AML Exam 2 Study Guide

What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee's October 2001 paper called "Customer Due Diligence for Banks?"

(1) Customer acceptance policy (2) Customer identification (3) On-going monitoring of high risk accounts (4) Risk management.

Identify 3 important tasks the FATF focuses on

- Identify the risks, and develop policies and domestic coordination - Pursue money laundering, terrorist financing and the financing of proliferation; - Apply preventive measures for the financial sector and other designated sectors Some specific tasks are AML/CFT policies and coordination, money laundering and confiscation, and terrorist financing and financing of proliferation.

According to Section 312 of the USA Patriot Act, the due diligence program for foreign correspondent accounts must address what 3 measures?

1. Determine whether the account is subject to enhanced due diligence under section 312 2. Assess the money laundering risk posed, based on a consideration of relevant risk factors 3. apply risk-based policies, procedures, and controls to each such correspondent account reasonably designed to detect and report known or suspected money laundering activity, including a periodic review of the correspondent account activity.

How is a private banking account defined under Section 312 of the USA Patriot Act?

A private banking account as an account that is established or maintained for the benefit of one or more non-U.S. persons, requires a minimum aggregate deposit of funds or other assets of not less than $1,000,000, and is assigned to a bank employee who is a liaison between the financial institution and the non-U.S. person.

In its paper on Customer Due Diligence of Banks Committee emphasized what three things? A. Customer acceptance B. Prohibition against opening accounts for PEPs C. Ongoing monitoring of high-risk accounts D. Customer identification

A. Customer acceptance C. Ongoing monitoring of high-risk accounts D. Customer identification

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? A. Defensive stance to questioning B. Use of precious stones for moving value C. Unrealistic wealth compared to client profile D. Significant use of prepaid cards

A. Defensive stance to questioning C. Unrealistic wealth compared to client profile

Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations? (Choose three.) A. Defining money laundering based on the model laws issued by the Organization of American States B. Permitting forfeiture in all cases following conviction C. Indicating whether it is relevant that a predicate offense may have been committed outside the local jurisdiction D. Requiring money laundering offenses to prove that the offender has actual knowledge of a criminal connection to the funds

A. Defining money laundering based on the model laws issued by the Organization of American States B. Permitting forfeiture in all cases following conviction C. Indicating whether it is relevant that a predicate offense may have been committed outside the local jurisdiction

The United Nations' Palermo Convention expanded on the Vienna Convention by doing what three things? A. Expanding the scope of when identification and confiscation of the proceeds of crime should be used B. Expanding the number of elements making up the definition of money laundering C. Expanding the coverage of the convention to include issues other than drug trafficking D. Expanding the coverage of the convention to include organized crime

A. Expanding the scope of when identification and confiscation of the proceeds of crime should be used C. Expanding the coverage of the convention to include issues other than drug trafficking D. Expanding the coverage of the convention to include organized crime

Section 311 of the Act provides for the potential designation of what three kinds of "primary money laundering concern"? A. Foreign account B. Foreign transaction C. Foreign politically exposed person D. Foreign jurisdiction

A. Foreign account B. Foreign transaction D. Foreign jurisdiction

Which three statements are true about the Fourth EU Directive on Money Laundering? A. It updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. B. It repeats the definition of a politically exposed person in previous directives. C. It repeats the customer due diligence requirements of the previous directives but adds more detail to the requirements by, for example, including a specific requirement to identify the beneficial owner and includes ongoing monitoring requirements. D. It includes new definitions for correspondent relationships and senior management.

A. It updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. C. It repeats the customer due diligence requirements of the previous directives but adds more detail to the requirements by, for example, including a specific requirement to identify the beneficial owner and includes ongoing monitoring requirements. D. It includes new definitions for correspondent relationships and senior management.

FinCEN's Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance, published in 2014, listed six areas of emphasis. Which three areas are included in that list? A. Leadership should be engaged. B. Information should be shared throughout the organization. C. Leadership and staff should understand how their BSA reports are used. D. The organization must have an appropriately qualified compliance officer.

A. Leadership should be engaged. B. Information should be shared throughout the organization. D. The organization must have an appropriately qualified compliance officer.

The Annex IV General Guide to Account Opening Consultative Document published in February 2016 by the Basel Committee lists information that should be obtained for the identification of legal persons. Which three items are recommended? A. Name, legal form, status and proof of incorporation of the legal person B. Permanent address of principal place of the legal person's activities C. A report describing a visit, by the account officer, to the principal place of business D. Identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means

A. Name, legal form, status and proof of incorporation of the legal person B. Permanent address of principal place of the legal person's activities D. Identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means

What are three suggestions articulated by FATF? A. That is appropriate to have good customer due diligence procedures B. That it is appropriate to require suspicious activity reporting C. That it is appropriate to criminalize money laundering and the financing of terrorism. D. That it is important never to allow numbered accounts

A. That is appropriate to have good customer due diligence procedures B. That it is appropriate to require suspicious activity reporting C. That it is appropriate to criminalize money laundering and the financing of terrorism.

Which of the following statements is TRUE? A. The Egmont Group membership comprises national FIUs. B. The Wolfsberg Group membership comprises central bank governors of the G10. C. The European Union recommends legislation to be passed in the member countries. D. The Basel Committee levies fines on the member countries for non-compliance with AML laws.

A. The Egmont Group membership comprises national FIUs.

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 diligence of a correspondent banking client? A. The geographic risk B. The ownership and management structure C. The résumé of the compliance officer D. The customer base

A. The geographic risk B. The ownership and management structure D. The customer base

FATF is currently comprised of 35 member-jurisdictions and 31 associate members or observers. A. True B. False

A. True

FATF's 40 Recommendations provide a complete set of countermeasures against money laundering, including special recommendations on terrorist financing. A. True B. False

A. True

For banks, the Wolfsberg Group papers are just recommendations. They do not have the force of law. A. True B. False

A. 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. A. True B. False

A. True

The European Directives have the force of law within the EU. A. True B. False

A. True

The IMF and the World Bank have started requiring countries that received aid to implement effective AML programs. A. True B. False

A. True

The Office of Foreign Assets Control (OFAC) is allowed to impose sanctions against certain foreign countries. A. True B. False

A. True

The Third EU Directive defined "money laundering" and "terrorist financing" as separate crimes. A. True B. False

A. True

Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the U.S.? A. USA PATRIOT Act B. Basel Due Diligence Principles for Banks C. FATF Guidance on Terrorist Financing D. UN Security Council Resolution on Correspondent Banking

A. USA PATRIOT Act

Identify three key aspects of OFAC sanctions that have extraterritorial reach. A. Restricting travel by U.S. citizens to certain countries B. Economic and trade sanctions based on U.S. foreign policy C. Freezing foreign assets under U.S. jurisdiction D. Blocking people on the Specially Designated Nationals and Blocked Persons List

B. Economic and trade sanctions based on U.S. foreign policy C. Freezing foreign assets under U.S. jurisdiction D. Blocking people on the Specially Designated Nationals and Blocked Persons List

The Basel Committee has observed that without due diligence, banks can be subject to social, operational, legal and economic risks. A. True B. False

B. False

The Basel Committee's paper on "Customer Due Diligence 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 A. True B. False

B. False

The Fourth EU Directive decreed that customer due diligence was to be applied for transfers of funds exceeding EUR 10,000. A. True B. False

B. False

The Wolfsberg Group aims to promote the establishment and the operational autonomy of FIUs, especially in areas with an AML/CFT program in the early stages of development. A. True B. False

B. False

The Wolfsberg 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 of terrorism. A. True B. False

B. False

There are ten FATF-style regional bodies (FSRBs) that have similar form and functions to those of FATF. A. True B. False

B. False

The Financial Action Task Force (FATF) is best known for what? A. Passing EU-Wide laws and policies on AML B. Issuing AML/CTF recommendations for countries to follow C. Having several subgroups D. Establishing the definition of counter terrorist financing

B. Issuing AML/CTF recommendations for countries to follow

Which three of the following statements are true in respect to the Fourth EU Anti-Money Laundering Directive? A. Member countries can decide when and if they incorporate it into their local laws. B. It repeals and replaces the Third EU Directive on Anti-Money Laundering. C. Each member country must hold beneficial ownership information in a central registry and it must be made available to competent authorities. D. The definition of a PEP is expanded to include domestic persons.

B. It repeals and replaces the Third EU Directive on Anti-Money Laundering. C. Each member country must hold beneficial ownership information in a central registry and it must be made available to competent authorities. D. The definition of a PEP is expanded to include domestic persons.

Identify three key roles of regional FATF-style bodies. A. Writing the FATF 40 Recommendations B. Publishing periodic typology reports C. Actively participating in identifying AML technical assistance needs D. Assisting in the FATF mutual evaluation process

B. Publishing periodic typology reports C. Actively participating in identifying AML technical assistance needs D. Assisting in the FATF mutual evaluation process

All of the following statements related to actions of the Office of Foreign Assets Control (OFAC) are true, EXCEPT: A. Imposition of economic and trade sanctions based on US foreign policy. B. Restriction of travel by US citizens to certain countries based on sanctions lists that OFAC issues periodically. C. Freezing or blocking of foreign assets of persons and organizations under US jurisdiction. D. Imposition of significant penalties on those who are found to be in violation of the blocking orders within each of the sanction programs.

B. Restriction of travel by US citizens to certain countries based on sanctions lists that OFAC issues periodically.

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. A. Egmont Group B. Wolfsberg Group C. International Monetary Fund D. Basel Committee on Banking Supervision

B. Wolfsberg Group

Does the USA PATRIOT Act have any international impact or ramifications? A. No B. Yes

B. Yes

The European Union's First EU Directive focused primarily on what issue? A. Terrorist financing B. Structuring C. Drug trafficking D. Casinos

C. Drug Trafficking

The Basel Committee on Banking Supervision's paper on "Customer Due Diligence for Banks" specifies four key elements of a KYC Program. Which of the following is NOT a component/element of the KYC Program specified in the paper? A. Customer identification B. Risk management C. Employee training D. Monitoring

C. Employee training

All of the following are changes made in the Fourth European Union Money Laundering Directive, EXCEPT: A. Applying customer due diligence for transfer of funds exceeding EUR 1,000. B. Applying enhanced due diligence to PEPs, irrespective of domestic or third-country citizenship status. C. Increasing the threshold for entities obliged to report suspicious transactions from EUR 10,000 to EUR 15,000. D. Increasing the scope of obliged entities from just casinos to include all "providers of gambling services."

C. Increasing the threshold for entities obliged to report suspicious transactions from 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: A. Financial and Non-Financial Institution Preventative Measures B. Powers and Responsibilities of Competent Authorities and Other Instructional Measures C. International Cooperation and Economic Sanctions D. Money Laundering and Confiscation

C. International Cooperation and Economic Sanctions

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? A. Section 319(a) B. Section 312 C. Section 313 D. Section 319(b)

C. Section 313

Which statement is true in respect to the Wolfsberg Group? A. It is a castle in Belgium where members of national FIUs meet to monitor global AML trends. B. This group is responsible for making international laws to combat anti-money laundering and counter terrorist financing. C. The major international banks meet in this group to develop global guidelines for anti-money laundering and counter terrorist financing. D. The governors of central banks meet in this group to discuss global trends in anti-money laundering and counter terrorist financing.

C. The major international banks meet in this group to develop global guidelines for anti-money laundering and counter terrorist financing.

FATF fulfills its stated objectives by monitoring implementation of the FATF Recommendations among its members through _______________________ and _____________. A. risk assessment; compliance assessment B. international cooperation; law enforcement C. compliance assessment; effectiveness assessment D. technical compliance assessment; institutional framework assessment technical

C. compliance assessment; effectiveness assessment

According to the EU Directives, an independent legal professional is obligated to report suspicion of money laundering in a client relationship when _________________. A. representing a client in a legal matter. B. ascertaining the legal position for a client. C. participating in financial or corporate transactions. D. obtaining information associated with a judicial proceeding.

C. participating in financial or corporate transactions.

Which one of the following statements is correct in respect of the FATF 40 Recommendations? Countries should ________________________. A. not allow bearer shares and legal persons that are able to issue bearer shares. B. gather statistics on STRs; prosecutions and convictions; on property frozen, seized and confiscated; and on mutual legal assistance, but not necessarily on other international requests for cooperation. C. consider the feasibility of a system in which banks and other financial institutions and intermediaries would report currency transactions without indicating a minimum fixed amount. D. not approve the establishment or accept the continued operation of shell banks.

D. not approve the establishment or accept the continued operation of shell banks.

In most money laundering international standards, it is stated that ___________________. A. financial institutions are not responsible for money laundering or suspicious transactions taking place within their accounts until the government places the customer on a watch list. B. informing customers that their accounts and/or transactions are the subject of an AML investigation is not punishable. C. the dirty money undergoing money laundering will not be confiscated because of privacy laws. D. the institution should identify the beneficial owner(s) of the account.

D. the institution should identify the beneficial owner(s) of the account.

How does the USA PATRIOT Act impact non-U.S. banks that have an account with a U.S. financial institution?

Section 319 allows for seizure of illegal or laundered funds in a US-based correspondent account that is maintained by a foreign bank.

What is the Basel Committee on Banking Supervision? What are the important publications?

The Basel Committee on Banking Supervision is a committee of banking supervisory authorities that was established by the central bank governors of the Group of Ten countries in 1974. The committee expanded its membership in 2009 and then again in 2014. Important publications include: - Customer Due Diligence paper - Prevention of Criminal Use of the Banking System

What is the revised threshold for reporting suspicious transactions under 4th EU Money Laundering Directive?

The customer due diligence thresholds have also been altered to any single or related transactions reaching or exceeding €15 000, while this threshold for gambling service providers is €2000 in case of a single transaction. Using cash payments of EUR 10 000 or more for goods trading is also subject of the Directive. The Directive also allows the member states to set lower thresholds.