Section I.07.025

Which of the following best describes the Bank Secrecy Act's Currency Transaction Report (CTR) requirements for U.S. financial institutions? All currency transactions over $5,000 require a CTR. All transactions under $5,000 require a CTR. All check or wire transactions over $10,000 require a CTR. All currency transactions over $10,000 require a CTR.

All currency transactions over $10,000 require a CTR. Under the Bank Secrecy Act, all U.S. banks and certain other financial institutions are required to file Currency Transaction Reports (CTR) whenever there is a currency transaction (deposit, withdrawal, exchange, or cashing of checks) of $10,000 or more. The easiest way to summarize the filing requirement is to remember the following: If currency in excess of $10,000 is brought into a financial institution to conduct a transaction, or if $10,000 in currency leaves the financial institution as the result of a transaction, a CTR must be filed.

Which of the following is an important element of a U.S. financial institution's anti-money laundering program? All of these answers are correct. Development of procedures to prevent money laundering. Designation of a money laundering compliance officer. Ongoing training for awareness of money laundering.

All of these answers are correct. A financial institution's anti-money laundering (AML) program is highly dependent on what jurisdictions it operates in, as well as the services that it offers. At a minimum, U.S. financial institutions should adopt the AML policies and procedures as required under the USA PATRIOT Act, but might also need to tailor their programs to the requirements of other jurisdictions in which they operate. Section 352 of the USA PATRIOT Act requires all financial institutions to establish anti-money laundering programs that include, at a minimum: • The development of internal policies, procedures, and controls to prevent money laundering • The designation of a money laundering compliance officer • An ongoing training program for awareness of money laundering • An independent audit function to test the programs

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? All of these answers are correct. Securities brokers. Casinos. Banks.

All of these answers are correct. In addition to traditional financial institutions such as banks and credit unions, a number of other U.S. industries are also required to file Suspicious Activity Reports with FinCEN if they suspect that a client or customer is attempting to launder funds or engage in other illegal activity. These include securities broker-dealers; casinos and card clubs; insurance companies; and unregistered investment firms.

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? Back-to-back loan. Alternative remittance system. Prepaid access. Money services business.

Alternative remittance system. Alternative remittance systems (also called parallel banking systems) are methods of transferring funds from a party at one location to another party (whether domestic or foreign) without the use of formal banking institutions. These systems are characterized by the lack of direct physical or digital transfer of currency from the sender to the receiver. Instead, in the typical alternative remittance system, the payer transfers funds to a local broker who has a connection to another broker in the region where the payee is located. The latter broker then distributes the funds to the payee. The parties involved in alternative remittance systems form a network and track their exchanges on an informal ledger. Unlike formal financial institutions, these ledgers will generally not list specific information about the payers and payees (such as bank account numbers and names), but will keep track of amounts owed. When the first broker requests that another broker in the network distribute funds, the debt is recorded in the ledgers. These debts between brokers could be paid back by offsetting transactions (i.e., the first broker pays someone locally at the request of the second broker). Alternatively, the parties could meet to settle all outstanding debts at a later time.

Which of the following accurately describes the requirements for filing a Report of Foreign Bank and Financial Accounts (FBAR) in the United States? An FBAR must be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $10,000. 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. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $25,000. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $10,000.

An FBAR must be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $10,000. U.S. Treasury Department regulations require citizens of the United States and resident aliens to file a Report of Foreign Bank and Financial Accounts (FBAR) (Treasury Form 90-22.1) when they maintain a financial interest or signature authority over a foreign bank account with a balance of more than $10,000 during the calendar year. Accounts in different foreign countries have to be aggregated.

Which of the following statutes is the heart of the money laundering control effort in the United States? Bank Secrecy Act. Money Laundering Crime Control Act. Crime Control Act. Bank Recording Act.

Bank Secrecy Act. Although money laundering has been around for a long time, the Bank Secrecy Act (BSA), which went into effect in the United States in 1970, was the first major piece of legislation aimed at detecting and preventing money laundering. The purpose of the law as stated in Section 5311 is "to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings." The BSA sets forth a system of reporting and recordkeeping requirements designed to help track large or unusual financial transactions.

Which of the following is an example of the use of a digital currency? Credit card transactions. Wire transfers. Bitcoin transactions. All of these answers are correct.

Bitcoin transactions. Digital currencies are a type of online payment method that has emerged as a money laundering concern. Broadly defined, digital currencies are currencies that exist and are traded in a digital format. The term typically excludes government-backed currencies, despite the fact that they can also exist and be traded digitally. Digital currencies can come in several forms and can have limited or broad uses. Among the most popular digital currencies is Bitcoin, which features a peer-to-peer network that allows users to send units of the currency to each other online without the use of a traditional financial institution.

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? Prepayment scheme. Canceled policy scheme. Integration scheme. Redemption scheme.

Canceled policy scheme. Insurance policies are designed to protect assets (as well as life and health), but they are also assets in their own right. As is the case with most assets, they can become part of a money laundering scheme. Launderers do not always need to keep or redeem the insurance policies they purchase. Many policies have cancellation provisions that, for a certain amount of time, allow the launderer to cancel the policy and have any unused premiums returned. This technique can be used to temporarily store illicit assets and confuse the money trail by having the cancellation paid out to a different account.

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. True.

False. A person is required to file a CMIR if he transports or is about to transport monetary instruments of more than $10,000 into or out of the United States at one time, or if he receives by transport, mail, or shipment monetary instruments in excess of $10,000 at one time transported into the United States from a place outside the United States. The form is to be filed at the time of transportation or within 15 days of receipt.

The operation of alternative remittance systems involves inherently illegal activities. True. False.

False. Alternative remittance systems (also called parallel banking systems) are methods of transferring funds from a party at one location to another party (whether domestic or foreign) without the use of formal banking institutions. These systems are characterized by the lack of direct physical or digital transfer of currency from the sender to the receiver. Instead, in the typical alternative remittance system, the payer transfers funds to a local broker who has a connection to another broker in the region where the payee is located. The latter broker then distributes the funds to the payee. Transferring funds in this manner is not necessarily illegal (although some jurisdictions require brokers to register with the government). If available, using such systems can be beneficial because the commission that the networked brokers take might be lower than a banking fee for international transactions. Additionally, the payers and payees do not need to have bank accounts to perform the transactions.

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. True.

False. Insurance policies are designed to protect assets (as well as life and health), but they are also assets in their own right. As is the case with most assets, they can become part of a money laundering scheme. This scenario is a redemption scheme. A person can redeem some insurance policies, such as life insurance, before the event that triggers the insurance occurs. In other words, the insurer agrees to pay the beneficiary of the policy an amount less than what the payout on a claim occurrence (in the case of life insurance, the death of the insured) would be. Using illicit assets, launderers can purchase life insurance or other redeemable contracts for themselves or their associates. If the investigator did not know that the launderer bought the insurance policy with illicit assets, the redemption payout would appear legitimate. In an insurance prepayment scheme, the launderer makes advance payments on insurance premiums. For instance, if a health insurer allowed $10,000 in advance premium payments, then the launderer could use the illicit assets to "store" those funds. Perhaps the launderer was going to buy that health insurance anyway; now illicit assets have taken care of that bill.

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. True. False.

False. Money services business (MSB) is a term used with growing frequency to define a regulatory class of non-depository financial service providers that transmit or convert money. Although an MSB has particular meanings in different jurisdictions, it generally includes any business that operates in one or more of the following capacities. • Currency exchangers • Check cashers • Issuers, sellers, or redeemers of traveler's checks, money orders, or stored value • Money transmitters • Prepaid access providers or sellers MSBs offer an alternative to depository institutions for both financial services and money laundering. For this reason, an individual unable to transfer illegal funds into the traditional depository banking system might turn to an MSB. In addition, most MSBs operate under less strict regulations than traditional financial institutions. For example, an MSB might not check a customer's credit report before opening an account, or it might require less rigorous proof of a customer's identity than a traditional bank. These overall less stringent requirements tend to raise the money laundering risk in certain transactions involving users of MSBs. However, there is a regulatory trend to expand certain requirements, such as customer due diligence programs, to MSBs.

Owen, a U.S. resident, receives a gift from a good friend for $15,000 in cash. Owen must file a Form 8300 (currency report) with the Financial Crime Enforcement Network (FinCEN) and the Internal Revenue Service. True. False.

False. Owen does not have to file a Form 8300 because, while he received over $10,000 in currency, he did not receive it in the course of his trade or business; he received it as a gift. Title 31, Section 5331 of the U.S. Code (instituted as part of the USA PATRIOT Act) requires persons engaged in a trade or business and who in the course of such trade or business receive more than $10,000 in cash in one or more related transactions to file IRS Form 8300. Reported transactions include any sale made in a trade or business that is retail in nature, a sale of goods and services, a sale of real property, an exchange of cash for cash, a collectible, a consumer durable, repayment of a loan, and conversion of cash to negotiate instruments. The information required to be reported under Section 5331 is very similar to the information that was already required by the IRS under Section 6050I of the Internal Revenue Code. Because of the similarity between the two statutes, the reports are to be made on the same Form 8300, which is filed jointly with the Financial Crimes Enforcement Network (FinCEN) and the IRS.

The placement stage of the money laundering process occurs when a criminal first steals or obtains illicit proceeds. True. False.

False. The three stages of money laundering are: 1. placement, 2. layering, and 3. integration Placement is the first stage of the money laundering process. In this stage, the launderer introduces his illegal profits into the financial system. Placement occurs after the initial act of stealing or receiving illicit assets. If the placement of the initial funds goes undetected, the launderer can design numerous financial transactions in complex patterns to prevent detection. For example, the launderer can move funds between bank accounts, transfer funds from one form of currency to another, or transfer money between businesses. This stage of the money laundering process is referred to as layering. Integration is the final stage in the laundering process. In this stage, the money is integrated back into the economy in a way that makes it appear to be part of a legitimate business transaction.

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 phenomenal. Of the following list, in which money laundering scheme might the suspect be involved? Trade-based laundering scheme. Alternative remittance system scheme. Front business scheme. Bankruptcy scheme.

Front business scheme. Money laundering is the disguising of the existence, nature, source, control, beneficial ownership, location, and disposition of property derived from criminal activity. Bars, restaurants, and nightclubs are commonly used to front money laundering operations for a number of reasons. These businesses charge relatively high prices, and customers vary widely in their purchases. Sales are generally in cash, and it is difficult to match the cost of providing food, liquor, and entertainment with the revenues they produce. As a result, a red flag of front businesses is observing a low amount of business, despite the business's books showing a relatively high income for that period.

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 I, II, and III II and IV only II, III, and IV

I, II, and IV One of the most common methods of laundering funds is to filter the money through a seemingly legitimate business, otherwise known as a front business. A front business can be a very effective way to launder money for a number of reasons. Front businesses provide a safe place for organizing and managing criminal activity, where the comings and goings of large numbers of people will not arouse undue suspicion. In addition, a front that conducts legitimate business provides cover for delivery and transportation related to illegal activity. The expenses from illegal activity can be attributed to the legitimate enterprise, and the illegal revenues can be easily placed into the enterprise. One disadvantage to this, however, is that launderers usually end up having to pay taxes on their illegal income.

Which of the following statements concerning mobile payments is false? Mobile payments allow for the money launderer to potentially remain anonymous if a prepaid phone is used. Money launderers often use mobile phone accounts to send funds to foreign accounts or otherwise layer illicit assets. Mobile payments or transactions are those facilitated through the use of an account associated with a mobile phone. 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.

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. Mobile payments, also known as mobile banking, involve using an account associated with a mobile phone—as opposed to cash, credit cards, and debit cards—to facilitate transactions. Similar to the way in which credit and debit cards significantly cut into the use of checks and cash for consumer transactions, mobile payments are likely to grow in popularity. As compared to other transaction methods, mobile payments are vulnerable to money laundering schemes in a few key ways. For one thing, given that mobile payments are still in the process of growing and developing definition, regulations are not as sophisticated or complete as they are for older payment systems. For another thing, many developing countries lack functional AML and anti-terrorism laws, making mobile payments outside of the jurisdiction even more difficult to prevent and trace. Also, a user can send mobile payments to almost anywhere in the world, making them a tool that launderers often use to move funds to foreign jurisdictions. In addition, the use of prepaid phones causes substantial money laundering issues because the owner of a prepaid phone can be virtually anonymous. Prepaid phones can be purchased for cash, and the user typically does not need to provide personal information to open or add funds to an account associated with the phone. Anonymity is a strong attraction for launderers because it helps to obscure the paper/digital trail leading back to them.

Which of the following statements concerning the U.S. Bank Secrecy Act is most accurate? Its primary purpose is to require the federal government to obtain a warrant to access financial information. It requires financial institutions to report all transactions to the federal government. Its primary purpose is to prevent third parties from accessing financial data held by financial institutions. It imposes recordkeeping requirements on financial institutions for large, unusual, and suspicious transactions.

It imposes recordkeeping requirements on financial institutions for large, unusual, and suspicious transactions. The Bank Secrecy Act (BSA), which went into effect in the United States in 1970, was the first major piece of legislation aimed at detecting and preventing money laundering. The purpose of the law as stated in Section 5311 is "to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings." The BSA sets forth a system of reporting and recordkeeping requirements designed to help track large, unusual, and suspicious financial transactions. Title I contains provisions requiring that financial institutions and securities brokers and dealers keep extensive records of the transactions and accounts of their customers. Title II of the BSA (originally entitled Currency and Foreign Transactions Reporting Act) requires banks, "financial institutions" (which include casinos, securities brokers and dealers, and currency exchanges), and, in some cases, individuals to report to the government certain transactions that tend to have a relatively high risk of money laundering or other crime.

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? Placement. Structuring. Layering. Integration.

Layering. The three stages of money laundering are placement, layering, and integration. Placement is the first stage of the money laundering process. In this stage, the launderer introduces his illegal profits into the financial system. Herman "placed" his stolen funds into the financial system when he incrementally deposited cash into a bank account. If the placement of the initial funds goes undetected, the launderer can design numerous financial transactions in complex patterns to prevent detection. For example, the launderer can move funds between bank accounts, transfer funds from one form of currency to another, or transfer money between businesses. This stage of the money laundering process is referred to as layering. This is the stage Herman was engaged in when he created additional transfers and fake loans involving foreign entities that he controlled. Integration is the final stage in the laundering process. In this stage, the money is integrated back into the economy in a way that makes it appear to be part of a legitimate business transaction. Herman performed this stage when he brought the funds home and integrated them as seemingly legitimate proceeds from investments.

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? None of these answers are correct. The names of the receivers. The names of the senders. The bank account numbers of the senders and receivers.

None of these answers are correct. Alternative remittance systems (also called parallel banking systems) are methods of transferring funds from a party at one location to another party (whether domestic or foreign) without the use of formal banking institutions. These systems are characterized by the lack of direct physical or digital transfer of currency from the sender to the receiver. Instead, in the typical alternative remittance system, the payer transfers funds to a local broker who has a connection to another broker in the region where the payee is located. The latter broker then distributes the funds to the payee. The parties involved in alternative remittance systems form a network and track their exchanges on an informal ledger. Unlike formal financial institutions, these ledgers will generally not list specific information about the payers and payees (such as bank account numbers and names), but will keep track of amounts owed. When the first broker requests that another broker in the network distribute funds, the debt is recorded in the ledgers. These debts between brokers could be paid back by offsetting transactions (i.e., the first broker pays someone locally at the request of the second broker). Alternatively, the parties could meet to settle all outstanding debts at a later time.

Which of the following statements concerning currency reporting requirements in the United States is most accurate? 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. Nonfinancal 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. Nonfinancial organizations and individuals are not required to report any instances where they receive over $10,000 or more in cash. Only banks are required to report currency transactions over $10,000 to the U.S. federal government.

Nonfinancal 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. U.S. financial institutions have specific regulations requiring currency transaction reporting, but nonfinancial individuals and entities engaged in business also have currency reporting requirements. Title 31, Section 5331 of the U.S. Code (instituted as part of the USA PATRIOT Act) requires persons engaged in a trade or business and who in the course of such trade or business receive more than $10,000 in cash in one or more related transactions to file IRS Form 8300. Reported transactions include any sale made in a trade or business that is retail in nature, a sale of goods and services, a sale of real property, an exchange of cash for cash, a collectible, a consumer durable, repayment of a loan, and conversion of cash to negotiate instruments. The information required to be reported under Section 5331 is very similar to the information that was already required by the IRS under Section 6050I of the Internal Revenue Code. Because of the similarity between the two statutes, the reports are to be made on the same Form 8300, which is filed jointly with the Financial Crimes Enforcement Network (FinCEN) and the IRS.

The ________________ 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. Office of Money Laundering Compliance. Office of Foreign Assets Control. FinCEN. Central Intelligence Agency.

Office of Foreign Assets Control. The Office of Foreign Assets Control (OFAC) 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. OFAC maintains a list of individuals, governmental entities, companies, and merchant vessels around the world that are known or suspected to engage in illegal activities. Persons or entities on the list, known as Specially Designated Nationals and Blocked Persons (SDNs), include foreign agents, front organizations, terrorists and terrorist organizations, and drug traffickers.

A money laundering scheme cannot be successful until the _________ is eliminated or made so complex that individual steps cannot be easily traced. Placement. Paper trail. Evidence of the initial fraud. Modus operandi.

Paper trail. A money laundering scheme cannot be successful until the paper trail is eliminated or made so complex that individual steps cannot be easily traced. The number of steps used depends on how much distance the money launderer wishes to put between the illegally earned cash and the laundered asset into which it is converted. A greater number of steps increases the complexity of tracing the funds, but it also increases the length of the paper trail and the chance that the transaction will be reported.

Of the choices below, which is the proper sequence of cycles in a money laundering process? Layering, placement, and integration. Placement, layering, and integration. Placement, bank complicity, and structuring. Integration, structuring, and placement.

Placement, layering, and integration.. Placement is the first stage of the money laundering process. In this stage, the launderer introduces his illegal profits into the financial system. It is at this stage that legislation has been developed to prevent launderers from depositing or converting large amounts of cash at financial institutions or taking cash out of the country. Money laundering schemes are most often detected at the placement stage. If the placement of the initial funds goes undetected, the launderer can design numerous financial transactions in complex patterns to prevent detection. For example, the launderer can move funds between bank accounts, transfer funds from one form of currency to another, or transfer money between businesses. This stage of the money laundering process is referred to as layering. Integration is the final stage in the laundering process. In this stage, the money is integrated back into the economy in a way that makes it appear to be part of a legitimate business transaction.

The stage in which money laundering schemes are most often detected is called: Integration. Layering. Placement. Washing.

Placement. Placement is the first stage of the money laundering process. In this stage, the launderer introduces his illegal profits into the financial system. It is at this stage that legislation has been developed to prevent launderers from depositing or converting large amounts of cash at financial institutions or taking cash out of the country. Money laundering schemes are most often detected at the placement stage.

Which of the following is not a minimum requirement of a written anti-money laundering (AML) compliance program? Provide for the immediate termination of any employee involved in avoiding the jurisdiction's reporting requirements. Establish a system of internal policies, procedures, and controls to ensure ongoing compliance. Provide training on an ongoing basis for all personnel. Provide for independent testing of compliance by internal auditors and/or outside examiners.

Provide for the immediate termination of any employee involved in avoiding the jurisdiction's reporting requirements. At a minimum, a written anti-money laundering (AML) compliance program should: • Establish a system of internal policies, procedures, and controls to ensure ongoing compliance with the regulatory AML regime. • Provide for independent testing of compliance by internal auditors and/or outside examiners. • Designate a compliance officer(s) to ensure day-to-day compliance with AML laws and regulations. • Provide training on an ongoing basis for all personnel.

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? Smurfing/structuring operation. Counterfeit checks scheme. Forged check scheme. Entrapment scheme.

Smurfing/structuring operation. Bank checks (such as cashier's checks and money orders) could provide evidence of smurfing operations. Many countries require financial institutions to report all currency transactions above a certain threshold (e.g., more than $10,000) to the government. As a result, the most common type of illegal structuring scheme in the money laundering context is smurfing, where the launderer breaks up the illicit money into smaller amounts and deposits it into bank accounts or purchases cashier's checks, traveler's checks, or money orders. A red flag of a smurfing scheme is a customer who attempts to make many deposits just under the reporting threshold.

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? Sizing currency transactions. Smurfing/structuring. Check tampering. Channel stuffing.

Smurfing/structuring. Bank checks (such as cashier's checks and money orders) could provide evidence of smurfing operations. Many countries require financial institutions to report all currency transactions above a certain threshold (e.g., more than $10,000 in the United States) to the government. As a result, the most common type of illegal structuring scheme in the money laundering context is smurfing, where the launderer breaks up the illicit money into smaller amounts and deposits it into bank accounts or purchases cashier's checks, traveler's checks, or money orders. A red flag of a smurfing scheme is a customer who attempts to make many deposits just under the reporting threshold.

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 complete extent of XYZ's anti-money laundering measures, which of the following basic elements is missing from the organization's anti-money laundering program? Report of all bank transfers over $50,000 to the U.S. federal government. Prohibition of consumer cash deposits over $10,000 per day. The designation of a money laundering compliance officer. A mandatory 30-day waiting period before cash deposits can be transferred.

The designation of a money laundering compliance officer. A financial institution's anti-money laundering (AML) program is highly dependent on what jurisdictions it operates in, as well as the services that it offers. At a minimum, U.S. financial institutions should adopt the AML policies and procedures as required under the USA PATRIOT Act, but might also need to tailor their programs to the requirements of other jurisdictions in which they operate. Section 352 of the USA PATRIOT Act requires all financial institutions to establish anti-money laundering programs that include, at a minimum: • The development of internal policies, procedures, and controls to prevent money laundering • The designation of a money laundering compliance officer • An ongoing training program for awareness of money laundering • An independent audit function to test the programs

Which of the following best describes a core function of the U.S. Office of Foreign Assets Control? To serve as the primary revenue collection agency for U.S. citizens with foreign income and assets. To maintain the Specially Designated Nationals and Blocked Persons (SDN) list and enforce its sanctions. To ensure that foreign corporate entities with a presence in the United States comply with securities regulations. To provide model anti-money laudering statutes for all member countries to adopt.

To maintain the Specially Designated Nationals and Blocked Persons (SDN) list and enforce its sanctions. The Office of Foreign Assets Control (OFAC) is an office within the U.S. 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. OFAC maintains a list of individuals, governmental entities, companies, and merchant vessels around the world that are known or suspected to engage in illegal activities. Persons or entities on the list, known as Specially Designated Nationals and Blocked Persons (SDNs), include foreign agents, front organizations, terrorists and terrorist organizations, and drug traffickers.

Money laundering is the disguising of the existence, nature, source, control, beneficial ownership, location, and disposition of property derived from criminal activity. True. False.

True. Money laundering is the disguising of the existence, nature, source, control, beneficial ownership, location, and disposition of property derived from criminal activity. Put differently, money laundering is the process by which criminals attempt to disguise illicit assets as legitimate assets that they have a right to possess and spend. In this context, the term assets assumes the wider definition of that which is physical, intangible, or represented in the form of rights or obligations, such as a pension or trust fund. Money laundering operations are designed to take the proceeds of illegal activity, such as profits from drug trafficking, and cause them to appear to come from a legitimate source. Once illegal money has been laundered, the perpetrator is able to spend or invest the illicit income in legitimate assets.

Financial institutions, as defined by the USA PATRIOT Act, include not only commercial banks, but also insurance companies and travel agencies. True. False.

True. The USA PATRIOT Act defines the term financial institution broadly to include not only insured and commercial banks, but also securities brokers and dealers, investment companies, currency exchanges, issuers of cashier's checks and money orders, credit card companies, insurance companies, travel agencies, and a host of other businesses. The complete list can be found at 31 U.S.C. § 5312 (a)(2).