AML Test 2
"Customer Due Dilligence for Banks"
1. Importance of KYC standards for supervisors and banks 2. Essential elements of KYC standards 3. The role of supervisors 4. Implementation of KYC standards in a cross-border context
FATF Important Document
40 recommendations
Wolfsberg important document
AML principles on private and correspondent banking
Nine FSRBs
APG CFATF MONEYVAL EAG ESAAMLG GIABA MENAFATF GABAC GAFILAT
The Wolfsberg Group
An association of 13 global banks that aims to develop financial services industry standards and guidance related to Know Your Customer, Anti-Money Laundering and Counter-Terrorist Financing policies.
AML/CTF policies and coordination
Assessing risks and applying a risk based approach National cooperation and coordination
Basel Committee Important Document
CDD for banks consolidated KYC
European Union topic
CDD risk-based gatekeepers
Regional FATF Bodies Members
Caribbean, Asia-Pacific countries
Basel Committee Members
Central Bank governors of the G-10
FATF fulfills its stated objectives by monitoring implementation of the FATF recommendations among its members through __________ and __________
Compliance assessment, effectiveness assessment
Egmont group topic
Cooperation among the national FIUs, promoting establishment of FIUs
FATF Topic
Criminalization, role of financial system, international cooperation
Wolfsberg topid
Customer acceptance, EDD
In its paper on Customer Due Dilligence of Banks Committee emphasized what three things?
Customer acceptance, ongoing monitoring of high-risk accounts, customer identification
The four key elements of a KYC program are:
Customer identification Risk management Customer acceptance Monitoring
The Egmont Training Group published FIUs in Action: 100 Sanitized Cases. Which two of the items noted below were listed in the report as part of the six most frequent indicators of money laundering?
Defensive stance to questioning, unrealistic wealth compared to client profile
Third Directive
Defined money laundering and terrorist financing as separate crimes, extending customer identification and suspicious activity reporting obligations to trusts and company service providers, detailing a risk-based approach to customer due diligence, requiring all financial institutions to identify and verify the "benefical owner" of all accounts held by legal entities or persons
Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations? (Choose three)
Defining money laundering based on the model laws issued by the Organization of American states
The European Union's first EU Directive focused primarily on what issue?
Drug trafficking
Identify three key aspects of OFAC sanctions that have extraterritorial reach
Economic and trade sanctions based on US foreign policy, freezing foreign assets under US jurisdiction, blocking people on the specially designated nationals and blocked persons list
The Basel Committee on Banking Supervisions paper on "Customer Due Dilligence for Banks" specifies four key elements of KYC programs. Which of the following is not a component/element of the KYC program specified on paper?
Employee training
European Union important document
European Union directives on AML/CTF
European Union Members
European Union member countries
Technical compliance assessment
Evaluates the specific requirements of the FATF Recommendations, including how a member relates them to its relevant legal and institutional framework, and the powers and procedures of its competent authorities.
Egmont Principles
Expanding and systematizing cooperation in the reciprocal exchange of information Increasing the effectiveness of FIUs by offering training and promoting peronnel exchanges to improve the expertise and capabilities of peronnel employed by FIUs Fostering better and secure communication better and secure communication among FIUs through the application of technology, such as the ESW Promoting the operational autonomy of FIUs Promoting the establishment of FIUs in conjunction with jursidictions with an AML/CTF program in place, or in areas with a program in the early stages of development
The United Nations Palermo convention expanded on the Vienna Convention by doing what three things ?
Expanding the scope of when identification and confiscation of the proceeds of crime should be used, expanding the coverage of the convention to include issues other than drug trafficking, expanding the coverage of the convention to include organized crime
What are the principles of FATF-style regional bodies
FSRBs play an essential role in identifying and addressing AML/CTF technical assistance needs for their individual members
The Basel Committee has observed that without due dilligence, banks can be subject to social, operational, legal and economic risks
False
The Basel committee's paper on "customer due dilligence for banks" specifies that the four key elements of a KYC program are ; 1) Customer identification 2) Risk Mitigation 3) Employee training 4) Geographic diversification
False
The Fourth EU directive decreed that customer due diligence was to be applied for transfers of funds exceeding EUR 10,000
False
The Wolfsberg Group aims to promote the establishment and the operational autonomy of FIUs especially in areas with an AML/CTF program in the early stages of development
False
The Wolfsburg Group was formed to provide a forum for Financial Intelligence Units around the world to improve cooperation in the fight against money laundering and financing terrorism
False
There are ten FATF-style regional bodies that have similar form and functions to those of FATF
False
Financial and non-financial institution preventative measures
Financial institution secrecy laws Customer due diligence and recordkeeping Additional measures for specific customers and activities Reliance, controls and financial groups Reporting of suspicious transactions Designated non-financial businesses and professions
Regional FATF Bodies Topic
Focus on regional AML issues
Section 311 of the Act provides for the potential designation of what three kinds of "primary money laundering concern"?
Foreign account, foreign transactions, foreign jurisdiction
FATF Members
Group counties and international organizations
USA Patriot Act
Has implications for US institutions and non-US institutions that do buisness in the US
All of the following are changes made in the Fourth European Union Money Laundering Directive, Except:
Increasing the threshold for entities obliged to report suspicious transactions for EUR 10,000 to EUR 15,000
The FATF 40 Recommendations are organized into seven groups. All of the following are valid FATF 40 group names, except:
International Cooperation and Economic Sanctions
International Cooperation
International instruments Mutual legal assistance Mutual legal assistance regarding freezing and confiscation Extradition Other forms of international cooperation
The Financial Action Task Force is best known for what?
Issuing AML/CTF reccommendations for countries to follow
Which three of the following statements are true in respect to the Fourth Eu Anti-Money Laundering Directive?
It repeals and replaces the Third Eu Directive on Anti-Money Laundering, Each member country must hold beneficial ownership information in a central registry and it must be made available to competent authorities, the definition of a PEP is expanded to include domestic persons
Which three statements are true about the Fourth EU Directive on Money Laundering?
It updates European Community legislation to be further in line with the financial action task force (FATF) 40 recommendations, it repeats the customer due diligence requirements of the previous directives but adds more detail to the requirements by, for example, including a speicif requirement to identify the beneficial owner and includes ongoing monitoring requirements, it includes new definitions for correspondent relationships and senior management
Basel Committee topic
KYC
USA Patriot Act Section 311 can require institutions to:
Keep records and file reports on certain financial transactions Obtain info on the beneficial ownership of any account opened in the US by a foreign person Identify and obtain information about customers who are permitted to use a payable through account Identify and obtain info about customers permitted to use correspondent accounts Close certain payable through accounts or correspondent accounts
Wolfsberg Members
Large international banks
FinCENs Advisory to the US Financial Institutions on Promoting a Culture of Compliance, published in 2014, listed six areas of emphasis. Which three areas are included in that list?
Leadership should be engaged, information should be shared throughout the organizations, the organization must have an appropriately qualified compliance officer
Money laundering and confiscation
Money laundering confiscations Confiscation and provisional measure
FATF
Monitors countries' progress in implementing the FATF regulations, reviews money laundering and terrorist financing techniques and counter-measures, promotes the adoption and implementation of the FATF recommendations globally
Mandatory
NO
The Annex IV General Guide to Account Opening Consultative Document published in February 2016 buy the Basel Committee lists information that should be obtained for the identification of legal persons. Which three items are recommended?
Name, legal form, status and proof of incorporation of legal persons; permanent address of principal place of legal person's activities; identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means
Egmont Group Members
National FIUs
Basel Committee Mandatory
No
Egmont group mandatory
No
Regional FATF Bodies manadtory
No
Wolfsberg mandatory
No
Which one of the following statements is correct in respect of the FATF 40 Recommendations? Countries should _________
Not approve the establishment or accept the continued operation of shell banks
According to the EU Directives, an independent legal professional is obligated to report suspicion of money laundering in a client relationship when __________
Participating in financial or corporate transactions
Egmont Group
Provide a forum for FIUs around the world to improve cooperation in the fight against money laundering and financing of terrorism to foster the implementation of domestic programs in this field
USA Patriot Act Section 311
Provides the US treasury department with the authority to apply graduated, proportionate measures against a foreign jurisdiction, a foreign financial institution, a type of international transaction or a type of account that the treasury secretary determines to be a "primary money laundering concern"
Wolfsberg Recommendations
Providing official lists of suspected terrorists on a globally coordinated basis by relevant authorities Including adequate information in the lists to help institutions search customer databases efficiently Providing promtpt feedback to institutions following circulation of the official lists
identify three key roles of retail FATF style bodies
Publishing periodic typology reports, actively participating in identifying aml technical assistance needs, assisting in the FATF mutual evaluation process
What are the Wolfsberg principles
Recommend controls for private banking that range from the basic such as customer identification to enhanced due dilligence
Regional FATF Bodies Important Document
Recommendations
Powers and responsibilities of competent authorities and other institutional measures
Regulation and supervision Operational and law enforcement General requirements Sanctions
USA Patriot Act Section 312
Requires due diligence/enhanced due diligence for foreign correspondent accounts and private banking for non-US persons
All of the following statements related to action of the Office of Foreign Assests Control are true, except:
Restriction of travel by US citizens to certain countries based on sanction lists that OFAC issues periodically
Which of the following Sections of the USA PATRIOT ACT prohibits US banks and securities brokers and dealers from maintaining correspondent accounts for foreign, unregulated shell banks that have no physical presence anywhere?
Section 313
Egmont Group important document
Secure communication using egmont secure web training
Effectiveness assessment
Seeks to assess the adequacy of a member's implementation of the FATF recommendations, and identifies the extent to which a member achieves a defined set of outcomes that are central to a robust AML / CTF system. The focus is on the extent to which legal and institutional framework of the member is producing the expected results.
What is the Financial action task force?
Serves as the vanguard in promulgating AML guidance to governmental bodies around the globe.
FATF objectives
Set standards and promote effective implementation of legal, regulatory and operational measures for combatting money laundering, terrorist financing, and other related threats
Wolfsberg principles
State that banks must "endeavor to accept only those clients whose source of wealth and funds can be reasonably established to be legitimate"
Terrorist financing and financing of proliferation
Terrorist financing offences Targeted financial sanctions related to terrorism and terrorist financing Targeted financial sanctions related to proliferation Non-profit organization
What are three suggestions articulated by FATF?
That is appropriate to have good customer due diligence procedures, that it is appropriate to require suspicious activity reporting, that it is appropriate to criminalize money laundering and the financing of terrorism
Which of the following statements is true?
The Egmont group membership comprises national FIUs
European Union Directives
The first EU direction on prevention of the sues of the financial system for the purpose of money laundering The second EU directive amended the first directive to require stricter money laundering controls across the continent The third EU directive was based on elements of FATFs revised 40 recommendations The fourth EU directive was on prevention of the use of the financial system for the money laundering and terrorist financing
In 2014, the Wolfsberg Group published its Anti-Money Laundering Principles for Correspondent banking. Which three of the following elements are recommended to be included in the due dilligence of a correspondent banking client?
The geographic risk, the ownership and management structure, the customer base
40 Recommendations
The identification of risks and development of appropriate policies The criminal justice system and law enforcement The financial system and its regulation The trasparency of legal persons and arrangements International cooperation
Which statement is true in respect to the Wolfsberg Group?
The major international banks meet in this group to develop global guidelines for anti-money laundering and counter terrorist financing
The Basel Committee
The primary global standard-setter for the prudential regulation of banks, and provides a forum for cooperation on banking supervisory matters
Fourth Directive
The threshold for entities obliged to report suspicious transactions decreased from EUR 15,000 to EUR 10,000 The scope of obliged entities was enlarged from just casinos to all providers of gambling services Customer due dilligence is to be applied for transfers of funds exceeding EUR 1,000
The Basel Committee's mandate
To strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability
Transparency and Beneficial Ownership of Legal Persons and Arrangements
Transparency and benefical ownership of legal persons Transparency and benefical of legal arrangements
FATF is currently compromised of 35 member-jurisdictions and 31 associate members or observers
True
FATF's 40 recommendations provide a complete set of countermeasures against money laundering, including special recommendations on terrorist financing
True
For banks, the Wolfsberg Group papers are just recommendations. They do not have the force of law
True
Section 311 of the USA PATRIOT act provides the US treasury department with the authority to obtain information on the beneficial ownership of any account opened or maintained in the US by a foreign person or a foreign person's representative.
True
The European Directives have the force of law within the EU
True
The IMF and World Bank have started requiring countries that received aid to implement effective AML programs
True
The Office of Foreign Assets Control is allowed to impose sanctions against certain foreign countries
True
The Third EU Directive defined "money laundering" and "terrorist financing" as separate crimes
True
Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the US?
USA PATRIOT Act
KYC (Know your customer)
Use of customer due diligence can help to mitigate the dangers of bad customers Sound KYC policies policies and procedures are critical to protecting the safety and soundness of banks, as well as the integrity of banking systems
The ________ is an association of 13 global banks that aims to develop financial services industry standards and guidance related to KYC, AML and Counter-Terrorist Financing Policies.
Wolfsberg Group
Does the USA Patriot Act have any international impact or ramifications
Yes
European Union Mandatory
Yes
In most money laundering international standards, it is stated that _________
the institution should identify the benefical owner(s) of the account