AML Test 1

1) What is the definition of a respondent bank? A. A bank that provides international services to another local financial institution B. A bank for which another financial institution establishes, maintains, administers or manages a correspondent account C. A foreign bank that does not have a permanent staff D. A bank that is not subject to any regulation

B. A bank for which another financial institution establishes, maintains, administers or manages a correspondent account

1) Which of the following is the most common method of laundering money through a legal money services business? A. Exchanging Colombian pesos on the black market B. Smuggling bulk cash C. Exchanging currency and remitting money D. Transferring funds through payable through accounts (PTAs)

C. Exchanging currency and remitting money

1) What is nesting? A. When customers have accounts with many local banks B. When a respondent bank is providing upstream correspondent services to other financial institutions C. When a respondent bank is providing downstream correspondent services to other financial institutions D. When a bank has many common customers with other local banks

C. When a respondent bank is providing downstream correspondent services to other financial institutions

1) Gatekeepers are defined as __________________. A. professionals such as lawyers, accountants, private bankers, investment advisors and trust and company service providers. B. professionals such as lawyers, accountants, notaries and foreign exchange dealers. C. professionals such as lawyers, accountants, notaries, investment advisors and trust and company service providers. D. professionals such as lawyers, accountants, notaries and fraud examiners.

C. professionals such as lawyers, accountants, notaries, investment advisors and trust and company service providers.

1) Administrators or Exchangers of virtual currency cannot be categorized as MSBs, and therefore need not comply with the registration, reporting, recordkeeping and other regulations applicable to money transmitters. a) True b) False

F

1) The practice of issuing numerous invoices for the same shipment of goods, thus allowing the money launderer the opportunity to make numerous payments and justify them with the invoices, is known as 'ghost-shipping.' a) True b) False

F

1) One of the reasons for the continued popularity of hawala as an alternative remittance system (ARS) is the ability to legitimately transfer money cheaper and faster than through a formal banking system. a) True b) False

True

1) In the "reverse flip" money laundering method, a criminal provides an associate with a specific amount of illegitimate money. The associate then provides a "mortgage" back to the trafficker for the same amount with all the necessary documentation. This creates an illusion that the trafficker's funds are legitimate. a) False b) True

a) False

1) In which three areas can money laundering occur? a) In payable through-accounts b) In correspondent accounts c) In luxury hotels d) In bank accounts

a) In payable through-accounts b) In correspondent accounts d) In bank accounts

1) What are the three potential economic consequences of money laundering in a country? a) Increased drug trafficking b) Corruption c) Increased crime d) Increased wealth for the residents

a) Increased drug trafficking b) Corruption c) Increased crime

1) All of the following are economic consequences of money laundering, EXCEPT: a) Increased involvement of the private sector in the financial economy. b) Increased exposure to organized crime and corruption. c) Dampening effect on foreign investments. d) Risk of international sanctions.

a) Increased involvement of the private sector in the financial economy.

1) What are three risks involved in private banking? a) The bank can become too dependent on the income b) The bank may not know the source of the funds c) The customer is usually not in the same town as the bank d) The account managers can develop a personal relationship with the owner of the account

a) The bank can become too dependent on the income b) The bank may not know the source of the funds d) The account managers can develop a personal relationship with the owner of the account

1) Which three reasons make shell companies vulnerable to money laundering? a) There are frequently established in off-shore jurisdictions that have lax AML regimes b) The directors for shell companies sometimes have no real connection with the company c) They can be used to hold a person's assets d) They are frequently used to disguise the ownership of the company

a) There are frequently established in off-shore jurisdictions that have lax AML regimes b) The directors for shell companies sometimes have no real connection with the company d) They are frequently used to disguise the ownership of the company

1) Accepting money derived from illegal sources makes you an accomplice to money laundering. a) Yes b) No

a) Yes

1) A virtual or digital currency is a medium of exchange that operates only in the digital space. It cannot be converted into or used as a substitute for real currency. a) True b) False

b) False

1) Terrorist financing always uses funds derived from illegal activities for achieving an illegal political purpose. a) True b) False

b) False

1) Structuring is usually a process associated with which stage of money laundering? a) The third stage b) The first stage c) The second stage d) None of the above

b) The first stage

1) Which of the following best describes the "alternative remittance system"? a) A non-electronic data remittance system used in several foreign countries to report suspicious activities. b) The transfer of values between countries, outside of the legitimate banking system. 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.

b) The transfer of values between countries, outside of the legitimate banking system.

1) An inherent risk of prepaid cards is non-face-to-face relationships and anonymity. a) False b) True

b) True

1) Since trusts may be formed in order to conceal the identity of the true owner or beneficiary, payments made to the beneficiaries of a trust can also be used in the money laundering process. a) False b) True

b) True

1) Financial institutions that rely on the proceeds of crime face all of the following adverse consequences of money laundering, EXCEPT: a) Reputational risks. b) Operational risks. c) Diversification risks. d) Legal risks.

c) Diversification risks.