at the institution - When 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 three possible red flags indicating suspicious or unusual activity that might warrant an investigation and 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 and ending balances - Multiple cash deposits made just under the reporting threshold What is the definition of a respondent bank? - CORRECT ANSWER A bank for which another financial institution establishes, maintains, administers or manages a correspondent account What are the three classic gateways for international cooperation and sharing? - CORRECT ANSWER - Mutual legal assistance treaties (MLATs) - Exchange of information between financial intelligence units (FIUs) - Exchange of information between supervisory agencies What are three 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 for information as promptly and thoroughly as possible, unless there is a valid objection that can and should be made. - Ensure that all communication, written and oral, is funneled through a centralized place. What three steps should be taken when there is a criminal investigation that is targeting the bank itself? - CORRECT ANSWER - The senior management and the Board of Directors should be notified and kept apprised of the progress of the investigation. - The bank should consider retaining experienced outside counsel to assist the bank in responding to the investigation. - The relevant employees of the bank should be notified of the existence of the investigation and should be given instructions as to what to do and how to act. 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 Ensure that responses are timely and thorough and that privileged material is not inadvertently handed over. When should a financial institution consider retaining an experienced outside counsel for assistance? - 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? (Choose three.) - CORRECT ANSWER - When there is a suspicion that an employee is conspiring with a long-term customer to launder money through the bank - When several 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 two weeks in a row, per bank policy What are three practical tips in interviewing employees with regard to an unusual or suspicious transaction they have witnessed? - CORRECT ANSWER - Interview the employees as soon after the occurrence as possible in order to ensure that their memories are fresh. - Try to put the employees at ease during the interview and start with relatively easy, noncontroversial 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 FIUs of different countries, what are three controlling principles? - CORRECT ANSWER - The sharing of information should be done as freely as possible on the basis of reciprocity. - The exchange of information should take place as informally and as rapidly as possible. - Differences in the definition of offenses should not impede the free exchange of information. Rick is the AML compliance officer for a small bank that had AML difficulties and is operating under a deferred prosecution agreement with the federal government. The FBI approaches Rick and requests that the bank maintain an account the FBI is examining so that the FBI can monitor continuing activity. What two things should Rick do? - CORRECT ANSWER - Ask that the request be submitted in writing. - Ensure that the request is from someone with the appropriate authority. Identify three methods of money laundering in the real estate business? - CORRECT ANSWER - Using large amounts of cash to purchase property - Disguising the beneficial ownership - Using an unlicensed agent Identify three methods of laundering money using lawyers? - CORRECT ANSWER - Creating trusts for clients - Buying and selling property - Setting up and managing a charity Roy, a BSA officer for a large financial institution, is reviewing a possible money laundering case. What are three potential red flags that should concern him? - CORRECT ANSWER - Multiple purchases and sales of property over a short period of time - High number of transactions over the Internet or by phone - Two or more people using the same identification Jim, an AML officer for a casino, identifies a number of potential red flags involving customers. Which should be the most troublesome? - CORRECT ANSWER A customer purchases a number of chips, plays for a short period of time and wants to wire the proceeds of the chips to another casino in a foreign country. What is nesting? - CORRECT ANSWER When a respondent bank is providing downstream correspondent services to other financial institutions A financial institution is concerned about the possibility of the proceeds from human trafficking being funneled through the institution. What are three things the institution should look out for? - CORRECT ANSWER - Multiple wire transfers, often below the reporting thresholds, sent from foreign countries - Multiple, unrelated individuals sending wires to the same beneficiary - Accounts for foreign workers for which the employment agency is the custodian for the accounts A new products manager wants to propose a product involving prepaid cards but the AML officer sees some problems. What would be three risks that the AML officer might raise? - CORRECT ANSWER - The new product would enable customers to move funds around the world quickly. - The product can be reloaded and used anonymously. - The cards could be used as a substitute for bulk-cash smuggling. Identify three key aspects of OFAC sanctions that have extraterritorial reach? - CORRECT ANSWER - Economic and trade sanctions based on U.S. foreign policy - Freezing foreign assets under U.S. jurisdiction - Blocking people on the Specially Designated Nationals and Blocked Persons List Identify three key roles of regional FATF-style bodies? - CORRECT ANSWER - Publishing periodic typology reports - Actively participating in identifying AML technical assistance needs - Assisting in the FATF mutual evaluation process Jim, an AML expert for a large bank, is reviewing some questionable customer account activity. What three scenarios should concern him the most in terms of possible AML red flags? - CORRECT ANSWER - A customer who threatens an employee in an effort to discourage required record keeping - Transaction a customer has with a country whose location is unfamiliar to the AML expert - Corporate account that shows high velocity of cash deposits and wire transfer withdrawals always leaving a low month-end balance Identify three key aspects of delivering targeted training for different audiences and job functions? - CORRECT ANSWER - Determining how to provide the training - Determining the focus of the training - Determining whom to train What are three initial things that a law enforcement investigator should consider in following up on an STR submitted by a financial institution? - CORRECT ANSWER - Identify potentially suspicious activity and any specified unlawful activity. - Trace the source and ownership of illegal money through all appropriate accounts. - In cross-border cases, seek international assistance. Jack, the AML officer for a financial institution, is confronted with reports that several bank employees have been assisting suspected money launderers. What three things should Jack consider doing to follow up on these reports? - CORRECT ANSWER - Determine whether the employees are living a lavish lifestyle. - Determine whether the employees may have been assisting the customers in hiding the ultimate beneficiaries of their accounts. - Determine whether the employees are involved in an excessive number of unresolved exceptions. Suzy, the AML compliance officer for a large financial organization, is asked by her board of directors to review how best to protect the confidentiality of STRs submitted by the organization and the confidential information contained therein. What are three things she should consider? - CORRECT ANSWER - Ensure training of employees so that they do not inadvertently inform, or tip off, the targeted customer of the filing. - Ensure strong record-keeping procedures to segregate information pertaining to STRs and to maintain their confidentiality. - Ensure that procedures are in place to promptly and appropriately respond to requests for copies of filed STRs. What three initial actions should a financial institution take in responding to red flags that indicate that a customer is laundering money through his or her accounts? - CORRECT ANSWER - Identify and review internal transactions engaged in by the customer. - Perform an Internet investigation focused on the customer, including a review of court records. - Compare the income generated by the customer with comparable businesses in the area. The compliance officer of a financial institution has just received an extensive law enforcement subpoena focusing on the potential inadequacy of the institution's AML program. What three steps should the compliance officer take? - CORRECT ANSWER - He or she should notify the board of directors and senior management of the financial institution of the subpoena and its focus on the institution. - He or she should consider advising the institution to retain outside counsel experienced in this area. - He or she should consider providing law enforcement with the results of any internal investigation conducted by the institution. What three factors could cause a financial institution to update its existing AML program? - CORRECT ANSWER - The launch of a new product - The acquisition of another financial institution - The passage of time (e.g., 12-18 months) What are three factors with regard to how and when to report an STR to the senior management and/or the board of directors of a financial institution? - CORRECT ANSWER - Whether the STR raises significant issues, especially in terms of reputational risk - Whether the STR indicates any compliance deficiencies - Whether the STR is indicative of any significant AML trends Diane, the AML compliance officer for a large financial institution, uncovers a serious case of potential money laundering being conducted through a number of related accounts. What three factors should she consider in deciding whether or not to close the accounts? - CORRECT ANSWER - Whether the alleged money laundering activity is occurring in all of the accounts or just some of the accounts - The legal basis for closing the accounts - The reputational risk to the institution if the accounts are maintained Which three are examples of best practices of ensuring an adequate AML program? - CORRECT ANSWER - Review the accuracy of account opening applications - Review applicable domestic and international AML guidelines - Perform a risk analysis on a regular basis and compare it to the coverage of the AML program Which Three statements are true regarding the extraterritorial reach of laws and legislation of the US? - CORRECT ANSWER - The criminal anti-money laundering law can apply to transactions that occur partially overseas - Economic and trade sanctions by OFAC may poise extraterritorial risks for financial institutions and businesses outside of US - The defendant does not need to know the funds came from an illegal activity under state, federal or foreign law What is a criterion for FATF membership? - CORRECT ANSWER The country should be a member of a FAFT-style regional body According to the Second European Union Money Laundering Directive, what may knowledge of criminal conduct be inferred from? - CORRECT ANSWER Objective, factual circumstances In which type of banking transaction is price manipulation, as a form of money laundering, a common practice? - CORRECT ANSWER Issuing a letter of credit Which two aspects of the security broker dealer industry increase its exposure to money laundering? - CORRECT ANSWER - Fast paced transactions conducted electronically - Disposing of cash through securities purchases To ensure that am institution's anti-money laundering program is current, which step should be taken? - CORRECT ANSWER The program should be reassessed at least annually A prospective AML officer comes highly recommended by a bank's up-stream correspondent institution of similar size and make-up, located in a different city in the same country. The bank is interested in hiring the individual. What should be the next step taken by the Board of directors? - CORRECT ANSWER Do a thorough background check Which type of transactions present the highest risk? - CORRECT ANSWER Foreign exchange According to experts, what is the most effective way to prevent money laundering through financial institutions? - CORRECT ANSWER Implementing a sound customer due diligence program What should a bank focus on to ensure on-going compliance with its AML Program? - CORRECT ANSWER It should ensure that it develops and provides on-going targeted training of all current and new employees What should a compliance officer do during an ongoing investigation into a client's activities by a competent authority? - CORRECT ANSWER Ensure communication with regulatory and law enforcement authorities is conducted only through the Board of Directors How can dealers on high-value items be at risk for money laundering? - CORRECT ANSWER Carrying large amounts of gems of high value is physically easy Which activity is most likely to facilitate money laundering through on-line systems with inadequate controls? - CORRECT ANSWER Providing continuous worldwide access In the FATF 40 Recommendations, the focus of AML efforts has been expanded beyond Financial Institutions. Which three businesses and/or professions are covered? - CORRECT ANSWER - Trust and company service providers - Real estate agents when they are involved in transaction for clients concerning buying and selling products - Dealers in art, when they engage in any cash transaction with a customer at or above a designated threshold When requested by LE via legal process to provide records or documentation, what should the officers of financial institutions do? - CORRECT ANSWER Not act on the legal process until the bank officer has contact with the agent and learn what the agent is investigating Which AML standards have force of law? - CORRECT ANSWER Standards as defined in the Third European Union Money Laundering Directive (2005/60/EC) What are some red flags pertaining to potentially suspicious transactions by a customer? - CORRECT ANSWER - Having multiple addresses and/or moving frequently - Having multiple individuals use the ATM card connected with the account in different cities - Have a common address with several other bank clients An anti-money laundering expert is hired by a new internet bank to assess the money laundering threat to the bank. What is the most important recommendations for the expert to make give it is an online bank? - CORRECT ANSWER The bank should limit the amount of money which can be processed per transaction Why is the Mutual Legal Assistance Treaty (MLAT) a gateway for international cooperation? - CORRECT ANSWER They provide a legal basis for transmitting evidence that can be used for prosecution and judicial proceedings Which element is generally required of all anti-money laundering programs? - CORRECT ANSWER A qualified compliance officer to manage the program What is one recommendation of the Basel Committee's 2001 paper Customer Due Diligence for Banks? - CORRECT ANSWER Banks should develop dear descriptions of acceptable customer's In performing a risk analysis, which factor(s) should a financial institution review? - CORRECT ANSWER Its customer base, location, products and services What should LE provide when asking an institution to keep an account open? - CORRECT ANSWER A written request on government agency letterhead with the appropriate signature Which example best describes the vulnerability of the securities sector for money laundering? - CORRECT ANSWER Compensation for broker-dealers is generally based on commissions In addition to monitoring for suspicious activity, what are electronic monitoring systems also valuable for? - CORRECT ANSWER Meeting mandatory regulatory requirements for system implementation In which three situations are corresponding banking most vulnerable to money laundering? - CORRECT ANSWER - When allowing foreign banks to use correspondent account to conduct large financial transactions on behalf of their customers - When allowing the correspondent bank account to be used as a payable through account (PTA) - When allowing corresponding bank account to be used by other banks How does a regulatory body typically obtain international assistance in a money laundering inquiry? - CORRECT ANSWER By submitting a request for overseas assistance to the corresponding supervisory body Federal law requires all US financial institutions to secure and maintain all records and supporting documentation used in suspicious activity reporting for how many years? - CORRECT ANSWER 5 years What is a major money laundering risk associated with several prepaid cards as opposed to credit or debit cards? - CORRECT ANSWER The anonymous access to funds An audit completed the previous week revealed that a private banking customer submitted incomplete documents when establishing an account earlier in the year. The customer received weekly electronic fund transfers from a narcotic-producing jurisdiction. While the relationship manager who opened the account is on leave for 5 weeks, the customer requests that the institution remit a substantial sum to a country that represents a high risk of money laundering. The relationship manager is a friend of the anti-money laundering specialist. What should the anti-money laundering specialist do first? - CORRECT ANSWER File a suspicious transaction report with the computer authority Why would a credit card account likely not be used in the placement stage of money laundering? - CORRECT ANSWER Cash payments are generally restricted What are some of the red flags financial institutions should be aware of when trying to verify the identity of a customer? - CORRECT ANSWER - Customer having unusual documents from a foreign country - Customer not having a connected phone - Customer having no permanent address A compliance officer is looking to modify procedures covering corresponding banking relationships. Which three would be recommended under the Wolfsburg Principles on Correspondent Banking? - CORRECT ANSWER - Prohibition on offering products or services to shell banks - Assessing the regulatory status and history of the client - Periodic risk-based reviews of cents When an institution conducts an internal investigation into an account following a LE inquiry, it should consider several factors to independently determine if the account should be dosed. Which three considerations should be made when making the determination about closing and account? - CORRECT ANSWER - The institution's policies and procedures for closing an account - The level of seriousness of the underlying conduct - Signed written requests by a LE agency or prosecutor on official letterhead for the account to remain open A profitable commercial customer who operates an import/export business has multiple accounts with the same institution at branches in different locations. The customer receives funds from a jurisdiction perceived as highly corrupt according to Transparency International ratings. The customer makes frequent transfers amount the accounts and prefers to manage the accounts separately. What should the institution do to mitigate the risk associated with these accounts? - CORRECT ANSWER File a suspicious transaction report What should be part of an institutions monitoring and STR filing process? - CORRECT ANSWER - Review on a regular basis of all high-risk accounts and transactions - Review of STR filing trends and typologies - Periodic training on the identification of red flags A commission regotorie would be used in which gateway to obtain information from another country? - CORRECT ANSWER An MLAT request The purpose of an anti-money laundering program should be to do what? - CORRECT ANSWER Focus monitoring efforts on riskier transactions and customers What facilitates LE agent obtaining evidence from authorities in a foreign country relating to criminal activity? - CORRECT ANSWER Mutual Legal Assistance Treaties (MLAT) Which three entities does the Third European Money Laundering Directive apply to? - CORRECT ANSWER - Financial Institutions - Real Estate Agents - Casinos Which two statements about the Wolfsburg Group are true? - CORRECT ANSWER - It focuses primarily on KYC, AML, and CTF guidance - It has no power to impose its principles/guidance After evaluating recent changes to international standards, an anti-money laundering specialist should consider enhanced due diligence on accounts held by which three groups of people? - CORRECT ANSWER - Lawyers - Foreign Exchange Dealers - Precious Metals Dealers Which of the following is the most common risk with a Personal or Private Investment Company (PIC)? - CORRECT ANSWER They often lack transparent ownership Pursuant to the Third European Union Money Laundering Directive, how long after being out of prominent office should a person NOT be a PEP? - CORRECT ANSWER 1 year Which method most likely indicates the placement stage of laundering dirty money in a land-based casino? - CORRECT ANSWER Using cash to buy casino winnings from legitimate winners at a premium A compliance officer at a small local bank reads in the newspaper that a high-ranking local official, who is a long-standing account holder, is being investigated by the competent authorities for accepting bribes. The compliance officer immediately checks the officials account and a newly opened account the official opened at the bank a few weeks ago. The compliance officer's investigation of these accounts discloses that the official's long-standing account had no unusual activity and that the recently opened account had no activity since it was opened. What should the compliance officer do next? - CORRECT ANSWER Call the competent authorities to assess the need to file a suspicious transaction report What is the key element required to ensure an anti-money laundering compliance program is effectively embedded into an institution's culture? - CORRECT ANSWER Ongoing training In 2004, Consolidated KYC Risk Management was issued by the Basel Committee on Banking Supervision (BCBS). What is a key message in this document? - CORRECT ANSWER Consolidated KYC risk management for a group is critical and trumps jurisdictional rules hat limit information sharing In order to protect investigative materials from disclosures when conducting an internal investigation of any employee of a FI, legal counsel of the FI should? - CORRECT ANSWER Request formal company authorization to conduct the investigation. Such authorization should be granted, if possible, by the board of directors or audit committee The marketing department presents a business plan targeting people holding important public positions. What are some steps the FI should implement as part of the plan to target such individuals? - CORRECT ANSWER - Investigate the source of funds - Determine the purpose of the account - Take all reasonable steps to check the background of the individual based on public information The Board of Directors and Senior Management of an FI should ensure that which three are established and followed about an effective AML program? - CORRECT ANSWER - There is a strong compliance program - Regulatory compliance is made part of all relevant job descriptions - They are kept informed of all major AML issues What is operational Risk? - CORRECT ANSWER The potential for loss due to inadequate processes, people, systems, or external events How should a financial institution deter money laundering through new accounts? - CORRECT ANSWER - Document the identity of the party opening the account - Seek to determine the source of deposited funds - Determine the beneficial owner(s) of the account What are the European Union Directives on Money Laundering? - CORRECT ANSWER They require members to implement certain laws to prevent money laundering Why do government entities around the world believe that a risk-based approach to AML/CTF compliance is a preferable prescriptive measure?ed - CORRECT ANSWER It is more flexible, effective and proportionate [Show More]

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