AML Exam Anti-Money Laundering WebCE

FinCEN rules require that the person who fills out and files an SAR must be the person who actually detects or witnesses the suspicious activity. a. True b. False

b. False That's correct! A producer or company employee who detects a red flag or any other suspicious activity is only required to report the suspicion to a manager or designated compliance principal. The insurance company's compliance officer, not the producer or employee, determines whether to file an SAR and report the case to federal authorities.

Under FinCEN's final rules as they apply to insurance companies, agents and brokers are required to establish and maintain their own AML programs and procedures. a. True b. False

b. False That's correct! Agents and brokers are not required to establish separate AML programs; however, as integral as they are to the insurance business and the insurance sales process, they have an important role to play in assisting their companies with AML efforts.

Insurance companies are not required to establish anti-money laundering programs, though they are encouraged to do so. a. True b. False

b. False That's correct! Title III of the PATRIOT Act specifically addresses money laundering and expands the Bank Secrecy Act to encompass all financial institutions, including life insurance companies. The Act's inclusion of insurance companies recognized the simple fact that some insurance products were being used in money laundering schemes.

All of the following are required elements of an insurance company's AML program EXCEPT: a. designating an AML compliance officer b. certifying every employee and appointed producer with FinCEN c. maintaining an ongoing training program d. periodically testing the AML program through independent audit

b. certifying every employee and appointed producer with FinCEN That's correct! The USA PATRIOT Act requires companies to develop and implement an AML program, designate an AML compliance officer, maintain an ongoing training program, and periodically test the AML program through an independent audit. While employees and appointed producers are expected to know and comply with a company's AML program, they are not required to receive FinCEN (or any other) certification.

All of the following are federal laws or related rulings that have a direct impact on anti-money laundering requirements EXCEPT: a. the Bank Secrecy Act of 1970 b. the Fair Credit Reporting Act of 1972 c. the USA PATRIOT Act of 2001 d. the FinCEN final rules published November 2005

b. the Fair Credit Reporting Act of 1972 That's correct! The USA PATRIOT Act expands the AML directives of the Bank Secrecy Act, and FinCEN's final rules amended the USA PATRIOT Act to address the insurance company needs. The FCRA does not directly relate to money laundering.

Factors that producers should consider when determining if an application raises a red flag include all of the following EXCEPT: a. the source of the premium or deposit payment b. the size of the commission that might be earned on the transaction c. the geographical location of the person requesting the transaction d. transaction history involving this customer or this policy

b. the size of the commission that might be earned on the transaction That's correct! The source of the premium, geographical location of the person or entity requesting the transaction, and transaction history are all factors that may raise a red flag. The potential commission is irrelevant when determining the need to file an SAR.

What must a Form 8300 be filed in conjunction with? a. all cash or cash equivalent receipts exceeding $5,000 b. any cash or cash equivalent receipts exceeding $5,000 that also raise a red flag c. all cash or cash equivalent receipts exceeding $10,000 d. any cash or cash equivalent receipts exceeding $10,000 that also raise a red flag

c. all cash or cash equivalent receipts exceeding $10,000 That's correct! Financial institutions must report all cash or cash equivalent receipts (or series of related receipts) exceeding $10,000 using Form 8300. An SAR is required to report transactions exceeding $5,000 that have also raised one or more red flags.

A customer requests a $5,000 partial surrender of her universal life insurance policy. The producer notices that the customer made a $5,000 premium deposit just the week before. The producer should: a. ask the customer to explain the unusual payment and withdrawal transaction history b. discuss the situation with other producers to determine what they would do c. discuss the situation with his or her manager d. contact FinCEN and report the activity as suspicious

c. discuss the situation with his or her manager That's correct! Suspicious activity or transactions should be discussed with the producer's manager, not with the customer. If the manager is unavailable, then the case can be directed to the field compliance principal assigned to the producer. Cases should never be discussed with anyone else, including co-workers. Only if the case escalates through the company's AML process will the compliance officer get involved.

A customer has purchased over a dozen life insurance and annuity contracts over the past year, using cashier's checks to pay the premiums. If this action is part of a money laundering operation, which stage does it represent? a. acquisition b. placement c. layering d. integration

c. layering That's correct! Money laundering is a process that moves illegal money through three stages on its way to apparent legitimacy: placement, layering, and integration. The second stage, layering, is achieved by using cash or cash equivalents to purchase multiple financial instruments that can subsequently be converted into clean money.

As part of the life insurance application process in compliance with AML requirements, producers are required to obtain all of the following information EXCEPT: a. the applicant's Social Security or tax identification number b. the applicant's residential address c. the beneficiary's date of birth d. the applicant's full legal name

c. the beneficiary's date of birth That's correct! Required information includes the applicant's full legal name, date of birth, residential address, and SSN or TIN. Beneficiary information is not required.

In determining the need to report suspicious activity, all of the following are considered to be "transactions" EXCEPT: a. All premiums are paid with money orders. b. The initial premium deposit is paid by wire transfer. c. Cash value transfers are made between policies (or via a 1035 exchange). d. Participating policy dividends are used to purchase paid-up additions.

d. Participating policy dividends are used to purchase paid-up additions. That's correct! For purposes of threshold determination, transfers of funds from almost any source are subject to review. The exercise of participating policy dividend options is generally excluded.

An agent knows that her insurance company has an AML policy in effect, but the $100,000 in money orders her customer is using to fund the purchase of a single premium whole life insurance policy would help her meet her sales goal for the year. Consequently, she overlooks the source of funds and submits the application to her company. From an AML perspective, the agent has: a. complied with the minimum requirement of her company's AML policy b. provided outstanding customer service c. committed the crime of perjury d. engaged in willful blindness

d. engaged in willful blindness That's correct! Willful blindness is the deliberate avoidance of knowledge of facts suggesting a criminal activity.

During which stage of the money laundering process are laundered or cleansed funds circulated back into the hands of the criminal and ultimately into the financial system? a. closet b. placement c. layering d. integration

d. integration That's correct! The final stage in the money laundering process is called integration. Here, the cleansed money is circulated back into the hands of the criminal and ultimately into the financial system.