ACAMS Practice Test (Book) – Flashcards
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Which of the following is the most common method of laundering money through a legal money services business?
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Purchasing structured money instruments
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In general, the 3 phases of money laundering are said to be: Placement;
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Layering and integration
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Which statement is true?
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Bust-out schemes are popular in creating large bankruptcy frauds where businesses secure increasing loans in excess of the actual value of the company or property and then run with the money. Leaving the lender to foreclose and take a substantial loss
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Which 3 of the following is an indication of possible money laundering in an insurance industry scenario?
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-Single-premium insurance bonds, redeemed at a discount -Policyholders who are unconcerned about penalties for early cancellation -Policyholders who make full use of the "free look" period
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Which 2 activities are typically associated with the black market peso exchange (BMPE) money laundering system?
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-Converting illicit drug proceeds from dollars or Euros to Colombian pesos -Facilitating purchases by Colombian importers of goods manufactured in the United States or Europe through peso brokers
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What is the Right of Reciprocity in the field of in the field of international cooperation against money laundering?
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A rule in the law of a country allowing its authorities to cooperate with authorities of other countries to the degree that their law allows them to do the same
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The greatest risk for money laundering is for casinos that
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Allow customers with credit balances to withdraw funds by check in another jurisdiction
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Which statement is true regarding the risk of Politically Exposed Persons (PEPs)?
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PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds
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Dirty money, derived from criminal activities of Belgian Criminal A, is sent to a foreign bank account of Corporation B. Then in Belgium, a new investment Company C is incorporated. Criminal A is appointed as a director of Company C. Company C borrows money from the foreign Company B and buys real estate in Belgium. The real estate is rented to third parties. Director (Criminal) A also rents an apartment in the building .With the funds generated by the rent, Company C pays off the loan to Corporation B, and the salary of Director A. Criminal A now converted his dirty money in legal funds .This laundering method is commonly referred to as what?
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Loan back
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A new customer approaches a bank to open a commercial account. The customer provides an address for the account located across the city from the branch. When asked by the account representative if the customer requires any additional banking services, the customer responds she is also interested in opening a personal investment account. The account representative refers the customer to their broke-dealer. The customer tells the firm representative she has never had a brokerage account before and has a few questions about how an investment account works. The customer asks how deposits can be made into her account, if there are any reporting requirements, and how to go about moving balances out of the account using wire transfers. No questions are asked about fees associated with these transactions. Which three items would be considered suspicious?
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The customer asks many questions about the brokerage account, but none of them are related to investing. The address of the account holder and the branch where the customer came to open the account are not close to each other. That the customer appears unconcerned about the fees.
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International trade in goods and services can be used as either a cover for money laundering or as the laundering mechanism itself. What is MOST important for the launderer when engaging in this method? The ability:
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To over-or under-invoice the goods.
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Which of the following statements is true? Correspondent banking is MOST vulnerable to money laundering when the correspondent account is:
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Maintained for a foreign bank that does not have a physical presence in any country.
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Which statement is true? Lawyers:
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Can be abused by launderers by using the accounts they set up for them for the placement and layering of funds.
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The Third EU Money Laundering Directive of 2005 applies to which of the following firms?
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Auditors, estate agents based in the EU.
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According to the EU Directives of 2001, an independent legal professional is obligated to report suspicion of money laundering in a client relationship when:
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Participating in financial or corporate transactions.
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Which of the followings is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the U.S.?
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USA Patriot Act
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Which were the Basel Committee's 2 main motivations to encourage strong Know Your Customer programs in it's paper "Customer Due Diligence for Banks?
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-Protect the safety and soundness of banks -Protect the integrity of banking systems
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What is the definition of a predicate offense?
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Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of money laundering
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What is considered a beneficial owner of an account? A person or entity:
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That is ultimately entitled to the funds in the account, even though his name may not appear on the account
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A bank in Italy holds a business account for a Italian company that sells gold throughout Europe and the Western Hemisphere. The bank knows the purpose of this account is to receive payment for sales. A review of the account shows a pattern of wire transfers coming from payable-through accounts. There is also a pattern of purchases of gold bullion held in Swiss banks. The MOST important factor in assessing whether money laundering is a threat is that the:
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Payments come from third-party accounts
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Which of the following should a national legislature consider when criminalizing money laundering in like with the CFATF 19 Recommendation (choose 3)?
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-Do not limit the number of specific predicate offenses for money laundering -Criminalize conspiracy or association to engage in money laundering -Indicate whether it is relevant that a predicate offense may have been committed outside the local jurisdiction
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Which 3 statements are true about the 3rd EU Directive on Money Laundering of 2005? it:
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-A Was proposed in order to update European Community legislation in line with the Financial Action Task Force (FATF) 40 recommendation -Repeats the main customer due diligence requirements of the first and second directives, but adds more detail to the requirements by, for example, including a specific requirement to identify the beneficial owner if one exists and includes ongoing monitoring requirements -Requires firms to apply the customer due diligence requirements to existing customers at appropriate times on a risk sensitive basis
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The FATF 40 Recommendations say that countries should:
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Not approve the establishment or accept the continued operation of shell banks
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Among the Principles for information Exchange Between Financial Intelligence Units for Money Laundering cases, issued by the Egmont Group on June 13, 2001, we find which of the following?
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Information exchanged between FIUs may be used only for the specific purpose for which the information was sought or provided
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In which stage of money laundering would you classify depositing small amounts of cash into several related accounts?
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Placement
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In which stage of money laundering would you classify the use of laundered funds to purchase high value assets and luxury items?
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Integration
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In most laws criminalizing money laundering, it is stated that:
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Employees of financial institution who intentionally ignore clear signs of money laundering may be punished with imprisonment an/or fines
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The tactic in which individuals make multiple deposits in small quantities to avoid detection is called:
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Structuring
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In which case might a Suspicious Transaction Report NOT be necessary?
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A customer who owns a large supermarket and deposits large amounts of cash several times a day
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As part of their role in fighting money laundering, financial institutions should:
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Designate a compliance officer
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What could happen to compliance officers if they do not comply with the anti-money laundering laws and regulations?
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Loss of job, prison penalties and fines, negative reputation to their employer
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What is willful blindness defined as?
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Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags
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In anti-money laundering terminology a "red flag" is:
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A warning sign used to bring attention to potentially suspicious, risky transactions or activities
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The Reporting Officer of a financial institution should:
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Review available information related to the customer, transactions, profile, history and file a Suspicious Transaction Report for only those customers where a suspicion of money laundering exists
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Which of the following statements is true?
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A launderer can launder money by prepaying his credit card using funds that are already in the banking system, creating a credit balance on his account, and requesting a credit refund
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Why is a Payable Through Account vulnerable to money laundering?
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These are master correspondent accounts that allow the customers of the foreign bank to do a wide range of transactions
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What is the reasoning behind implementing a "risk-based anti-money laundering approach?
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Institutions can best use their limited resources to focus on matters where the money laundering risks are highest
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According to the FATF 40 Recommendations, "designated non-financial businesses and professions" Include:
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Casinos, real estate agents and dealers in precious stones
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According to the FATF 40 Recommendation, the threshold for identifying occasional customers at financial institutions is:
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EURO/US $15,000
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Tom works as a compliance officer at ABC Bank, he is looking at the transactions of one of the bank's customers, Me. Brown, the owner of a check cashing company. Over the last 6 months, Me. Brown has not made withdrawals of cash against check deposits. He also deposited two checks for US$2000 each that were issued by a casino. When checking the KYC file, Tom sees that, when opening the account, Mr. Brown had requested detailed information about fees and commission that are charged by the bank. What should arouse Tom's suspicion the most? Mr. Brown:
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Did not make withdrawals of cash against check deposits
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A small broker-dealer has an AML compliance program that addresses procedures for filing Suspicious Transaction Reports and includes policies, procedures and internal controls for customer identification, monitoring accounts and identifying money laundering red flags. Every employee of the broker dealer is trained via the internet in January and in July on AML issues. The board does not take the internet training. Instead, the compliance officer organizes a luncheon for them where and outsider comes in and trains them. The Program provides for the appointment of a compliance officer, and once a year the compliance officer conducts an audit to test the program. In what respect does the program need improvement?
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The AML program should be tested by an independent person, not the compliance officer
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Susan works as a senior Money Laundering Reporting Officer at XYZ Bank. She is taking a closer look at the activity of several customers. What would arouse her suspicion the MOST?
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A customer involved in investment management who guarantees a very high rate of return, will above what other competitors can offer
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Which of the following best describes the "alternative remittance system"?
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The transfer of values between countries, outside of the legitimate banking system
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An AML compliance officer was reviewing customers at XYZ Bank and one of the customers (Mr. Sam Tropicana) attracted her attention. Through a period of several months, cash deposits and withdrawals were transacted through his account with amounts ranging between US $7,500 and US $17,000. In addition, Sam deposited 2 checks, issued by a casino into his account for US $32,000 each. When opening the account, Sam stated that he operated an import/export company. Which of the following additional items should arouse the suspicion of an anti-money laundering compliance officer the most?
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Sam conducted large cash transactions for his import/export business
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Which 3 of the following statements are true?
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-Online gambling provides and excellent method of laundering because transactions are conducted primarily through credit or debit cards and the sites are typically unregulated offshore firms -An institution can know when a credit card is used for online gambling transactions because the cards rely on codes that illustrate the type of transactions -Some banks no longer allow the use of credit cards for online gambling
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What are the 3 key goals of an anti-money laundering program?
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Prevent and detect money laundering and terrorist financing; report suspicious activity to proper authorities if the laws or regulations require; train all pertinent employees
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An anti-money laundering specialist is employed by a large bank. An account owner is well known to the specialist and the account has been open at the bank for several years. The specialist noticed that financial instruments have been deposited in a suspicious manner over the last 4 months, leading him to file 2 Suspicious Transaction Reports (STRs) on the account. Recently, suspicious activity involving high-risk countries has been detected over the last few days. Various law enforcement agencies have called to discuss the STRs with the specialist. The specialist has asked the agents whether they think the relationship with the customer should be terminated. These agents advised that this a business decision for the bank to make. The specialist has kept the legal advisors and upper management apprised of the activity and has provided them copies of the STRs. Which of the following should the specialist recommend?
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Terminate the relationship with this account owner if possible
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The FATF has consistently noted the use of casinos in money laundering schemes in its annual typologies reports. One laundering technique involving casinos is:
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Asking for winners' checks to be made out in the name of third persons or without a payee
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Which of the following should an anti-money laundering specialist include on a internal investigation log?
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Notes pertaining to activity that is unusual, but for which a Suspicious Transaction Report has not been filed
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What are 3 key criteria in AML risk rating?
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Customer type, geographic location, products and services used
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A financial institution is looking to establish an online account opening service. The institution plans to offer this product to new and existing customers within the country. Which of the following would be the best plan of action for an AML specialist to recommend enabling the institution to verify the customer's identify?
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Ensure that the institution has a reliable third party source that will enable verification of the customer
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Which of the following controls would most effectively minimize the need to correct failures to collect required customer information in the account opening process?
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An automated account opening platform that requires data entry prior to allowing the account to be opened
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When conduction training for AML purposes for account opening staff, which of the following addresses the most important aspects to consider in the training?
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What the employees need to do, the importance of AML efforts and the penalties for non-compliance
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When drafting an AML policy, which of the following internal parties is most important to have approve the policy?
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Senior Management
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Suzy is an AML compliance officer at an institution that is looking to open treasury management services (e.g., wires, checks clearing, foreign draft issuance) for correspondent banking customers. Which of the following should Suzy be most concerned about regarding the institution's capabilities regarding these customers?
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Whether the correspondent accounts will be able to be monitored by the institution's monitoring systems
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John is an AML compliance officer at a financial institution that is looking at an electronic KYC tool to facilitate the account opening process. Which of the following aspects would be most useful for John to consider when assessing vendors providing the tools?
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How well can the vendor work with the institution's existing account systems and account opening processes?
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A customer wants to establish a sizable relationship with a financial institution. The AML officer is not comfortable with the client's explanation for the source of the fund, but the client manager is vouching for the client and is eager to open the relationship quickly. What should the AML officer do to validate the client's sources of funds?
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Perform background investigation to determine whether the client's source of funds is credible
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An AML compliance officer is investigating unusual activity that she has noticed in a customer's accounts. The customer has a retirement account, a savings account in trust for his son, a joint checking account with his wife, a company checking account and an individual brokerage account. The compliance officer believes the customer may be embezzling funds form his business. Which is the best path for her to follow up on her suspicions?
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Look at the movement of funds in all the accounts, as the customer may be using all ofthem to launder money
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About an hour before closing time, a construction worker comes to a financial institution and wants to provide cash in exchange for sending money abroad. It is the middle of summer and the customer indicates that he's been outside for the bulk of the day and needs to send money to a family member who is in another country. Which of the following would be considered the biggest concern with the customer and his request?
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The customer is not able to provide a reasonable response as to the source of the funds
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A customer at a brokerage firm indicated that he was primarily a conservative, long-range investor. The customer has recently been engaging in day trading in penny stocks. What should an AML compliance officer do in such a situation?
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Check with the account officer to see if the customer has indicated a change in is investment strategy
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A financial institution branch manager who has been in place for over ten years has not taken a vacation for almost 4 years. The company does not allow employees to roll vacation over from year to year. An AML compliance officer has noticed unusual activity in several accounts at the branch location. What should the AML officer do?
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Determine whether the manager has engaged in transactions in the accounts where the unusual activity has occured
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An AML compliance officer is looking to establish a suspicious activity reporting process at her small institution. Which of the following would be the best course of action?
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Have employees refer all unusual activity to her so that she may conduct an investigation into what needs to be reported to authorities.
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After reporting suspicious activity to the appropriate authorities and they request additional follow up on the reports, which of the following actions should an AML compliance officer do?
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Cooperate fully with the authorities, as permitted by law
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A compliance officer is looking to improve a compliance program or a financial institution that operates in several countries. The institution has developed a consistent customer due diligence (CDD) requirement for all customers of the institution that exceed each of the individual countries' requirements. When looking to provide management reporting on the CDD compliance efforts of the institution, which of the following would make most sense?
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Report on compliance with the company's stated requirements
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Establishing compliance as a key responsibility for every employee of a financial institution is best performed how?
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By having senior management require compliance as a condition of employment
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An institution that offers mortgages notices the national financial intelligence unit has issued several advisories about reporting mortgage fraud. A compliance officer has noticed that the level of mortgage fraud reporting has increased as a result of conducting post-account opening source of funds verification. The FIU has noted that loans with unverified income have been noted as a significant concern. What should the AML compliance officer do?
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Speak to the mortgage unit about revising the income verification process to do this earlier in process, as suggested by the FIU.
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Robert is a compliance officer for a financial institution. Robert is looking to assess the effectiveness of the current AML program. Which of the following should Robert consider in his assessment of the program's effectiveness?
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Customer due diligence error rates, quality assurance testing on STR filings, percentage of products and services monitored for suspicious activity
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Joe, the compliance offer for a small bank, has noticed that new regulations now require reporting on cross-border transactions that exceed a certain threshold. What is appropriate set of next steps for Joe to take to prepare his bank for the new requirements?
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Provide training to impacted associates, work with technology partners to capture all cross-borders transaction for reporting and implement a testing plan to be sure appropriate transactions are captured and reported
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When documenting ongoing training efforts, which of the following should be documented to demonstrate the distribution of the training to appropriate employees?
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The names and areas of the employees who took the training
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When assessing a new product, which of the following should be considered as part of the assessment from an AML perspective?
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The inherent risk of the product, the control environment to mitigate the risks presented by the product, the residual risk of the product in light of the controls
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Marie, a compliance officer at a financial institution, attends an annual AML-industry conference and learns of a new regulation that will impact her current AML processes. The regulatory environment has been relatively stable within the industry for several years, but Marie is glad she attended this conference to get news of the new requirements. What should Marie do to stay abreast of future changes in requirements?
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Implement a process to determine when new regulations are published and assess them for impacts to the AML program
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A compliance officer is looking to provide some way to report on the effectiveness of the AML program to senior management. Which of the following would be the most appropriate means to keep senior management informed of these efforts?
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Develop a report containing metrics that reflect the effectiveness of various key program elements
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A financial institution's internal audit department has found an issue with an AML process involving the AML compliance officer's efforts to conduct sufficient account monitoring on certain products offered by the institution. The AML compliance officer should do which of the following?
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Develop and follow an action plan to remediate the issue and report to audit on the progress made on the issue
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A financial institution has determined that opening accounts for certain types of customers is not worthwhile, as the cost of implementing controls is too great for the revenue earned from the customers. Which of the following options is the most effective way to enforce such a decision?
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Implement automated account opening controls to prevent the account opening for the prohibited customer types and provide employee training
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A longtime customer of the bank comes into the bank a number of times over a series of weeks and deposits and large amount of money and, the next day, asks for the money to be wired to a third world country. This behavior is not in keeping with his normal business practices. What should the compliance officer recommend?
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Collect the appropriate documentation and review it with the purpose of filing and STR
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After collecting and reviewing all of the appropriate documentation in preparation in preparation for the filing of an STR. what should the compliance officer do with the documentation?
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The officer should maintain the documentation in a separate file in case law enforcement asks for the supporting documentation for the STR.
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After receiving an STR, the relevant law enforcement agency requests permission to interview the bank personnel who are familiar with the underlying transaction. What should the compliance officer recommend?
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The officer should confer with bank counsel as to whether to request subpoenas from law enforcement
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What are 3 factors a prosecutor should take into consideration in deciding whether to bring criminal charges against a financial institution?
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- Whether the institution has a criminal history - Whether the institution cooperated with the law enforcement investigation - Whether the institution discovered and self-reported the potential criminal violation
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The compliance officer is trying to put together a set of procedures for handling the documentation that supports the filing of an STR. What should the compliance officer recommend to be part of these procedures?
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Segregate the documents that support each STR and ensure that they are available for inspection at the request of law enforcement
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The compliance officer is trying to put together a set of procedures for handling the review of potentially suspicious transactions. What should the compliance officer recommend be part of these procedures?
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That the institution make it the responsibility of all employees to identify suspicious activity
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The compliance officer is trying to put together a set of procedures for handling the decision of whether or not to file an STR. What should the compliance officer recommend to be part of these procedures?
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The officer should recommend that the decision as to whether or not to file an STR be centralized to ensure uniformity
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Of the following scenarios, which 2 are potential red flags indicating possible suspicious activity that should be investigated further?
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-Accounts held for a business in a branch that is located on the other side of town from where the business is located -An individual who holds multiple accounts under the same name
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In conducting a criminal investigation, what are 3 things that the law enforcement investigator should do?
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-The criminal investigator should make every effort to "follow the money" in the transaction to determine where it came from and where it went -The criminal investigator should identify the potential unlawful activity involved, referred in some countries as the "specified unlawful activity". -The criminal investigator should document the underlying activity and transaction
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Typically, when should a financial institution file an STR?
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Whenever they detect unusual or suspicious transaction
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When a bank receives a subpoena for information about a specific account, what 2 steps should the compliance officer take?
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-The compliance officer should ensure that the staff research and collect all documents responsive to the subpoena - The compliance officer should ensure that an independent review is conducted of the account and the transactions in the account.
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A law enforcement representative calls up the compliance officer and urgently requests information pertaining to a particular account in connection with an on-going terrorist financing investigation. What should the compliance officer do?
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Request the law enforcement representative provide a court order or grand jury subpoena unless the bank has already filed an STR on the matter
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In conducting a criminal investigation, what are 3 things that the law enforcement investigators should do?
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-Conduct computer-based searches on the individuals and entities involved -Review any previously filed STRs on the individuals and entities involved -Analyze the financial transactions and activity of the subject and try to determine if there is anything that is high-risk or is out of the ordinary
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The compliance officer reads about a large potential fraud case in the morning newspaper. When the officer gets to the bank, the officer uncovers the fact that the potential fraud case involves an important customer of the bank. After doing an internal investigation, the officer determines that there is no suspicious activity in the customer's accounts. What should the officer do next?
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The officer should document the nature and results of the internal investigation and keep the documentation in an appropriate file
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What are 3 developments that should cause a financial institution to conduct an internal investigation?
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-When the institution receive a grand jury subpoena with regard to transactions that have occurred within several accounts at the institution -When several employees of the institution alert senior management or the compliance officer that there are some suspicious transactions within an account -When a small local business starts engaging in overseas activity involving numerous, unexplained wire transfers
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What are 3 possible red flags indicating suspicious or unusual activity that might warrant an investigation and the filing of an SRT?
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-Unusually high monthly balances in comparison to known sources of income -High level of monetary transactions through an account during the course of a month, but low beginning and ending balances -Multiple cash deposits made just under the reporting threshold
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What is an advantage of having an outside counsel perform an internal investigation on behalf of the financial institution?
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The outside counsel can bring an impartial and legal perspective to the review
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What are the 3 classic gateways for international cooperation and sharing?
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-Mutual Legal Assistance Treaties (MLATs) -Exchange of information between Financial Intelligence Units (FIUs) -Exchange of information between supervisory agencies
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What are 3 of the recommended ways to respond to a law enforcement inquiry?
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-Cooperate with the law enforcement inquiry as much as possible -Respond to all formal requests for information as promptly and thoroughly as possible, unless there is a valid objection that can and should be made -Ensure that all communication, written and oral, is funneled through a centralized place
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What 3 steps should be taken when there is a criminal investigation that is targeting the bank itself?
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-The senior management and the Board of Directors should be notified and kept apprised of the progress of the investigation -The bank should consider retaining experienced outside counsel to assist the bank in responding to the investigation -The relevant employees of the bank should be notified of the existence of the investigation and should be given instructions as to what to do and how to act.
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When a financial institution is responding to a formal criminal investigation by a law enforcement agency, what is the primary purpose of requiring information going through a central point within the institution?
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To ensure that responses are timely and thorough and that privileged material is not inadvertently handed over
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When a financial institution is served with a search warrant by a law enforcement agence, what are 3 things that the employees of the institution should do?
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-They should cooperate fully with the law enforcement agents and remain calm and polite -They should try to obtain an inventory of the materials that the law enforcement agents take from the institution -They should review the warrant to determine its scope
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When should a financial institution consider retaining an experienced outside counsel to assist it?
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When the institution itself appears to be the target of a criminal investigation
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When should a compliance officer recommend that a financial institution conduct an internal investigation? Choose 3 out of 4
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-When there is a suspicion that an employee is conspiring with a long-term customer to launder money through the bank -When a series of customers open separate accounts at different branches, but with the same contact information -When a long term employee decides to take only intermittent vacation days, but not two weeks in a row, per bank policy
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What are 3 practical tips in interviewing employees with regard to an unusual or suspicious transaction that they have witnessed?
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-One should interview the employees as soon after the occurrence as possible in order to ensure that their memory are fresh -One should try to put the employees at ease during the interview and start with relatively easy, non-controversial, questions before getting into more sensitive matters -One should use open-ended questions for the employees in order to ensure that the questions o not dictate what the expected answer is
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With regard to exchanges of information between FIUs of different countrie, what are 3 controlling principles?
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-That the sharing of information should be done as freely as possible on the basis of reciprocity -That the sharing should be on the basis of requests and also spontaneously -That differences in the definition of offenses should not impede the free exchange of information
