OVERVIEW - Money Laundering
Which of the following crimes would best be described as money laundering? A. A criminal engages in a process to disguise the criminal nature of stolen funds to make it seem as though he earned them legitimately. B. A person who is applying for a loan provides fraudulent data to the bank to make his credit seem better than it really is. C. A corporate officer is entrusted with assets that belong to the organization, but he fraudulently sells them for personal gain. D. A corrupt employee accepts a kickback from his organization's vendor in return for rewarding the vendor a contract.
A. A criminal engages in a process to disguise the criminal nature of stolen funds to make it seem as though he earned them legitimately.
Which of the following best describes the Bank Secrecy Act's Currency Transaction Report (CTR) requirements for U.S. financial institutions? A. All currency transactions over $10,000 require a CTR. B. All check or wire transactions over $10,000 require a CTR. C. All currency transactions over $5,000 require a CTR. D. All transactions under $5,000 require a CTR.
A. All currency transactions over $10,000 require a CTR.
Which of the following statements concerning the U.S. Bank Secrecy Act is MOST ACCURATE? A. It imposes recordkeeping requirements on financial institutions for large, unusual, and suspicious transactions. B. Its primary purpose is to prevent third parties from accessing financial data held by financial institutions. C. Its primary purpose is to require the federal government to obtain a warrant to access financial information. D. It requires financial institutions to report all transactions to the federal government.
A. It imposes recordkeeping requirements on financial institutions for large, unusual, and suspicious transactions.
Which of the following statements concerning currency reporting requirements in the United States is MOST ACCURATE? A. Nonfinancial organizations and individuals are required to report any receipt of currency over $10,000 in the course of their trade or business using IRS Form 8300. B. Only banks are required to report currency transactions over $10,000 to the U.S. federal government. C. Nonfinancial organizations and individuals are not required to report any instances where they receive over $10,000 or more in cash. D. Nonfinancial organizations are required to report all currency and non-currency transactions over $10,000 in the course of their trade or business to the federal government using IRS Form 8300.
A. Nonfinancial organizations and individuals are required to report any receipt of currency over $10,000 in the course of their trade or business using IRS Form 8300.
Charles operates a movie theater, but he also has a stream of illegal cash income. To launder the cash, he over-reports the amount of tickets he sells and disguises the illicit cash as proceeds from those fake sales. Which of the following best describes Charles's scheme? A. Overstating revenues B. Depositing, but not recording, revenue C. Skimming D. Fictitious liabilities
A. Overstating revenues
Which of the following money laundering schemes would be classified as depositing, but not recording, revenue? A. Placing illicit proceeds into a company's account without entering them as a sale B. Over-reporting revenue at a company to disguise illegal proceeds C. Over-reporting expenses at a company to mask illicit income D. All of the above
A. Placing illicit proceeds into a company's account without entering them as a sale
Bars, restaurants, and nightclubs are favorite businesses through which to launder funds because: A. Sales are generally in cash. B. They charge relatively low prices for services. C. It is easy to match the cost of providing food, liquor, and entertainment with the revenues they produce. D. All of these choices are correct.
A. Sales are generally in cash.
If a subject has deposited a large number of bank checks, each for less than $10,000 (the jurisdiction's threshold for mandatory reports on currency transactions), this could be an indication of which of the following? A. Smurfing/structuring operation B. Entrapment scheme C. Forged check scheme D. Counterfeit checks scheme
A. Smurfing/structuring operation
XYZ Bank, a U.S. company, has a money laundering compliance program that provides for internal controls and procedures to prevent money laundering, money laundering awareness training, and a regular independent audit function to test the bank's procedures. If these are the extent of XYZ's anti-money laundering measures, which of the following basic elements is missing from the organization's anti-money laundering program? A. The designation of a money laundering compliance officer B. A mandatory 30-day waiting period before cash deposits can be transferred C. Report of all bank transfers over $50,000 to the U.S. federal government D. Prohibition of consumer cash deposits over $10,000 per day
A. The designation of a money laundering compliance officer
Which of the following accurately describes the requirements for filing a Report of Foreign Bank and Financial Accounts (FBAR) in the United States? A. An FBAR must only be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $25,000. B. An FBAR must be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $10,000. C. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $25,000. D. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $10,000.
B. An FBAR must be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $10,000.
Which of the following is an example of the use of a digital currency? A. Credit card transactions B. Bitcoin transactions C. Wire transfers D. All of the above
B. Bitcoin transactions
A criminal is attempting to launder stolen funds. To confuse the money trail for the funds, he purchases an expensive insurance contract with the illicit funds, cancels the policy shortly after, and receives a refund in a foreign bank account. Which of the following best describes the criminal's money laundering scheme? A. Redemption scheme B. Canceled policy scheme C. Prepayment scheme D. Integration scheme
B. Canceled policy scheme
The USA PATRIOT Act requires U.S. financial institutions to implement programs designed to verify the identity of any person seeking to open an account. These programs are called _________. A. Anti-Money Laundering Programs B. Customer Identification Programs C. Customer Verification Programs D. None of the above
B. Customer Identification Programs
Which of the following statements concerning mobile payments is FALSE? A. Mobile payments allow for the money launderer to potentially remain anonymous if a prepaid phone is used. B. In most countries, mobile phone accounts that can be used to send funds or purchase items are regulated in the same way as bank accounts. C. Mobile payments or transactions are those facilitated through the use of an account associated with a mobile phone. D. Money launderers often use mobile phone accounts to send funds to foreign accounts or otherwise layer illicit assets.
B. In most countries, mobile phone accounts that can be used to send funds or purchase items are regulated in the same way as bank accounts.
Over time, Herman stole $500,000 in cash from his employer. He deposited the cash in small increments into a bank account to avoid reporting requirements. He then transferred the stolen funds to an overseas account and proceeded with several additional transfers and fake loans to foreign entities that he controlled. Finally, he moved the funds back home, disguising them as profits from investments. Which of the following stages of money laundering was Herman performing when he engaged in transfers and fake loans to foreign entities? A. Placement B. Layering C. Structuring D. Integration
B. Layering
Of the choices below, which is the proper sequence of cycles in a money laundering process? A. Layering, placement, and integration B. Placement, layering, and integration C. Placement, bank complicity, and structuring D. Integration, structuring, and placement
B. Placement, layering, and integration
Which of the following best describes a core function of the U.S. Office of Foreign Assets Control? A. To provide model anti-money laundering statutes for all member countries to adopt B. To maintain the Specially Designated Nationals and Blocked Persons (SDN) list and enforce its sanctions C. To serve as the primary revenue collection agency for U.S. citizens with foreign income and assets D. To ensure that foreign corporate entities with a presence in the United States comply with securities regulations
B. To maintain the Specially Designated Nationals and Blocked Persons (SDN) list and enforce its sanctions
Which of the following financial institutions is NOT considered a money services business? A. A prepaid access card provider B. A currency exchange C. A depository investment bank D. A check cashing company
C. A depository investment bank
Baker owns a U.S. corporation. Approximately 20% of his sales occur in Australia. To avoid paying taxes on these overseas funds, the money is sent directly from Australia to a bank account in the Cayman Islands. The overseas account is in Baker's name, not the corporation's, and he is a signatory on the account. The account balance is approximately $75,000. Which of the following statements is TRUE? A. Baker is required to file a Currency Transaction Report. B. Baker is not required to report the funds in the account until he brings the money into the United States. C. Baker is required to file a Report of Foreign Bank and Financial Accounts. D. Baker is not required to report anything until the account balance is over $100,000.
C. Baker is required to file a Report of Foreign Bank and Financial Accounts.
Which of the following statutes is the heart of the money laundering control effort in the United States? A. Bank Recording Act B. Money Laundering Crime Control Act C. Bank Secrecy Act D. Crime Control Act
C. Bank Secrecy Act
Which of the following is NOT a favorite front business for laundering money? A. Wholesale distribution B. Restaurants C. Electronics stores D. Vending machines
C. Electronics stores
Page, a Certified Fraud Examiner, is investigating a suspect's sources of income. Page notices that funds available to the suspect include the suspect's interest in a restaurant/bar. Page has surveilled the establishment several times and notices that the business has very few customers, even during peak times. Yet the income reported from this restaurant/bar is substantial. Of the following list, in which money laundering scheme might the suspect be involved? A. Bankruptcy scheme B. Alternative remittance system scheme C. Front business scheme D. Trade-based laundering scheme
C. Front business scheme
he ________________ is an office within the Department of the Treasury charged with administering and enforcing U.S. sanction policies against targeted foreign organizations and individuals that sponsor terrorism and international narcotics traffickers. A. FinCEN B. Central Intelligence Agency C. Office of Foreign Assets Control D. Office of Money Laundering Compliance
C. Office of Foreign Assets Control
A fraud examiner discovers that Fred, a fraud suspect in the United States, has made dozens of cash deposits over the last few months into a bank account. None of the deposits have been $10,000 or more, and none of them have been below $8,500, either. Based on this information, which of the following schemes is Fred most likely committing? A. Sizing currency transactions B. Check tampering C. Smurfing/structuring D. Channel stuffing
C. Smurfing/structuring
The Bank Secrecy Act requires U.S. financial institutions to monitor suspicious activity and file Suspicious Activity Reports (SARs) to disclose known or suspected criminal offenses or transactions that involve money laundering or violate the Act. Which of the following scenarios would NOT require a SAR to be filed? A. Money that appears to be proceeds from illegal drug sales is deposited in a bank account. B. Someone at a casino deposits $9,000 into a casino account using a cashier's check and does little to no gambling before cashing out. C. A transaction that appears to have no legitimate business purpose is conducted through a bank. D. A customer in a jewelry store buys $4,000 worth of diamond jewelry using traveler's checks.
D. A customer in a jewelry store buys $4,000 worth of diamond jewelry using traveler's checks.
Which of the following are considered financial institutions subject to Currency Transaction Report requirements in the United States? A. Depository institutions (banks) B. Currency exchangers C. Money transmitters D. All of the above
D. All of the above
Which of the following are required to file a Suspicious Activity Report with FinCEN if they suspect customers are laundering or attempting to launder funds through their organization? A. Casinos B. Banks C. Securities brokers D. All of the above
D. All of the above
Which of the following is a function or purpose of the U.S. Bank Secrecy Act? A. To detect and prevent money laundering in the financial industry B. To set forth a system of recordkeeping requirements for financial institutions C. To require financial institutions to report suspicious transactions D. All of the above
D. All of the above
Which of the following is an important element of a U.S. financial institution's anti-money laundering program? A. Designation of a money laundering compliance officer B. Development of procedures to prevent money laundering C. Ongoing training for awareness of money laundering D. All of the above
D. All of the above
Which of the following statements concerning the Financial Action Task Force's (FATF) Recommendations is TRUE? A. They suggest that countries should enable authorities to trace, freeze, and confiscate assets suspected in money laundering and terrorist financing B. They suggest that countries should adopt a risk-based approach when setting anti-money laundering policies C. They suggest that countries should create policies that increase cooperation and coordination with other countries D. All of the above
D. All of the above
A criminal wants to launder money by sending it to a co-conspirator in a foreign country. Rather than sending funds through a financial institution, the party pays Broker A the funds, and Broker A then directs Broker B, who lives in the foreign country, to pay the co-conspirator. Later, Broker A offsets his debt to Broker B by paying someone at the direction of Broker B. Which of the following best describes this payment scheme? A. Back-to-back loan B. Money services business C. Prepaid access D. Alternative remittance system
D. Alternative remittance system
In alternative remittance systems, which of the following types of information are typically found in the ledgers that the brokers use to keep track of amounts owed to each other? A. The bank account numbers of the senders and receivers B. The names of the receivers C. The names of the senders D. None of the above
D. None of the above
A money laundering scheme cannot be successful until the _________ is eliminated or made so complex that individual steps cannot be easily traced. A. Modus operandi B. Evidence of the initial fraud C. Placement D. Paper trail
D. Paper trail
The stage in which money laundering schemes are most often detected is called: A. Integration B. Washing C. Layering D. Placement
D. Placement
Which of the following is NOT a minimum requirement of a written anti-money laundering (AML) compliance program? A. Provide training on an ongoing basis for all personnel. B. Establish a system of internal policies, procedures, and controls to ensure ongoing compliance. C. Provide for independent testing of compliance by internal auditors and/or outside examiners. D. Provide for the immediate termination of any employee involved in avoiding the jurisdiction's reporting requirements.
D. Provide for the immediate termination of any employee involved in avoiding the jurisdiction's reporting requirements.
Jessica is about to travel from the United States to the United Kingdom while carrying $12,000 in U.S. currency. Will Jessica be required to file a CMIR (Report of International Transportation of Currency of Monetary Instrument)? A. No, because CMIRs are only required for currency coming into the United States. B. No, because she is transferring less than $15,000 in currency out of the United States. C. Yes, because a CMIR must be filed for any amount of currency physically transferred out of the United States. D. Yes, because she is transferring over $10,000 in currency out of the United States.
D. Yes, because she is transferring over $10,000 in currency out of the United States.
T or F: A person is required to file a CMIR (Report of International Transportation of Currency or Monetary Instrument) only if he is transporting money OUT of the United States.
False
T or F: In an insurance prepayment scheme, a money launderer purchases life insurance or a similar policy with a redemption provision and redeems the policy with the intent to make the income appear legitimate.
False
T or F: Owen, a U.S. resident, receives a gift from a good friend of $15,000 in cash. Owen must file a Form 8300 (currency report) with the Financial Crime Enforcement Network (FinCEN) and the Internal Revenue Service.
False
T or F: The Financial Action Task Force's Recommendations provide that countries should take certain measures to reduce the prevalence of money laundering and terrorist financing, but they do not specifically advise countries to criminalize such activities.
False
T or F: The operation of alternative remittance systems involves inherently illegal activities.
False
T or F: The placement stage of the money laundering process occurs when a criminal first steals or obtains illicit proceeds.
False
T or F: Transactions involving money services businesses (MSBs) generally have a lower money laundering risk than those at other financial institutions because MSBs have more stringent regulatory requirements.
False
Tor F: If a U.S. securities broker believes that a client might be engaging in transactions to launder money, the broker is required to file a Suspicious Activity Report.
False
One of the most common methods of laundering funds is to filter the money through a front business. A front business can be useful to a criminal for which of the following reasons? I. It provides a safe place for organizing and managing criminal activity. II. It provides a base of operations where the comings and goings of large numbers of people will not arouse undue suspicion. III. It is an easy way for the criminal to avoid paying taxes on illegal sources of revenue. IV. The front that does the legitimate business provides cover for delivery and transportation related to illegal activity.
I, II, and IV
T or F: Digital currencies are attractive to money launderers because these payment devices often allow anonymity in transactions and tend to be less strictly regulated than other payment systems.
True
T or F: Greg goes to a money transmitter and wires $15,000 in cash to a bank in another state. The money transmitter is required to file a Currency Transaction Report with the U.S. federal government.
True
T or F: The Financial Action Task Force's Recommendations advise that countries should require financial institutions to keep certain records and establish anti-money laundering policies.
True
T or F: To launder funds, a consultant reports payments for services that he never actually provided. He then deposits unrelated illicit assets disguised as payments for the fake services. This laundering technique is called overstating revenues.
True