Section I Question Set: Money Laundering
13 Of the choices below, which is the proper sequence of cycles in a money laundering process? a. Placement, layering, and integration. b. Placement, bank complicity, and structuring. c. Layering, placement, and integration. d. Integration, structuring, and placement.
A
14 Financial institutions, as defined by the USA PATRIOT Act, include not only commercial banks, but also insurance companies and travel agencies. a. True. b. False.
A
17 Money laundering is the disguising of the existence, nature, source, control, beneficial ownership, location, and disposition of property derived from criminal activity. a. True. b. False.
A
21 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? a. Alternative remittance system. b. Back-to-back loan. c. Prepaid access. d. Money services business.
A
23 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? a. Layering. b. Structuring. c. Integration. d. Placement.
A
24 The stage in which money laundering schemes are most often detected is called: a. Placement. b. Washing. c. Integration. d. Layering.
A
28 Which of the following statements concerning currency reporting requirements in the United States is most accurate? a. 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. b. 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. c. Only banks are required to report currency transactions over $10,000 to the U.S. federal government. d. Nonfinancial organizations and individuals are not required to report any instances where they receive over $10,000 or more in cash.
A
31 Which of the following statutes is the heart of the money laundering control effort in the United States? a. Bank Secrecy Act. b. Crime Control Act. c. Bank Recording Act. d. Money Laundering Crime Control Act.
A
10 Which of the following statements concerning mobile payments is false? a. Mobile payments or transactions are those facilitated through the use of an account associated with a mobile phone. b. 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. c. Money launderers often use mobile phone accounts to send funds to foreign accounts or otherwise layer illicit assets. d. Mobile payments allow for the money launderer to potentially remain anonymous if a prepaid phone is used.
B
11 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. a. True. b. False.
B
15 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. a. True. b. False.
B
16 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. a. Central Intelligence Agency. b. Office of Foreign Assets Control. c. Office of Money Laundering Compliance. d. FinCEN.
B
26 The placement stage of the money laundering process occurs when a criminal first steals or obtains illicit proceeds. a. True. b. False.
B
29 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? a. The names of the senders. b. None of these answers are correct. c. The names of the receivers. d. The bank account numbers of the senders and receivers.
B
3 The operation of alternative remittance systems involves inherently illegal activities. a. True. b. False.
B
30 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? a. Report of all bank transfers over $50,000 to the U.S. federal government. b. The designation of a money laundering compliance officer. c. Prohibition of consumer cash deposits over $10,000 per day. d. A mandatory 30-day waiting period before cash deposits can be transferred.
B
7 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. a. True. b. False.
B
9 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. a. True. b. False.
B
12 Which of the following best describes the Bank Secrecy Act's Currency Transaction Report (CTR) requirements for U.S. financial institutions? a. All transactions under $5,000 require a CTR. b. All currency transactions over $5,000 require a CTR. c. All currency transactions over $10,000 require a CTR. d. All check or wire transactions over $10,000 require a CTR.
C
19 Which of the following is not a minimum requirement of a written anti-money laundering (AML) compliance program? a. Provide training on an ongoing basis for all personnel. b. Establish a system of internal policies, procedures, and controls to ensure ongoing compliance. c. Provide for the immediate termination of any employee involved in avoiding the jurisdiction's reporting requirements. d. Provide for independent testing of compliance by internal auditors and/or outside examiners.
C
2 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? a. Trade-based laundering scheme. b. Alternative remittance system scheme. c. Front business scheme. d. Bankruptcy scheme.
C
20 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. a. II and IV only b. II, III, and IV c. I, II, and IV d. I, II, and III
C
5 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? a. Casinos. b. Securities brokers. c. All of these answers are correct. d. Banks.
C
8 Which of the following statements concerning the U.S. Bank Secrecy Act is most accurate? a. It requires financial institutions to report all transactions to the federal government. b. Its primary purpose is to require the federal government to obtain a warrant to access financial information. c. It imposes recordkeeping requirements on financial institutions for large, unusual, and suspicious transactions. d. Its primary purpose is to prevent third parties from accessing financial data held by financial institutions.
C
1 Which of the following is an example of the use of a digital currency? a. Credit card transactions. b. Wire transfers. c. All of these answers are correct. d. Bitcoin transactions.
D
18 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? a. Entrapment scheme. b. Forged check scheme. c. Counterfeit checks scheme. d. Smurfing/structuring operation.
D
22 Which of the following best describes a core function of the U.S. Office of Foreign Assets Control? a. To ensure that foreign corporate entities with a presence in the United States comply with securities regulations. b. To serve as the primary revenue collection agency for U.S. citizens with foreign income and assets. c. To provide model anti-money laudering statutes for all member countries to adopt. d. To maintain the Specially Designated Nationals and Blocked Persons (SDN) list and enforce its sanctions.
D
25 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? a. Sizing currency transactions. b. Check tampering. c. Channel stuffing. d. Smurfing/structuring.
D
27 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? a. Integration scheme. b. Redemption scheme. c. Prepayment scheme. d. Canceled policy scheme.
D
32 Which of the following accurately describes the requirements for filing a Report of Foreign Bank and Financial Accounts (FBAR) in the United States? a. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $25,000. b. An FBAR must only be filed if any single foreign financial account owned or controlled by a citizen has a balance over $10,000. c. 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. d. An FBAR must be filed if the aggregate balance of all foreign financial accounts owned or controlled by a citizen is over $10,000.
D
4 A money laundering scheme cannot be successful until the _________ is eliminated or made so complex that individual steps cannot be easily traced. a. Placement. b. Modus operandi. c. Evidence of the initial fraud. d. Paper trail.
D
6 Which of the following is an important element of a U.S. financial institution's anti-money laundering program? a. Designation of a money laundering compliance officer. b. Development of procedures to prevent money laundering. c. Ongoing training for awareness of money laundering. d. All of these answers are correct.
D
