CAMS Study Book Practice Test
According to the FATF 40 Recommendations, "designated non-financial businesses and professions" include: A. Casinos, real estate agents and dealers in precious stones. B. Money service businesses, gatekeepers, and issuers of electronic money. C. Dealers in precious metals, lawyers, commodity futures traders. D. Life insurance companies, real estate agents and notaries.
A
Identify three risks to individuals for violations of AML laws. A. Civil penalties B. Termination of employment C. Criminal penalties D. Loss of passport
A, B, C
Which three of the following statements are included in Section 313 of the PATRIOT Act definition of "Physical Presence" in respect of Shell Banks? A. A fixed address. B. Employ at least one full time employee. C. The majority of the board of directors must be local residents. D. Keep banking records at the fixed address.
A, B, D
Which two activities are typically associated with the black market peso exchange (BMPE) money laundering system? A. Converting illicit drug proceeds from dollars or Euros to Colombian pesos. B. Converting illicit drug proceeds from Colombian pesos to dollars or Euros. C. Facilitating purchases by Colombian importers of goods manufactured in the United States or Europe through peso brokers. D. Facilitating purchases by European or U.S. importers of goods manufactured in Colombia through peso brokers.
A, C
Which statement is true regarding the risk of Politically Exposed Persons (PEPs)? A. PEPs provide access to third parties on whom the financial institution has not conducted sufficient due diligence. B. PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds. C. PEPs are foreign customers who inherently present additional risk as they are engaged in cross- border transactions. D. PEPs generally do not pose enhanced risks to an institution due to their political standing; rather, PEPs increase the prestige of an institution.
B
With regard to exchanges of information between FIUs of different countries, what are three controlling principles? A. That sharing between FIUs be permitted only if the central banks are also a party to the sharing. B. That the sharing of information should be done as freely as possible on the basis of reciprocity. C. That the sharing should be on the basis of requests and also spontaneously. D. That differences in the definition of offenses should not impede the free exchange of information
B, C, D
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 is vouching 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? A. Accept the client manager's approval of the client. B. Allow the account to be opened but be sure to monitor the account activity. C. Perform a background investigation to determine whether the client's source of funds is credible. D. Decline the account.
C
According to the FATF 40 Recommendations, the threshold for identifying occasional customers at financial institutions is: A. EURO/US$ 5,000. B. EURO/US$ 10,000. C. EURO/US$ 15,000. D. EURO/US$ 20,000.
C
In which case might a Suspicious Transaction Report NOT be necessary? A. A customer who deposits money of suspicious origins and refuses to answer questions from the financial institution's staff. B. A customer who tries to move money that is suspected of being derived from criminal activity. C. A customer who owns a large supermarket and deposits large amounts of cash several times a day. D. A customer whose account is showing transaction activities which are beyond his known financial capability.
C
When documenting ongoing training efforts, which of the following should be documented to demonstrate the distribution of the training to appropriate employees? A. Whether the training was provided to the board of directors. B. The topics the training addressed. C. The names and areas of the employees who took the training. D. Whether the employees who took the training passed the post-training assessment.
C
After reporting suspicious activity to the appropriate authorities and they request additional follow up on the reports, which of the following actions should an AML compliance officer do? A. Inform the customer that his/her activity has been reported as suspicious and the authorities are asking about him/her. B. Indicate to the authorities that you have fulfilled your regulatory duty by referring the matter to them. C. Give the authorities everything they request. D. Cooperate fully with the authorities, as permitted by law.
D
Suzy is an AML compliance officer at an institution that is looking to open treasury management services (e.g., wires, check 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? A. Whether the new account systems will be able to handle customers with foreign names. B. Whether the correspondent accounts will be approved by government regulators. C. Whether the correspondent accounts will be able to provide evidence of their customers' identities at account opening D. Whether the correspondent accounts will be able to be monitored by the institution's monitoring systems.
D
The tactic in which individuals make multiple deposits in small quantities to avoid detection is called: A. Paralleling. B. Integration. C. Investing. D. Structuring.
D
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? A. Develop a report containing metrics that reflect the effectiveness of various key program elements. B. Rely on the internal audit reporting and regulatory examinations. C. Provide a summary of all reported suspicious activity. D. Provide detailed training to senior management on their AML obligations.
A
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? A. Check with the account officer to see if the customer has indicated a change in his investment strategy. B. Report the customer as suspicious due to investing in penny stocks. C. Contact the customer and ask why he is engaged in high-risk day-trading activity. D. Refer the customer for senior management for approval.
A
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? A. The AML program should be tested by an independent person, not the compliance officer. B. The AML program should be tested more than once per year. C. The board should receive the same training provided to the employees. D. Employees should not be trained via the Internet, because classroom training is better.
A
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? A. The officer should confer with bank counsel as to whether to request subpoenas from law enforcement. B. The officer should deny permission for any such interviews without the creation of a grand jury or a formal court ordered investigation. C. The officer should only allow those employees who are comfortable be interviewed by law enforcement. D. The officer should allow the employees to be interviewed only if they are given immunity by law enforcement.
A
As part of their role in fighting money laundering, financial institutions should: A. Designate a compliance officer. B. Depend solely on The State's staff for combating money laundering. C. Refuse small cash deposits under the reporting threshold. D. Not open accounts for people from high risk jurisdictions.
A
Establishing compliance as a key responsibility for every employee of a financial institution is best performed how? A. By having senior management require compliance as a condition of employment. B. By having auditors conduct testing on employee compliance. C. By pointing out the regulatory consequences of non- compliance in training. D. By having the AML officer personally tell associates of their responsibilities.
A
In anti-money laundering terminology a red flag is A. A warning sign indicating potentially suspicious, risky transactions or activities. B. A general banking term used once the balance is negative / overdue. C. The standard flag of countries not cooperative in fighting money laundering and terrorist financing. D. An indicator that a customer is listed on an economic sanctions list.
A
In which stage of money laundering would you classify the use of laundered funds to purchase high value assets and luxury items? A. Integration. B. Structuring. C. Placement. D. Construction.
A
The FATF has consistently noted the use of casinos in money laundering schemes in its annual typologies reports. One laundering technique involving casinos is: A. Asking for winners' checks to be made out in the name of third persons or without a payee. B. Abusing casinos by circumventing its gatekeepers. C. Prepaying a casino token or chip by using funds that are already in the casino system, creating a debit balance. D. Extensive gambling via multiple games throughout the casino.
A
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 recommend to be part of these procedures? A. The officer should recommend that the decision as to whether or not to file an STR be centralized to ensure uniformity. B. The officer should recommend de-centralizing the decision in order to speed up the process and to ensure that the decision is made closest to where the activity occurred. C. The officer should recommend that STRs only be filed once they have been authorized by the Board of Directors of the bank. D. The officer should recommend that STRs only be filed once they have received a thorough legal review.
A
Trade Based Money Laundering requires the ability to: A. Over- or under-invoice the goods. B. Sell the imported goods for as little as possible. C. Use goods that do not need to be declared. D. Avoid the use of high-value assets such as luxury cars or boats.
A
What are the three key criteria in AML risk rating? A. Customer type, geographic location, products and services used. B. Geographic location, customer type, employment status. C. Products and services used, customer type and prior banking relations. D. Employment status, customer type, products and services used.
A
What is an advantage of having an outside counsel perform an internal investigation on behalf of the financial institution? A. The outside counsel can bring an impartial and legal perspective to the review. B. The outside counsel can intimidate the employees into confessing complicity with the wrongdoers. C. The outside counsel can create an attorney-client privilege not just vis à vis the bank, but also in connection with each employee. D. The outside counsel will be able to convince the prosecutors not to take any action against the institution.
A
When assessing a new product, which of the following should be considered as part of the assessment from an AML perspective? A. 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. B. The control environment to mitigate the risks presented by the product, the residual risk of the product in light of the controls and the projected profitability of the product. C. The projected profitability of the product, the control environment to mitigate the risks presented by the product and the Inherent risk of the product. D. The residual risk of the product in light of the controls, the inherent risk of the product and the projected profitability of the product.
A
When conducting training for AML purposes for account opening staff, which of the following addresses the most important aspects to consider in the training? A. What the employees need to do, the importance of AML efforts and the penalties for non- compliance. B. The governmental AML bodies, what the employees need to do and the importance of AML efforts. C. The penalties for non-compliance, the governmental AML bodies, and what employees need to do. D. The importance of AML efforts, the governmental AML bodies and the penalties for non- compliance.
A
When drafting an AML policy, which of the following internal parties is most important to have approve the policy? A. Senior management. B. The audit department. C. The sales team management. D. The operational staff management.
A
Which of the following best describes the "alternative remittance system"? A. The transfer of values 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.
A
Which of the following is the most common method of laundering money through a legal money services business? A. Purchasing structured money instruments. B. Smuggling bulk-cash. C. Transferring funds through Payable Through Accounts (PTAs). D. Exchanging Colombian pesos on the black market.
A
Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the U.S.? A. USA Patriot Act. B. Basel Due Diligence Principles for Banks. C. FATF Guidance on Terrorist Financing. D. UN Security Council Resolution on Correspondent Banking.
A
Which one 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 legistation to be passed in the member countries. D. The Basel Committee levies fines on the member countries for non-compliance with AML laws..
A
Which statement is true? A. Bust-out schemes are popular in creating large bankruptcy frauds where businesses secure increasing loans in excess of the actual value of the company or property and then run with the money, leaving the lender to foreclose and take a substantial loss. B. Cuckoo smurfing is a significant money laundering technique identified by the Financial Action Task Force, where 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.
A
Why is a Payable Through Account vulnerable to money laundering? A. It can be very difficult to conduct due diligence on the foreign institution customers who are ultimately using these accounts. B. These are concentration accounts located in a domestic branch of a foreign bank. C. These are nested correspondent accounts at a foreign shell bank with customers with whom the domestic bank did not exercise due diligence. D. These are master escrow accounts on which a domestic bank generally does not conduct periodic verification.
A
In conducting a criminal investigation, what are three things that the law enforcement investigator should do? A. The criminal investigator should make every effort to "follow the money" in the transaction to determine where it came from and where it went. B. The criminal investigator should identify the potential unlawful activity involved, referred in some countries as the "specified unlawful activity." C. The criminal investigator should document the underlying activity and transactions potentially involved in the transaction. D. The criminal investigator should research all similar cases that have occurred in recent history in the immediate area.
A, B, C
In conducting a criminal investigation, what are three things that the law enforcement investigators should do? A. Conduct computer-based searches on the individuals and entities involved. B. Review any previously filed STRs on the individuals and entities involved. C. Analyze the financial transactions and activity of the subject and try to determine if there is anything that is high-risk or is out of the ordinary. D. Perform a review of the individual's or entity's credit history and borrowing record.
A, B, C
The FATF 40 Recommendations are organized into seven Groups. Which three items in the list below are valid Group names? A. Money Laundering and Confiscation. B. Financial and Non-Financial Institution Preventative Measures. C. Powers and Responsibilities of Competent Authorities and Other Instructional Measures. D. National Cooperation.
A, B, C
The FinCen "Advisory to US Financial Institutions on Promoting a Culture of Compliance", published in 2014, listed six areas of emphasis. Which three areas below are included in that list: A. Leadership Should Be Engaged. B. Information Should Be Shared Throughout the Organization. C. Leadership and Staff Should Understand How Their BSA Reports are Used. D. The Organization must have an Appropriately Qualified Compliance Officer.
A, B, C
What are three factors a prosecutor should take into consideration in deciding whether to bring criminal charges against a financial institution? A. Whether the institution has a criminal history. B. Whether the institution cooperated with the law enforcement investigation. C. Whether the institution discovered and self-reported the potential criminal violation. D. Whether the institution is a very large institution and its prosecution will make good headlines for the law enforcement agency.
A, B, C
What are three of the recommended ways to respond to a law enforcement inquiry? A. Cooperate with the law enforcement inquiry as much as possible. B. 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. C. Ensure that all communication, written and oral, is funneled through a centralized place. D. Guard against unwarranted publicity by resisting all inquiries and requests whenever possible.
A, B, C
What are three practical tips in interviewing employees with regard to an unusual or suspicious transaction that they have witnessed? A. One should interview the employees as soon after the occurrence as possible in order to ensure that their memories are fresh. B. One should try to put the employees at ease during the interview and start with relatively easy, non- controversial, questions before getting into more sensitive matters. C. One should use open-ended questions for the employees in order to ensure that the questions do not dictate what the expected answer is. D. One should control the interview as much as possible in order to attempt to resolve the matter quickly and uncover the wrongdoer.
A, B, C
What are three specific methods of financing terrorism? A. Kidnapping for ransom B. Trafficking of humans C. Contributions of charities D. Wiring funds internationally
A, B, C
Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations (choose three)? A. Do not limit the number of specific predicate offenses for money laundering. B. Criminalize conspiracy or association to engage in money laundering. C. Indicate whether it is relevant that a predicate offense may have been committed outside the local jurisdiction. D. Require money laundering offenses to prove that the offender has actual knowledge of a criminal connection to the funds.
A, B, C
In 2014 the Wolfsberg Group published their 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? A. The geographic risk. B. The ownership and management structure C. The resume of the Compliance Officer D. The customer base.
A, B, D
The Egmont Group is supported by Working Groups. Which three in the following list are members of the five Groups? A. Operational. B. Legal.C. Examination. D. Outreach.
A, B, D
What are three developments that should cause a financial institution to conduct an internal investigation? A. When the institution receives a grand jury subpoena with regard to transactions that have occurred within several accounts at the institution. B. When several employees of the institution alert senior management or the compliance officer that there are some suspicious transactions within an account. C. When the institution's auditor identifies various shortcomings in the institution's AML policies and procedures. D. When a small local business starts engaging in overseas activity involving numerous, unexplained wire transfers.
A, B, D
What three steps should be taken when there is a criminal investigation that is targeting the bank itself? A. The senior management and the Board of Directors should be notified and kept apprised of the progress of the investigation. B. The bank should consider retaining experienced outside counsel to assist the bank in responding to the investigation. C. The bank should immediately go to the media and explain why it has done nothing wrong. D. 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.
A, B, D
When should a compliance officer recommend that a financial institution conduct an internal investigation? Choose three out of four. A. When there is a suspicion that an employee is conspiring with a long-term customer to launder money through the bank. B. When a series of customers open separate accounts at different branches, but with the same contact information. C. When the bank's regulatory agency gives the bank low marks with regard to its AML compliance efforts. D. When a long term employee decides to take only intermittent vacation days, but not two weeks in a row, per bank policy.
A, B, D
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.
A, B, D
When a bank receives a subpoena for information about a specific account, what two steps should the compliance officer take? A. The compliance officer should ensure that the staff research and collect all documents responsive to the subpoena. B. The compliance officer should insist on law enforcement explaining why the subpoena was issued and what law enforcement is looking for. C. The compliance officer should ensure that an independent review is conducted of the account and the transactions in the account. D. The compliance officer should only comply with the subpoena after first getting approval from the bank's legal counsel.
A, C
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 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? A. The customer asks many questions about the brokerage account, but none of them are related to investing. B. The customer is opening a commercial account and at the same time a personal investment account. C. The address of the account holder and the branch where the customer came to open the account are not close to each other. D. That the customer appears unconcerned about the fees.
A, C, D
What are the three classic gateways for international cooperation and sharing? A. Mutual Legal Assistance Treaties (MLATs). B. Law enforcement use grand jury subpoenas. C. Exchange of information between Financial Intelligence Units (FIUs). D. Exchange of information between supervisory agencies.
A, C, D
Which three statements are true about the 4th EU Directive on Money Laundering? It: A. Updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. B. Repeats the definition of a politically exposed person in previous Directives. C. 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. D. Requires firms to apply the customer due diligence requirements to existing customers at appropriate times on a risk sensitive basis.
A, C, D
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 most sense? A. Report by each country's compliance with the legal requirements within their country. B. Report on compliance with the company's stated requirements. C. Report on compliance with each country's requirements only for those customers that are serviced by branches in multiple countries; all others should be reported on the company's stated requirements. D. Report on the level of monitoring performed on the activity in the accounts.
B
A junior compliance analyst learns over lunch with a friend in the computer operations department that during the previous week there was a problem related to the data being transmitted to the transaction monitoring application. The friend states that since 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? A. Congratulate his friend on his prompt action. B. Congratulate his friend and, as soon as possible, ensure that the Compliance Officer is aware of the situation. C. Nothing because the appropriate controls are in place for such events. D. Immediately report the situation to the regulators.
B
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? A. Consult with the regulators, provide training to impacted associates and work with the technology partners to capture all cross-border transactions for reporting. B. 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 captured and reported. C. Work with technology partners to capture all cross- border transactions for reporting, implement a testing plan to be sure appropriate transactions are captured and consult with the regulators. D. Implement a testing plan to be sure appropriate transactions are captured and reported, provide training to impacted associates and consult with the regulators.
B
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? A That the institution rely primarily on the back office to identify suspicious trends in account activity. B. That the institution make it the responsibility of all employees to identify suspicious activity. C. That the institution rely primarily on the account relationship managers of accounts to identify suspicious activity. D. That the institution rely on the dissemination of red flags in each area of the bank to cover all possible suspicious activity.
B
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? A. The officer should notify the Board of Directors of the nature and results of the internal investigation. B. The officer should document the nature and results of the internal investigation and keep the documentation in an appropriate file. C. The officer should file an STR in case that the customer's accounts could assist law enforcement in its formal criminal investigation. D. The officer should file an STR in order to justify the time spent on the internal investigation and to not be second guessed by the bank examiners.
B
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 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 and commission that are charged by the bank. What should arouse Tom's suspicion the most? Mr. Brown: A. Deposited checks from casinos. B. Did not make withdrawals of cash against check deposits. C. Showed uncommon curiosity about commissions and fees charged. D. Does not have an escrow account.
B
Typically, when should a financial institution file an STR? A. Whenever they are preparing to close an account. B. Whenever they detect unusual or suspicious transactions. C. Only when they are able to establish the existence of a criminal violation. D. Only when the Board of Directors approves the filing of the STR.
B
What is considered a beneficial owner of an account? A person or entity: A. That has direct signatory authority over an account, and whose name appears on the account. B. That is ultimately entitled to the funds in the account, even though his name may not appear on the account. C. That is the originator and the destination of most (but not all) transactions conducted within the account, but who does not ultimately control such funds. D. That is a gatekeeper, has the legal title to the account, and typically transfers the funds to a trust.
B
What is the definition of a predicate offense? A. Lawful or unlawful activity that involves willful blindness, and if there is an international element to the crime, can lead to a suspicious activity report. B. Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of money laundering. C. An interface which is the underlying segment of a suspicious transaction monitoring system. D. A specified unlawful activity that is committed through concentration accounts deceiving customers that are not directly related to the account.
B
What is the reasoning behind implementing a "risk-based anti-money laundering approach"? A. It will keep the regulators focused on money laundering controls in sectors beyond banks. B. Institutions can best use their limited resources to focus on matters where the money laundering risks are highest. C. A quantitative approach will generate better results than a qualitative approach. D. It allows the institution to focus on selling products that have a better return on investment
B
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? A. To be able to ensure that nothing damaging to the financial institution gets released. B. To ensure that responses are timely and thorough and that privileged material is not inadvertently handed over. C. To ensure that the employees of the institution do not divulge information that would breach the privacy rights of customers. D. To ensure that there is one person who can adequately and thoroughly apprise the Board of Directors of the progress of the investigation.
B
When should a financial institution consider retaining an experienced outside counsel to assist it? A. Whenever the institution receives a subpoena from any law enforcement agency. B. When the institution itself appears to be the target of a criminal investigation. C. When law enforcement appears to be focused on the accounts of a very good and long-standing customer of the institution. D. When the banking agencies criticize the adequacy of the institution's AML monitoring procedures.
B
Which of the following controls would most effectively minimize the need to correct failures to collect required customer information in the account opening process? A. A quality review staff that checks paper applications to ensure all fields are complete. B. An automated account opening platform that requires data entry prior to allowing the account to be opened. C. Requiring that a manager review and approve all new account applications. D. Documenting a procedure that sets forth the steps required to open an account.
B
Which statement below defines a Mutual Legal Assistance Treaty? A. A written request for legal or judicial assistance sent by the central authority of one country to the central authority of another when seeking assistance from the foreign jurisdiction. B. An agreement among countries allowing for mutual assistance in legal proceedings and access to documents and witnesses and other legal and judicial resources in the respective countries, in private sectors, for use in official investigations and prosecutions. C. An agreement between two parties establishing a set of principles that govern their relationship on a particular matter. D. An MOU is often used by countries to govern their sharing of assets in international asset-forfeiture cases or to set out their respective duties in anti-money laundering initiatives.
B
Of the following scenarios, which two are potential red flags indicating possible suspicious activity that should be investigated further? A. A large family with multiple accounts held in the name of different family members. B. Accounts held for a business in a branch that is located on the other side of town from where the business is located. C. An individual who holds multiple accounts under the same name. D. A company that has multiple accounts, one for each of their various subsidiary businesses
B, C
What are three possible red flags indicating suspicious or unusual activity that might warrant an investigation and the filing of an STR? A. The opening of a new account without a local telephone number or utility bill available. B. Unusually high monthly balances in comparison to known sources of income. C. High level of monetary transactions through an account during the course of a month, but low beginning and ending balances. D. Multiple cash deposits made just under the reporting threshold.
B, C, D
When a financial institution is served with a search warrant by a law enforcement agency, what are three things that the employees of the institution should do? A. They should not release any documents until the institution's outside counsel arrives on the scene. B. They should cooperate fully with the law enforcement agents and remain calm and polite. C. They should try to obtain an inventory of the materials that the law enforcement agents take from the institution. D. They should review the warrant to determine its scope.
B, C, D
Which three of the following is an indication of possible money laundering in an insurance industry scenario? A. Insurance products sold through intermediaries, agents or brokers. B. Single-premium insurance bonds, redeemed at a discount. C. Policyholders who are unconcerned about penalties for early cancellation. D. Policyholders who redeem the policy within the "free look" period.
B, C, D
Which three of the following statements are true in respect of the Fourth EU Anti-Money Laundering Directive? A. Member countries can decide when and if the incorporate it into their own local laws. B. It repeals and replaces the Third EU Directive on Anti- Money Laundering. C. The beneficial owner is defined as having a minimum of 25% direct or indirect ownership of the company. D. The definition of a PEP is expanded to include domestic persons.
B, C, D
A financial institution branch manager who has been in place for over ten 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? A. Insist that the manager take a vacation, as not taking one is a red flag. B. Report the manager to authorities for engaging in suspicious activity. C. Determine whether the manager has engaged in transactions in the accounts where the unusual activity has occurred. D. Conduct a background check to see if the manager has been convicted of criminal activity.
C
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? A. Do not offer the product, as it is too high risk as the customer cannot be seen to verify their identity. B. Require all customers to send a copy of valid photo identification to the institution. C. Ensure that the institution has a reliable third party source that will enable verification of the customer. D. Allow customers to enter required information, but require all customers to come to the institution in person for verification.
C
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? A. Let the independent audit function remediate the issue, as they have identified it and the resolution of the issue needs to be handled independently of the compliance function. B. Dispute the finding with audit, as the compliance officer should be sufficiently empowered to make all AML-related decisions for the institution. C. Develop and follow an action plan to remediate the issue and report to audit on the progress made on the issue. D. Escalate the matter to the account opening team and have them make the appropriate business decision.
C
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? A. Get permission from the Board of Directors to hand the material over to law enforcement. B. Hand the material over to law enforcement immediately because of the urgent nature of the request. C. Request the law enforcement representative provide a court order or grand jury subpoena unless the bank has already filed an STR on the matter. D. Get permission from the bank's legal counsel before handing the material over to law enforcement.
C
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 money and, the next day, asks for the money 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? A. Contact the Board of Directors as soon as possible and inform them of this activity. B. Immediately contact law enforcement by phone and tell them of the potential money laundering activity. C. Collect the appropriate documentation and review it with the purpose of filing an STR. D. Make a note of the activity, but do not file a STR in order to not risk losing a longtime customer.
C
According to the EU Directives an independent legal professional is obligated to report suspicion of money laundering in a client relationship when: A. Representing a client in a legal matter. B. Ascertaining the legal position for a client. C. Participating in financial or corporate transactions. D. Obtaining information associated with a judicial proceeding.
C
Among the Principles for Information Exchange Between Financial Intelligence Units for Money Laundering Cases, issued by the Egmont Group on June 13, 2001, we find which of the following? A. Information-sharing agreements must follow the model issued by the Egmont Group. B. Information which is shared under these agreements will be exempt from the local privacy laws of the countries involved. C. Information exchanged between FIUs may be used only for the specific purpose for which the information was sought or provided. D. The requesting FIU may make use of the information shared by a disclosing FIU for administrative purposes without the prior consent of the disclosing FIU.
C
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? A. Focus on the checking accounts, as the checking accounts allow the fastest movement of funds. B. Ignore the savings and brokerage accounts, as these are not used in the placement stage of money laundering. C. Look at the movement of funds in all the accounts, as the customer may be using all of them to launder money. D. Focus on the business account, as the customer is embezzling money from the company.
C
In which stage of money laundering would you classify depositing small amounts of cash into several related accounts? A. Integration. B. Structuring. C. Placement. D. Construction.
C
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? A. Request permission to attend future annual AML- industry conferences. B. Ask internal auditors to provide her with notice of changes needed to the program. C. Implement a process to determine when new regulations are published and assess them for impacts to the AML program. D. Conduct a risk assessment to determine if the regulations change frequently enough to implement a process to check for changes.
C
The AML Reporting Officer of a financial institution should: A. Report everything that comes his way from anyone in the organization. B. Report everything that comes his way from senior management or Board of Directors. C. Review all available information and file a Suspicious Transaction Report in respect of any unusual or potentially suspicious activity. D. Report only what the Reporting Officer's superior agrees should be reported.
C
The General Guide to Account Opening Consultative Document published in 2015 by the Basel Committee lists information that should be obtained for the identification of "Legal Persons". Which three items, listed below, are recommended? A. Name, legal form, status and proof of incorporation of the legal person. B. Permanent address of principal place of the legal person's activities. C. A report describing a visit, by the account officer, to the principal place of business. D. Identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means.
C
The greatest risk for money laundering is for casinos that A. Provide their customers with a wide array of gambling services. B. Operate in a non-Egmont member country. C. Allow customers with credit balances to withdraw funds by check in another jurisdiction. D. Only send suspicious transaction reports to the financial intelligence unit of the country it operates in.
C
What is willful blindness defined as? A. Failing to file a Suspicious Transaction Report for dealing with companies or financial institutions from offshore tax havens. B. Not following customer identification procedures as set out in the institution's procedures. C. Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags. D. Deliberate avoidance of a customer based on the assumption that his or her behavior suggested a potential threat as money launderer and/or terrorist.
C
Which of the following should an anti-money laundering specialist include on an internal investigation log? A. A government order on a customer that garnishes his wages for failure to pay child support. B. Supporting documentation and materials for denying service to a client with a bad credit rating. C. Notes pertaining to activity that is unusual, but for which a Suspicious Transaction Report has not been filed. D. Reference to a memorandum to the company's corporate management relating to budgetary and similar concerns.
C
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 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 credit card bill for goods purchased, which is an example of placement.
C
Which of the following statements is true? Correspondent banking is MOST vulnerable to money laundering when the correspondent account is: A. Maintained for foreign financial institutions that are banks. B. Not used to provide services directly to third parties. C. Maintained for a foreign bank that does not have a physical presence in any country. D. Maintained for a foreign private bank that is publicly traded and is a qualified intermediary.
C
Which were the Basel Committee's two main motivations to encourage strong Know Your Customer programs in its paper "Customer Due Diligence for Banks"? A. Mirror FATF's KYC Recommendations. B. Meet European Union guidelines. C. Protect the safety and soundness of banks. D. Protect the integrity of banking systems.
C, D
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? A. Allow employees to refer suspicious activity directly to the government authorities to file as quickly as possible. B. Have employees refer all unusual activity to the internal independent audit department to assess whether the activity should be reported. C. Have employees refer all unusual activity to senior management to ensure they are aware of all unusual activity within the organization. D. Have employees refer all unusual activity to her so that she may conduct an investigation into what needs to be reported to authorities.
D
In most laws criminalizing money laundering, it is stated that: A. Financial institutions are not responsible for money laundering or suspicious transactions taking place within their accounts until the government places the customer on a watch list. B. Informing customers that their accounts and/or transactions are the subject of an AML investigation is not punishable. C. The dirty money undergoing money laundering will not be confiscated because of privacy laws. D. It is required that the institution identifies the beneficial owner(s) of the account
D
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? A. Sales staff surveys on AML efforts, customer due diligence error rates, quality assurance testing on STR filings. B. Customer due diligence error rates, sales staff surveys on AML efforts, percent of products and services monitored for suspicious activity. C. Quality assurance testing on STR filings, sales staff surveys on AML efforts, percentage of products and services monitored for suspicious activity. D. Customer due diligence error rates, quality assurance testing on STR filings, percentage of products and services monitored for suspicious activity.
D
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? A. A customer who owns several check cashing companies in town and rents safe deposit boxes at different branches. B. A customer who avoids taking vacations. C. A small business that provides financial statements which are not prepared by an accountant. D. A customer involved in investment management who guarantees a very high rate of return, well above what other competitors can offer.
D
What is the Right of Reciprocity in the field of international cooperation against money laundering? A. The legal principle that financial institutions that have referred customers to other financial institutions can share information about these customers with the other institutions. B. A rule of the Basel Committee allowing properly regulated financial institutes of another member state of the Basel Committee to do business without additional supervision to the degree that the other state grants the same right. C. The right of each FATF member country to delegate prosecution of a case of money laundering to another member that is already investigating the same case. D. 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.
D
Which one of the following statements is correct in respect of the FATF 40 Recommendations which state that countries should: A. Not allow bearer shares and legal persons that are able to issue bearer shares. B. Gather statistics on STRs; prosecutions and convictions; on property frozen, seized and confiscated; and on mutual legal assistance, but not necessarily on other international requests for co- operation. C. Consider the feasibility of a system where banks and other financial institutions and intermediaries would report currency transactions without indicating a minimum fixed amount. D. Not approve the establishment or accept the continued operation of shell banks.
D
Which statement is true? Lawyers: A. In FATF member countries can generally not be used to serve as formation agents to set up trusts, front companies or shell companies. B. And similar professional "gatekeepers" are called money services businesses. C. Can generally not be used to act as a nominee shareholder for a beneficial owner. D. Can be abused by launderers by using the accounts they set up for them for the placement and layering of funds.
D
n AML compliance officer was reviewing customers at XYZ Bank and one of the customers (Mr. Sam Tropicana) attracted her attention. Through a period of several months, cash deposits and withdrawals were transacted through his account with amounts ranging between US $7,500 and US $17,000. In addition, Sam deposited two 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 laundering compliance officer the most? A. Sam maintained a personal account as well as the business account. B. Sam's home telephone number was disconnected last month. C. Sam asked for a letter of credit to finance some imports from a new supplier. D. Sam conducted large cash transactions for his import/ export business.
D
In general, the three phases of money laundering are said to be:
Placement, Layering, and Integration