Part 1: Practice Quiz

A senior manager at a regional bank receives an anonymous tip about a bank employee who has been handling an unusually high volume of large cash transactions. The employee does not usually handle cash transactions as part of their normal duties. Which of the following actions should the manager consider taking?

Question the employee in front of their colleagues about the cash transactions.
Contact the bank’s compliance officer to review the employee’s transactions.
Disregard the tip as it was provided anonymously.
Contact the local police department to report a potential crime.

A U.S. based bank has been tracking suspicious transactions related to its correspondent banking relationships. The bank has noticed that a certain European correspondent bank has been consistently triggering alerts in its transaction monitoring system. Which of the following scenarios could justify the decision of the U.S. bank to terminate this correspondent banking relationship?

The correspondent bank has recently decided to expand its operations into emerging markets.
The correspondent bank has frequently exceeded the risk thresholds set in the U.S. bank’s risk model.
The correspondent bank has recently changed its logo and corporate identity.
The correspondent bank is planning to introduce new digital banking services.

Why is the use of precious metals in money laundering activities considered particularly high risk?

Precious metals cannot be tracked once they have been exchanged
Precious metals are often used in high-value transactions, making them ideal for money laundering
The ability to mold precious metals into various forms allows for easy transportation and concealment
Precious metals have a volatile market value, making it difficult for authorities to accurately estimate the total amount of money laundered

An investment manager at a financial institution requests access to Suspicious Transaction Report (STR) data to help evaluate potential investment risks associated with certain customers. How should the compliance officer handle this request?

Share the requested STR data with the investment manager
Seek the approval of the board of directors to share the STR data
Deny the request for STR data by the investment manager
Refer the request to the senior management of the investment department

A regional bank is issued a regulatory enforcement action due to failures in its anti-money laundering (AML) program. The bank’s board of directors is meeting to determine the best course of action. What should they decide to do?

File a legal appeal against the enforcement action
Instruct the compliance officer to address the deficiencies in the AML program
Implement a state-of-the-art transaction monitoring system
Terminate the current compliance team and recruit a new one

A bank teller has been processing daily deposits for a new bakery account over the past two months. The cash deposits have consistently been slightly under $10,000. What should be considered as potential red flags for possible money laundering?

The bakery is owned by a foreign national
The daily deposits are consistently just under the reporting threshold
The bakery has a successful opening and seems to be doing well
The bakery’s deposits come from several branches across the city

A long-time customer of a bank, who is a retired teacher, usually deposits her monthly $2,000 pension check. Over the past three months, she has made frequent deposits of $4,000 every Tuesday and Friday. Every week, a $10,000 check is withdrawn from her account. The bank decides to file a suspicious transaction report (STR). What key detail should be included in the STR?

The fact that the customer has been banking with this bank for a long time
The new pattern of deposits and withdrawals in the account
The fact that the customer is well known to the bank staff
The customer’s profession and the amount of her monthly pension check

An investigator is interviewing a potential suspect in a bank fraud case. The suspect starts to provide inconsistent information that the investigator believes to be false. What should the investigator’s next course of action be?

Confront the suspect about the inconsistencies directly
Cease the interview and seek legal guidance
Ask follow-up questions related to the inconsistent information without indicating suspicion
Ignore the inconsistencies and proceed with the original line of questioning

During a cross-border money laundering investigation, which of the following channels would be most effective and in compliance with global regulatory guidance for information gathering?

Publicly available online forums
Communication between local banks
Direct engagement with overseas suspects
Liaison officers in the foreign jurisdiction

Which step does the Financial Action Task Force (FATF) recommend when addressing strategic deficiencies in a country’s anti-money laundering (AML) and counter-terrorist financing (CTF) regime?

Suspend all transactions with the country in question
Implement enhanced due diligence for individuals from the country
Encourage the jurisdiction to self-correct without any assistance
Apply countermeasures to address the deficiencies.

Which of the following accurately describes the reach of the European Union Money Laundering Directives?

They apply to all United Nations member states.
They are implemented by EU member states only.
They extend to any state with a European embassy.
They are applicable to countries part of the European Economic Area.

What could be an indicator of money laundering risks when dealing with an international charity’s transactions?

The charity receives many small donations.
The charity is transferring funds to disaster-hit areas.
The charity’s fund transfers have clear, consistent documentation.
The charity’s transactions are intricate and lack traceability.

What illicit activity has been used by terrorist organizations to generate funds for their operations?

Manufacturing counterfeit luxury goods
Coordinating international drug trafficking
Launching cyber attacks against banks
Selling cultural artifacts on the black market

If the compliance officer verifies the identity of the law enforcement officer who visited the branch, what is the next appropriate action?

The compliance officer should immediately share all customer information with the officer
The compliance officer should await a formal request or subpoena for specific information
The compliance officer should report the incident to the bank’s board of directors
The compliance officer should initiate an internal investigation into the client’s transactions

Bank Y, a U.S. institution, is preparing to open an account for a non-U.S. bank. According to the USA PATRIOT Act, which of the following information is not required from the non-U.S. bank?

The ownership structure of the non-U.S. bank
The identity of the board of directors of the non-U.S. bank
The client list of the non-U.S. bank
The financial performance of the non-U.S. bank in the past year

According to the Wolfsberg Principles, what is a critical aspect to be incorporated in monitoring and reporting suspicious activity for correspondent banking?

Including due diligence results like customer risk ratings
Involving third-party service providers for monitoring activities
Reporting suspicious activities to the correspondent bank’s Board of Directors
Monitoring and reporting suspicious activities solely based on transaction volume

What is a crucial purpose of the Egmont Group in relation to its member Financial Intelligence Units (FIUs)?

To enforce strict compliance measures on all FIUs in line with global standards.
To facilitate the exchange of intelligence and expertise among its member FIUs.
To provide direct financial support for the creation and maintenance of FIUs.
To take over the operations of FIUs in cases of national security threats.

Which method is often used by those financing terrorism to evade leaving a traceable financial record?

Smuggling precious metals
Use of formal banking channels
Investing in real estate
Crowdfunding through social media platforms

A broker-dealer’s corporate client with multiple beneficial owners makes large and rapid transactions that are inconsistent with the stated investment strategy. The compliance officer is queried about the transactions. What action should be the compliance officer’s immediate response?

Ignore the query, assuming it’s part of regular business operations
Conduct an investigation into the suspicious account activities
Notify the beneficial owners about the unusual transactions
Transfer the query to the broker-dealer’s senior management

A bank in Oregon is reviewing a loan application from a LLC, established by a Washington-based lawyer. The loan’s collateral is a property in Nevada. The LLC plans to repay the loan in monthly wire transfers of $8,000, which is more than the required payment. The LLC’s ownership is kept confidential. Which aspect suggests potential money laundering?

The LLC’s ownership is not disclosed to the bank.
The collateral property is located in a different state.
The repayment method involves monthly wire transfers.
The lawyer setting up the LLC is based out of state. The lawyer setting up the LLC is based out of state.

What is a primary aim of imposing economic sanctions on a country by international bodies?

To assist the country in debt management
To deter the country from engaging in undesirable activities
To promote free trade agreements with the country
To boost the economic growth of the sanctioning country

What event triggers a necessary update to the anti-money laundering risk assessment?

Changing of the Chief Compliance Officer
Implementation of new financial technology
Acquisition of a new business branch
Regulatory bodies releasing new guidelines

A bank employee is reviewing wire transactions to identify possible signs of wire stripping. He comes across a transaction where the language used in the instruction appears suspiciously crafted to conceal the identity of the originator. What should the employee do?

Ignore the transaction as the amount involved is not substantial
Report the transaction to law enforcement authorities immediately
Conduct further investigation to confirm suspicions before escalating
Freeze the originator’s account until the investigation is concluded

What does the USA PATRIOT Act require from a foreign bank that wants to open a correspondent account in the United States and offers payable through account services?

A comprehensive list of clients using the payable through account services
A certified copy of the bank’s license to operate in the foreign country
A designated representative in the United States to receive legal process notices
A copy of the bank’s anti-money laundering policy

A U.S. financial institution is in the process of establishing a correspondent banking relationship with a foreign bank. According to the USA PATRIOT Act, what information must the foreign bank provide about its ownership?

Names of all employees who will be directly dealing with the correspondent account
Detailed backgrounds of the board of directors
Identity of individuals who own 10% or more of the foreign bank, unless it is publicly traded
Complete list of the foreign bank’s corporate clients

How do FATF-style regional bodies contribute to understanding and mitigating regional money laundering and terrorist financing risks?

They implement uniform anti-money laundering laws across all member countries
They directly monitor suspicious transactions within their member countries’ financial institutions
They conduct regional-level research and analysis of money laundering and terrorist financing trends, similar to FATF typologies reports
They act as intermediaries between member countries and international law enforcement agencies in cases of money laundering or terrorist financing

A regional bank recently acquired a small fintech company. The bank’s existing anti-money laundering (AML) training protocol requires training for all new employees within a month of joining, and annual refresher courses. Is this training sufficient to be applied to the employees of the newly acquired fintech company?

Yes, as it covers the bank’s AML policies, procedures, and standards.
No, the AML training should be delivered personally for fintech companies.
Yes, as it provides a broad understanding of the AML regulations applicable to the bank.
No, the AML training needs to be customized to address the risks specific to the fintech industry.

According to the Wolfsberg Anti-Money Laundering Principles for Private Banking, which individual is typically classified as a beneficial owner of a private banking account?

Individuals who are named on the account as joint owners
Individuals who have provided initial funds for the account
Individuals who are the ultimate source of the account’s funds and whose source of wealth is subject to due diligence
Individuals who have power of attorney over the account

A regional bank receives a request from a foreign law enforcement agency for detailed customer information as part of an ongoing investigation. Which of the following steps should the bank’s compliance officer prioritize in response to the request, as per FATF guidance?

Contact the customer to inform them of the ongoing investigation and request
Immediately provide all requested information to support the foreign investigation
Verify the authenticity of the request and ensure it aligns with local privacy laws
Refuse to provide the information on the grounds of customer confidentiality

A compliance officer for a bank notices a sudden increase in the frequency of large cash deposits made by a number of customers. The customers are not related, and there are no clear links between them. How should the bank respond?

Disallow further deposits from these customers until an explanation is provided
Conduct an investigation to determine the cause of this unusual activity
File a Suspicious Activity Report (SAR) immediately
Request law enforcement to interrogate these customers

A real estate company, with one of the principals based in another country and the other working out of a recreational vehicle, makes unusually large deposits in the business account at irregular intervals. The deposits are mainly in cash, and the nature of the transactions is not clear. The business fails to provide satisfactory explanations for the transactions. What risk could this indicate?

Tax evasion
Trade-based money laundering
Smuggling operations
Insider trading

When reviewing transactions for potential trade-based money laundering, what should raise suspicion regarding the commodity involved in the transactions?

The commodity is highly valuable or rare
The commodity is often shipped to or from high-risk jurisdictions
The commodity doesn’t align with the nature of the business of the importer or exporter
The commodity has a high market demand

A popular local bakery has seen a decrease in cash deposits and an increase in credit card payments over the past year. The owner has recently installed a privately-owned ATM in the shop and has also expanded the bakery to include a coffee corner. Which situation should trigger further AML investigation?

The decrease in cash deposits
The increase in credit card payments
The installation of a privately-owned ATM
The expansion of the bakery

A compliance officer receives a phone call from a law enforcement agency asking to leave an account open for investigative purposes. How should the officer respond?

Agree immediately and leave the account open
Close the account to protect the institution’s interest
Ask for a written confirmation on official agency letterhead before taking any action
Request the agency to get a court order to keep the account open

The compliance officer at a bank notes repeated wire transfers from different foreign accounts into a PEP’s account. The news reveals corruption scandals involving officials from the PEP’s home country. The bank’s AML analyst is unsure of the next course of action. Who should the analyst approach in this situation?

The bank’s CEO
The local law enforcement agency
The bank’s anti-money laundering officer
The account manager overseeing the PEP’s account

Your bank has a long-standing relationship with a customer who runs a medium-sized grocery store. Which transaction could be indicative of possible money laundering?

The customer frequently transfers funds to a foreign jurisdiction where they have suppliers.
The customer frequently deposits large sums of cash, consistent with grocery store earnings.
The customer opens multiple bank accounts at different branches under the grocery store’s name.
The customer has a line of credit with the bank to manage fluctuations in cash flow.

A law enforcement officer contacts a bank and requests information about a particular client for an ongoing investigation. What is the appropriate response from the bank?

The bank should immediately provide the requested information.
The bank should refuse the request unless a court order is presented.
The bank should require a formal written request from the law enforcement officer.
The bank should inform the client about the law enforcement inquiry.

A Spanish real estate broker is approached by a foreign client interested in buying a commercial property in Madrid worth EUR 40 million. The client proposes using funds from an offshore corporation and insists on the company’s name being used for the purchase. The client is unwilling to disclose their personal information to the bank. What aspect of this deal should make the broker pause?

The client’s status as a foreign investor.
The use of an offshore corporation for the transaction.
The client’s reluctance to provide personal information to the bank.
The use of the offshore corporation’s name for the purchase.

A bank teller discovers that a coworker is providing guidance to a customer on how to structure transactions to avoid detection by the bank’s anti-money laundering systems. What should the teller do in this situation?

Convey the information to the customer service manager
Report the incident to the bank’s compliance officer
Advise the coworker to stop providing such advice
Ignore the incident because the coworker has seniority

A multinational bank provides a vast range of financial services and has a presence in multiple jurisdictions. A compliance officer wants to evaluate the bank’s inherent anti-money laundering risk. Which two factors should be the primary focus of the officer’s investigation?

The bank’s employee training programs
The bank’s internal audit findings
The countries where the bank has operations
The variety of financial services provided by the bank

An intermediary manages assets for a number of clients and opens accounts for them with your private bank. This intermediary is also a financial institution subject to similar regulations. As per the Wolfsberg Anti-Money Laundering Principles for Private Banking, what action should your bank take?

Your bank should only perform due diligence on the intermediary, not on the clients.
Your bank should rely solely on the due diligence conducted by the intermediary.
Your bank should perform due diligence on both the intermediary and its clients.
Your bank does not need to perform any due diligence as the intermediary is already regulated.

According to the Wolfsberg Anti-Money Laundering Principles, who must approve the initiation of a relationship with a new private banking client?

Only the chief executive officer (CEO) of the bank
Any employee at the bank who isn’t involved with the client
A person other than the private banker managing the client’s account
A representative from the bank’s internal audit team

What provision of the USA PATRIOT Act primarily affects foreign financial institutions engaging with U.S. financial counterparts?

A requirement to appoint a designated compliance officer at each foreign branch
The authority to apply special measures to institutions that pose a primary money laundering concern
The obligation to regularly audit anti-money laundering programs at all foreign branches
The requirement for foreign branches to report all transactions above $10,000

As per the USA PATRIOT Act, what due diligence requirements are placed on US financial institutions when dealing with private banking accounts held by non-US persons?

The institution must obtain identification documentation for each non-U.S. person
The institution must investigate the source of funds deposited into the private banking account
The institution must obtain consent from each non-U.S. person to share account information with US authorities
The institution must require each non-U.S. person to maintain a minimum balance in the private banking account

Under the European Union Fifth Anti-Money Laundering Directive, what is the currency threshold for obliged entities to apply customer due diligence measures?

5,000 Euros
7,000 Euros
10,000 Euros
15,000 Euros

When should a financial institution screen its customers to comply with economic sanctions?

Only when customers open an account
Quarterly, regardless of any changes
Promptly following updates to sanction lists
Annually, during the institution’s audit process

Which three circumstances would require a U.S. bank to block transactions under the Office of Foreign Assets Control (OFAC) rules? (Choose three.)

The transactions involve or pass through a blocked entity.
The transactions are conducted by or on behalf of a sanctioned individual.
The transactions are initiated by an exempt individual on behalf of a blocked entity.
The transactions are related to an event in which a blocked entity or person has an interest.
The transactions are related to an event in which a blocked entity or person has no direct interest.

A regular customer, who is a farmer, usually makes monthly deposits averaging around $20,000. Recently, during the harvest season, the deposits have spiked to an average of $150,000 a month. When questioned, the customer explains that it’s the peak harvest season and he’s made significantly more sales. What should the financial institution do next?

Terminate the customer’s account immediately.
Schedule an annual review of the account activity.
Investigate further, and if the findings align with the customer’s explanation, write a report explaining why a Suspicious Activity Report (SAR) was not filed.
Proceed with additional investigation, if suspicious activity is confirmed, report to authorities and limit future transactions.

What indicates a potential money laundering situation in a wire remittance scenario via a bureau de change or money services business?

A customer in country A makes one large wire transfer monthly to a business in country B.
A customer in country A receives multiple wire transfers from different individuals in country B that in aggregate fall below the reporting threshold.
A customer in country A makes a wire transfer to country B on the same day of every month.
A customer in country A receives an annual wire transfer from a relative in country B.

When suspicious financial activity is observed in a company’s account, what should be a key part of the investigation by financial institution’s compliance team?

Checking the personal credit history of the company’s CEO
Surveying the market reputation of the company’s products
Analyzing the patterns of fund transfers between the company’s account and related personal accounts
Determining if the company’s owners have political connections

A financial institution has recently acquired a smaller bank that primarily deals in high-risk overseas transactions. The institution’s risk assessment was updated just before this acquisition. What event calls for a prompt revision of the institution’s risk assessment?

The smaller bank changes its corporate logo.
The smaller bank specializes in high-risk overseas transactions.
The institution modifies its customer complaint handling procedures.
The institution’s risk assessment was completed a few months prior.

In a money laundering case involving multiple countries, what two practices are instrumental in enhancing the effectiveness of the investigation? (Choose two.)

Law enforcement agencies should be allowed to form and operate joint investigative teams across countries.
All countries should automatically share all information related to the case with other countries’ law enforcement agencies without due process.
Law enforcement and other relevant authorities should have access to any financial data necessary for the investigation.
Countries should withhold information sharing until the last moment to maintain suspense in the investigation.

An account holder living in a high-risk jurisdiction often deposits large sums of cash into his account at your bank and sends small amounts via wire transfers to different parties in other high-risk jurisdictions. What are two factors that raise concerns about possible money laundering?0

The fact that the account holder lives in a high-risk jurisdiction.
The large cash deposits made by the account holder.
The small wire transfers sent to high-risk jurisdictions.
The bank’s policy of allowing large cash deposits.

After studying a suspicious transaction report (STR) filed by a financial institution about an individual’s frequent cash withdrawals, a law enforcement agency asks for additional data. What documentation is the agency likely to request?

The financial institution’s AML training material.
Account opening documentation and account history for the subject.
Copies of the institution’s marketing brochures and leaflets.
Copies of STRs on other customers of the financial institution.

A business customer frequently deposits large amounts of cash into their account and immediately wires these funds to various companies overseas. These companies are seemingly involved in the import-export business, based on their descriptions. What money laundering scheme might this pattern suggest?

Utilizing casino gambling
Over-invoicing or under-invoicing in international trade
Implementing a Ponzi scheme
Using shell companies

A bank, considering terminating a client relationship due to AML concerns, receives a request from a law enforcement agency to keep the account open for investigation purposes. What must the bank prioritize in response to this situation?

The bank’s anticipated profits from keeping the account open.
The size of the client’s deposits in the bank.
The ability of the bank to continue complying with regulatory obligations.
The bank’s historical track record with complying with law enforcement requests.

A bank’s compliance officer supervises its anti-money laundering independent review, conducted biennially by the bank’s internal audit team. The compliance officer also reviews the final report before presenting it to the Board of Directors. What is the main concern in this scenario?

The review should be conducted yearly
The internal audit team should not conduct the review
The final report should be directly presented to the board of directors
There is a conflict of interest in the handling of the review process

Which international organization provides a list of High Risk and Non-Cooperative Jurisdictions that can be used as a source for maintaining up-to-date sanctions information?

United Nations Security Council
World Bank
International Monetary Fund
Financial Action Task Force

A regional bank has been found non-compliant with certain anti-money laundering regulations during a recent regulatory review. To improve its AML program, who within the bank should take the ultimate responsibility for implementing changes and ensuring an effective compliance framework?

The bank’s risk management team
The bank’s senior management
The bank’s BSA/AML compliance officer
The bank’s Board of Directors

A bank manager sees that a teller frequently serves certain customers who regularly deposit the same large amounts of cash. The teller and these customers share a common language and the customers occasionally bring gifts for the teller. How should the bank manager handle this?

Discuss with the teller the importance of diversifying customer interaction.
Carry out a review of the transactions made by the customers to ensure they are legitimate.
Encourage the teller to attract more customers from their ethnic group.
Immediately suspend the teller pending further investigation.

How does the use of physical certificates in off-market transactions contribute to money laundering risk?

It facilitates unauthorized trades without broker involvement
It allows quick alteration of the certificate’s information
It enables deposit to nominee accounts without sufficient scrutiny
It makes it impossible to track the transaction history

A client consistently uses different branches to carry out large transactions, often moving money to accounts in various foreign jurisdictions. The client maintains a low balance in their account. What type of suspicious behavior might this indicate?

Layering in money laundering
Ponzi scheme involvement
Terrorist financing
Embezzlement

Which aspect of a real estate transaction involving a nominee should raise suspicions for potential money laundering?

The nominee is a family member of the purchaser
The nominee does not have a direct connection with the property
The nominee is a reputable real estate agent in the region
The nominee resides in the same country where the property is located

U.K. law enforcement informs a bank in London about a potential money laundering operation involving certain casas de cambio and the sale of large denomination Pound Sterling notes. What two steps should the bank take to support the law enforcement investigation? (Choose two.)

Assess if there is a drastic increase in large denomination Pound Sterling note transactions with casas de cambio
Check for multiple wire transfers initiated by casas de cambio to jurisdictions that bear no apparent business relationship with the casa de cambio
Examine if the casas de cambio are making frequent small transactions, a potential sign of structuring
Identify deposits by casas de cambio that involve third-party items, including sequentially numbered monetary instruments

If a law enforcement agency requests supporting documentation for a suspicious transaction report, which of the following actions should NOT be taken by the financial institution?

Confirming the identity and authority of the law enforcement representative
Providing the requested documents without delay
Informing the customer about the law enforcement request
Complying with local laws and regulations regarding the disclosure of such documents

A charity with global operations often receives small cash donations from various countries. Recently, the charity started making large cash deposits at the bank every week. What could this indicate in terms of terrorist financing?

The charity’s operation in numerous countries
The charity’s acceptance of cash donations
The sudden increase in large cash deposits
The charity’s international funding sources

In line with the Fourth European Union Directive on money laundering, what is expected of obliged entities?

They are required to conduct enhanced due diligence on all cryptocurrency transactions.
They are mandated to label all foreign PEPs as high-risk customers indefinitely.
They are compelled to maintain comprehensive records of all transactions above €1000.
They are obliged to obtain information about the beneficial owners of corporate customers.

A bank’s compliance officer has noticed an unusual pattern of cash deposits and withdrawals in different cities by a certain customer. Which of the following best describes why this behavior is a potential red flag for human trafficking?

The customer is making frequent international wire transfers.
The customer is depositing large amounts of cash in their home city.
The customer is depositing cash in various cities and making same-day withdrawals
The customer’s account has an unusually high number of declined transactions.

A casino patron with a consistent record of minor winnings buys $20,000 worth of chips, spends a few hours at the blackjack tables, then cashes out and requests a wire transfer of the winnings to a foreign business account. What red flag might indicate a possible money laundering attempt?

The purchase of a large amount of chips
Spending only a few hours at the blackjack tables
The patron’s consistent record of minor winnings
Requesting a wire transfer to a foreign business account

Which of the following actions taken in a casino could potentially indicate money laundering activity?

Purchase chips with a debit card, play at a table, and later redeem for cash
Purchase chips with cash, make no effort to play, and later redeem for a check
Purchase chips with cash, play extensively, and later lose all chips in a game
Purchase chips with cash, win a significant amount, and donate the winnings to a charity

A non-profit organization consistently sends large donations to a single overseas entity. The financial intelligence unit in the country of origin becomes suspicious of these transactions. According to the FATF guidelines, what action should the financial intelligence unit consider?

Freeze all assets of the non-profit organization immediately
Conduct an investigation into the transactions to ascertain their legitimacy
Mandate that all future transactions be processed through known terrorist databases
Require the non-profit organization to register with the financial intelligence unit

A foreign politically exposed person (PEP) wants to change the beneficiary in their life insurance policy. How should the request be handled to ensure regulatory compliance and risk mitigation?

Reject the request because of potential compliance risk.
Allow the request without any additional checks as it’s within the PEP’s rights.
Conduct due diligence on the new beneficiary before approving the change.
Request documentation proving the source of the PEP’s wealth before making any changes.

An AML officer learns through an indirect source about a potential new service being deliberated by the product development team. The officer has not been directly included in the discussions. What should be the AML officer’s next step?

Start risk assessment of the service even before official notification.
Request inclusion in the product development discussions.
Inform regulatory bodies about the non-inclusion in the product development process.
Wait until the product is launched to conduct a risk assessment.

A compliance officer for a financial institution is reviewing documents for a new account opening for a foreign corporation. The documents contain information about the nominee shareholders but there is a lack of clarity about the actual beneficial owners. The corporation’s expected activity includes conducting a high volume of wire transfers. Which factor constitutes a significant anti-money laundering concern in this case?

The corporation’s intended business activities include conducting a high volume of wire transfers.
The account opening documents do not provide clear information on the actual beneficial owners.
The business is foreign and will be opening an account in a different jurisdiction.
The provided documents contain detailed information about the nominee shareholders.

What activity on a crowdfunding platform should raise immediate suspicion for potential anti-money laundering?

A project that receives donations from a diverse range of geographical locations
A project that quickly reaches its funding goal and is immediately closed
A project that sets a low monetary threshold but receives excessive funds
A project that is widely shared on social media platforms

If a compliance officer grants an exception to a policy that subsequently is identified as violating a regulation during an audit, what action is appropriate for the auditor to take?

Issue a warning to the compliance officer and offer them remedial training on the regulations.
Include the violation in the audit report, along with recommendations for improvements, and present it to the board of directors.
Omit the violation from the audit report to maintain the integrity of the compliance officer.
Directly impose sanctions on the compliance officer without further discussion with the board of directors.

A compliance analyst at a bank notices a pattern of large, rounded-sum wire transfers coming into a local electronics store’s account from a country known for lax anti-money laundering regulations. Despite the store owner’s positive reputation in the community, the analyst finds no clear business reason for these transfers. Who should the analyst contact about this situation?

The store’s most frequent customers
The bank’s board of directors
The store owner directly
The bank’s anti-money laundering officer

A compliance officer at a bank receives an anonymous tip regarding possible money laundering activities by a customer. The customer’s account reflects high volumes of transactions and wires to high-risk jurisdictions. What would be a prudent approach in handling this scenario?

Disregard the tip since the customer is exempt from currency transaction reporting requirements
Verify the anonymous tip by conducting a thorough investigation of the account’s activity
Immediately freeze the customer’s account until the investigation is concluded
Report the tip to law enforcement without conducting any internal investigation

A European bank plans to open a correspondent account with a U.S. bank. According to the USA PATRIOT Act, which information should the European bank provide to the U.S. bank?

The names and addresses of all beneficial owners with stakes of 25% or more in the bank
The bank’s detailed transaction history for the past year
A list of all the bank’s employees and their roles
An assurance that the bank doesn’t deal with any shell companies

As part of the new employee orientation program, a compliance officer is preparing a presentation for a group of newly hired tellers. Which of the following should be included in the presentation as part of the bank’s anti-money laundering program?

The process of conducting internal AML audits
Methods of identifying and verifying customer identity
The financial institution’s data privacy policy
Handling and reporting procedures for large cash transactions

A bank’s automated monitoring system is effective at identifying sudden large-scale fluctuations in customer transactions. However, it fails to send out alerts when there’s a consistent pattern of unusual activity over an extended duration. The bank is in the process of testing new scenarios to address this issue. Which scenario could be effective in rectifying this weakness?

Volume-based
Trend-based
Value-based
Rule-based

As per the Financial Action Task Force (FATF), how should financial institutions keep documentation regarding potentially suspicious activity?

In a manner where it can be swiftly provided upon request
Stored in a secure, off-site location that only specific employees have access to
In a form that can only be released to government authorities through a subpoena process
Retained digitally, with no paper copies allowed to ensure security

A criminal organization is in the process of laundering illicit funds. Which of the following scenarios would be an example of the integration phase of money laundering?

Investing the laundered funds into legitimate businesses
Exchanging small denomination bills for larger ones to decrease the physical volume of cash
Using multiple transactions at different branches to deposit large sums of cash into a bank account
Shuffling funds between several offshore accounts to obscure the origin of the funds

In the context of a Financial Intelligence Unit’s engagement with competent authorities, which activity is typically performed by the FIU?

It provides direct oversight and control over the competent authorities’ actions.
It facilitates the transfer of analyzed information to relevant authorities.
It determines the penalties for non-compliance with anti-money laundering rules.
It conducts internal audits within the competent authorities.

Why does the Egmont Group provide a platform for global Financial Intelligence Units (FIUs)?

To provide a channel for FIUs to share intelligence information on money laundering and terrorist financing.
To enable FIUs to enhance international laws against money laundering and the financing of terrorism.
To strengthen the collaboration among FIUs in the fight against money laundering and terrorist financing, and to advance the establishment of domestic programs in this field.
To facilitate interactions between law enforcement agencies and FIUs on matters related to money laundering and terrorist financing.

What potential effect might money laundering through trade-based activities have on local industries?

Encourages competition and innovation in the industry
Distorts market values and harms legitimate businesses
Promotes ethical business practices
Enhances trade regulations and oversight

Given the new anti-money laundering laws, a financial institution must gather certain information from its customers. How should the institution communicate this requirement to its customers?

Post an announcement on the institution’s website
Send a personalized notice to each customer explaining the changes and the required information
Run an advertisement campaign to inform the public about the changes
Set up automatic email reminders to customers who haven’t provided the information

A fintech startup is launching a new P2P payment service targeting underbanked populations. The service would allow real-time transfers through a mobile application using minimal recipient information. Which of the following considerations present the highest risk and would necessitate enhanced AML controls?

The service’s ease of use
The fee structure compared to market rates
The service’s access to a traditionally underbanked demographic
The potential for misuse due to the ease of cross-border transactions

According to the Basel Committee’s Customer Due Diligence for Banks paper, which of the following is a crucial component of Know Your Customer (KYC) standards?

Only senior management should interact with high-risk customers.
A policy defining customer acceptance parameters.
Due diligence requirements should be uniform across all customer types.
KYC documents must be stored in a separate physical location.

According to the Wolfsberg Group’s Suppression of the Financing of Terrorism, what action should a financial institution take when it identifies suspicious or irregular activities related to terrorism financing?

Inform the media to spread awareness about the suspicious activity
Apply extra due diligence, especially when the activities are related to sectors identified by competent authorities as being used for financing of terrorism
Take immediate action to freeze the accounts of the suspected individuals or entities
Conduct an internal investigation before informing the competent authorities

In the context of the Basel Customer Due Diligence paper, what is a principal risk associated with operating Correspondent Accounts?

The account generates minimal transaction fees.
The respondent bank’s customer due diligence measures are insufficient.
The account is not actively used.
The respondent bank is located in a low-risk jurisdiction.

Which transaction should raise potential money laundering concerns for a compliance officer at an insurance company?

A client regularly pays the premium for their comprehensive car insurance through an online bank transfer.
A client pays the annual premium of their life insurance policy using numerous money orders.
A company client has taken out worker’s compensation insurance for their newly opened factory.
A client has recently upgraded their home insurance after acquiring expensive artworks.

What is the primary function of FATF-style regional bodies in relation to their member countries?

They conduct audits of financial institutions in member countries.
They issue regulations and guidelines that member countries must follow.
They provide guidance and assistance in implementing FATF recommendations.
They directly handle cases of money laundering and terrorist financing in member countries.

A multinational corporation is found to have insufficient privacy procedures in place. As a result, a substantial amount of personal data is leaked. What legal risk could the corporation face?

Being charged with deceptive business practices
Loss of partnerships and affiliations
Decrease in stock prices
Increased expenses in data recovery

As per the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking, when should a bank increase its risk assessment and due diligence efforts for a correspondent bank customer?

When the customer operates in a FATF member country and primarily caters to domestic individual clients
When the customer is located in a FATF member country and provides services to other correspondent banks in surrounding countries
When the customer operates in a FATF member country and its head of internal audit is a politically exposed person
When the customer primarily provides banking services to non-profit organizations

Among the following insurance products, which one is generally acknowledged as having a higher risk of being exploited for money laundering?

Liability insurance
Annuity contracts
Auto insurance
Homeowner’s insurance

According to the Basel Committee’s paper on Customer Due Diligence for Banks, what is the customer’s role in identifying Politically Exposed Persons (PEPs)?

The customer is responsible for informing the bank if they are a PEP
The customer should disclose their political affiliations at account opening
The customer should provide a list of all political figures they know
The customer has no specific role in identifying PEPs, it’s the bank’s responsibility

What are the potential consequences for a bank officer who deliberately circumvents anti-money laundering procedures?

The officer could be given an opportunity to explain their actions to the bank’s board.
The officer could be subject to regulatory fines and industry disbarment.
The officer might receive a bonus for achieving higher transaction volumes.
The officer could be transferred to another branch or department within the bank.

A bank’s transaction monitoring system flags a pattern of small deposits and subsequent withdrawals from an ATM located in a conflict-prone zone for an immigrant customer. What is the most appropriate immediate response?

Immediately report to law enforcement.
Contact the customer to discuss the transactions.
Initiate an investigation to determine the nature and purpose of the activity.
Cancel the client’s debit card to prevent future suspicious transactions.

Following the detection of deficiencies in clearing transaction monitoring alerts, management develops a plan for remediation. What is the auditor’s role during this correction phase?

Providing direct supervision of the remediation process
Formulating new transaction monitoring procedures
Teaching the alert clearing team about the significance of efficient alert clearing
Confirming the successful resolution of the issue once informed by management

CAMS Question Set: 700 questions with in-dept Analysis

Part 1: Practice Quiz

B.Yamanaka July 13, 2023

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