AML test 1

All of the following characteristics of charities or NPOs make them particularly vulnerable to misuse for TF Except?

Charities and NPOs use formal bank accounts to store and transfer funds

What are the three things that might be done during the course of money laundering?

Depositing money into a bank account, buying high end goods, and sending money abroad

Financial institutions that rely on the proceeds of the crime face all of the following adverse consequences of money laundering, EXCEPT?

Diversification risks

How can ML occur through banks and other depository institutions?

Electronic fund transfer, corresponding banking, private banking, PEP-politically exposed persons, structuring

Which of the activities are typically associated with the black market peso exchange money laundering system?

Facilitating purchases by Columbian importers of goods manufactured in the US or Europe through peso brokers

A corporation that at the time of incorporation has no significant assets or operations known as shelf company? T/F?

False

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. T/F

False

Administrators or Exchangers of virtual currency cannot be categorized as MSBs, and therefore need not comply with the registration, reporting, record keeping and other regulations applicable to money transmitters? T/F?

False

If Jennifer wants to send $5,000 money transfer, but knowing that in her country there is a threshold of $3,000 for the recording of funds transfers, she sends a $2,500 money transfer and asks her friend to send the other have, this is know as layering?

False

In the "reverse flip" ML 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 necessary documentation. This creates an illusion that the funds are legitimate. T/F?

False

Limited liability companies are entities formed outside of a person or business country of residence, typically in offshore jurisdictions, for confidentially or asset protection purposes. T/F?

False

Terrorist financing always use funds derived from illegal activities for achieving an illegal political purpose. T/F?

False

In the first stage of money laundering, what is the goal?

Get the money into the financial system

In which three areas can money laundering occur?

In payable through accounts, in correspondent accounts, in bank accounts

What are the three potential economic consequences of money laundering in a country?

Increased drug trafficking, corruption, increased crime

Which statement is false related to ML via non-bank financial institutions?

Money laundering through casinos generally does not occur in the placement or layering stages.

Which of the following best describes the "alternative remittance system"?

Old fashioned reporting requirements commonly used in non-cooperative countries and territories

In general, the three phases of money laundering are said to be:

Placement, layering, and integration

What are the three stages in the money laundering process?

Placement, layering, and integration

What are the three risks to financial institutions?

Reputation risk, operation risk, and legal risk

What is the process in the second stage of money laundering?

Sending money between accounts so the audit trail is obscured

What are three risks involved in private banking?

The bank can become too dependent on the income, the bank may not know the source of the funds, the account manager can develop a personal relationship with the owner of the account

Structuring is usually a process associated with which stage of money laundering?

The first stage

Which three reasons make shell companies vulnerable to money laundering?

There are frequently established offshore jurisdictions that have lax AML regimes, The directors for shell companies sometimes have no real connection with the company, and they are frequently used to disguise the ownership of the company

An inherent risk of prepaid cards is non face to face relationships and anonymity ?

True

Due to the cash intensive and humanitarian nature of their operations, charities that use formal bank accounts to store and transfer funds are subjected to less stringent know-your-customer rules and reduced compliance requirements for reporting their financial activities? T/F?

True

One of the reasons for the continued popularity of hawala as an alternative remittance system (ARS) is the ability to legitimate transfer money chapter and faster than through a formal banking system. T/F?

True

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 ML process. T/F?

True

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. T/F?

True

Does accepting money derived from illegal sources make you a compliance to money laundering?

Yes

What is an AML method?

a method is a discrete procedure or process used to carry out ML/TF activities

What is an AML Technique?

a particular action or practice for carrying out ML/TF activity

What is an AML scheme?

a specific operation or case of money laundering or terrorist financing that combines various methods into a single structure

What is an AML mechanism?

a system or element that carries out part of the ML/TF process

What is an AML typology?

a typology is a pattern or series of similar types of money laundering or terrorist financing schemes or methods

All of the following are economic consequences of money laundering, EXCEPT?

increased involvement of the private sector in the financial economy

What is the ultimate purpose of money laundering?

make it appear that the fund are legitimate

What are prepaid cards?

prepaid cards are attractive to criminals because they are portable, valuable, exchangeable, and anonymous

Designing a transaction to evade triggering a reporting or record keeping requirement is called?

structuring

What are some money laundering techniques?

structuring, co-mingling, over and undervaluing merchandise, and wire transfers

What is Money Laundering?

the process of making dirty money look clean

What are the three things that may be done during the course of money laundering?

-Depositing money into a bank account -buying high end goods -sending money abroad

What are the three differences between money laundering and terrorist financing?

-The process for terrorist financing can involve legitimate and illegitimate money, while ML only involves illegal money -the flow for terrorist financing is linear while it is circular for ML -usually more money is involved in ML than with terrorist financing

Name 5 consequences of ML?

1.exposure to corruption 2. weakening financial institutions 3. loss of tax revenue 4.reputation risk 5. risks to privatization efforts