CAFCA Basic– Questions With Verified Solutions (A+)
Name two important pieces of anti-bribery and corruption legislation with
extra territorial reach. Right Ans - The Foreign Corrupt Practices Act
in the US and The UK Bribery Act
2010.
What are the main types of sanctions and who do they target? Right Ans
- Financial, economic, and trade.
They generally target individuals,
organizations, and countries.
List the three major reasons people commit fraud, and what this model is
called. Right Ans - The three major reasons are pressure, opportunity,
and rationalization. This model is referred to as the
"Fraud Triangle.
State two differences between tax avoidance and tax evasion. Right Ans
- Tax avoidance uses legal practices to reduce taxes owed, whereas tax
evasion uses illegal practices to evade paying taxes owed.
State an example of high-risk customers that Fin Techs might encounter.
Right Ans - Examples include customers who sign up using false identities,
customers who lie about the purpose of business relationships, front
companies, companies with complex ownership structures, and customers
linked to organized crime groups.
Name an example of politically exposed persons Right Ans - Examples of
PEPs include heads of state or heads of government; senior politicians;
senior government; judicial and military officials, senior executives of
state-owned corporations; and important political party officials, as well as
their families and close associates. Usually, PEP positions are specified
in each jurisdiction's AML regulation.
Name some jurisdiction risks and red flags in the Fin Tech sector. Right
Ans - Jurisdictions with higher risk include those with poor AML
regulations, high levels of corruption, inadequate frameworks to prevent
financing of terrorism,
and economic sanctions in place. Jurisdictions
,that ere tax havens and those known to host
shell companies are also high-risk.
Why are Fin Techs often considered to be
high-risk companies? Right Ans - Because of the lack of face-to-
face encounters and the speed
with which a person can access financial
products
What are some Fin Tech risks and red flags? Right Ans - Non-face-to-
face customer
interactions and onboarding, cryptocurrencies and anonymity, faster
payments, new technologies and their potential vulnerabilities, unproven
business models, and undeveloped governance frameworks.
What are the benefits to using banking as a
service provider? Right Ans - Faster speed to market and
overcoming regulatory
complexities.
What are card schemes? Right Ans - Membership-based networks that
enable a payment method, such as
Visa, JCB, and MasterCard.
What are the three lines of defense in AML
compliance? Right Ans - The first line of defense is the line
of business. The second line of
defense is the compliance and internal control
functions. The third line of defense is internal
audit.
What is meant by a "four-eyes check" during
onboarding? Right Ans - To ensure proper checks are
performed, a second person might
review the file. This is also known as employing
"dual controls."
What are dual controls? Right Ans - In the prevention of financial crime,
dual controls can be applied during
,CDD to ensure it is performed correctly.
Why is it important for the second line of
defense to be independent from the business
line? Right Ans - To be empowered to obtain
access to information throughout
the organization; conduct investigations of
possible breaches; and freely express and
disclose findings to senior management.
Describe the responsibilities of the money
laundering reporting officer (MLRO). Right Ans - Ensuring that the
organization's
AML/CFT efforts are effectively
designed and implemented, handling inquiries;
determining whether SARs require reporting to
authorities; and overseeing training
For optimal effectiveness, who should perform
an organization's audit? Right Ans - The audit should be independent;
that is, performed by people not
involved with the organization's AML/CFT
compliance staff. The audit team should report
directly to the board of directors or a designated
board committee of outside directors.
What is an organization's risk appetite? Right Ans - Risk appetite
determines the type
of customer it will accept, the type
of product it will offer, and the jurisdictions in
which it will do business.
Why should customer risk assessments be
dynamic and capable of revision over time? Right Ans - Customer risk
can change during
the business relationship.
Organizations need a current understanding of
customer risk so they can apply due diligence
and ongoing monitoring.
, For any financial institution, who should receive
ongoing AML training? Right Ans - An organization's employees and
third parties, such as contractors
and agents.
How can a Fin Tech prepare for a successful
audit? Right Ans - Plan in advance, ensure staff
availability; ensure documentation
is correct and up-to-date; address potential
issues on an ongoing basis throughout the year;
and fully understand the audit scope.
What are two sources of internal risk in a
Fin Tech? Right Ans - The organization's employees and
internal processes.
Aside from the legal requirement, why is good
recordkeeping important to Fin Techs? Right Ans - It could help to
defend your
organization against a money laundering or a terrorist financing offense. It
also
supports law enforcement agencies to fight
financial crime.
With whom can financial institutions share
customer data? Right Ans - Data you hold about a customer
should be shared only with others
who need to know. Many jurisdictions have
privacy and data security laws and regulations
that apply to financial institutions.
What is the advantage of independently
collecting customer information in addition to
customer-completed digital forms? Right Ans - It can be more reliable
and less
prone to fraud and manipulation.
Name some common red flags when
Name two important pieces of anti-bribery and corruption legislation with
extra territorial reach. Right Ans - The Foreign Corrupt Practices Act
in the US and The UK Bribery Act
2010.
What are the main types of sanctions and who do they target? Right Ans
- Financial, economic, and trade.
They generally target individuals,
organizations, and countries.
List the three major reasons people commit fraud, and what this model is
called. Right Ans - The three major reasons are pressure, opportunity,
and rationalization. This model is referred to as the
"Fraud Triangle.
State two differences between tax avoidance and tax evasion. Right Ans
- Tax avoidance uses legal practices to reduce taxes owed, whereas tax
evasion uses illegal practices to evade paying taxes owed.
State an example of high-risk customers that Fin Techs might encounter.
Right Ans - Examples include customers who sign up using false identities,
customers who lie about the purpose of business relationships, front
companies, companies with complex ownership structures, and customers
linked to organized crime groups.
Name an example of politically exposed persons Right Ans - Examples of
PEPs include heads of state or heads of government; senior politicians;
senior government; judicial and military officials, senior executives of
state-owned corporations; and important political party officials, as well as
their families and close associates. Usually, PEP positions are specified
in each jurisdiction's AML regulation.
Name some jurisdiction risks and red flags in the Fin Tech sector. Right
Ans - Jurisdictions with higher risk include those with poor AML
regulations, high levels of corruption, inadequate frameworks to prevent
financing of terrorism,
and economic sanctions in place. Jurisdictions
,that ere tax havens and those known to host
shell companies are also high-risk.
Why are Fin Techs often considered to be
high-risk companies? Right Ans - Because of the lack of face-to-
face encounters and the speed
with which a person can access financial
products
What are some Fin Tech risks and red flags? Right Ans - Non-face-to-
face customer
interactions and onboarding, cryptocurrencies and anonymity, faster
payments, new technologies and their potential vulnerabilities, unproven
business models, and undeveloped governance frameworks.
What are the benefits to using banking as a
service provider? Right Ans - Faster speed to market and
overcoming regulatory
complexities.
What are card schemes? Right Ans - Membership-based networks that
enable a payment method, such as
Visa, JCB, and MasterCard.
What are the three lines of defense in AML
compliance? Right Ans - The first line of defense is the line
of business. The second line of
defense is the compliance and internal control
functions. The third line of defense is internal
audit.
What is meant by a "four-eyes check" during
onboarding? Right Ans - To ensure proper checks are
performed, a second person might
review the file. This is also known as employing
"dual controls."
What are dual controls? Right Ans - In the prevention of financial crime,
dual controls can be applied during
,CDD to ensure it is performed correctly.
Why is it important for the second line of
defense to be independent from the business
line? Right Ans - To be empowered to obtain
access to information throughout
the organization; conduct investigations of
possible breaches; and freely express and
disclose findings to senior management.
Describe the responsibilities of the money
laundering reporting officer (MLRO). Right Ans - Ensuring that the
organization's
AML/CFT efforts are effectively
designed and implemented, handling inquiries;
determining whether SARs require reporting to
authorities; and overseeing training
For optimal effectiveness, who should perform
an organization's audit? Right Ans - The audit should be independent;
that is, performed by people not
involved with the organization's AML/CFT
compliance staff. The audit team should report
directly to the board of directors or a designated
board committee of outside directors.
What is an organization's risk appetite? Right Ans - Risk appetite
determines the type
of customer it will accept, the type
of product it will offer, and the jurisdictions in
which it will do business.
Why should customer risk assessments be
dynamic and capable of revision over time? Right Ans - Customer risk
can change during
the business relationship.
Organizations need a current understanding of
customer risk so they can apply due diligence
and ongoing monitoring.
, For any financial institution, who should receive
ongoing AML training? Right Ans - An organization's employees and
third parties, such as contractors
and agents.
How can a Fin Tech prepare for a successful
audit? Right Ans - Plan in advance, ensure staff
availability; ensure documentation
is correct and up-to-date; address potential
issues on an ongoing basis throughout the year;
and fully understand the audit scope.
What are two sources of internal risk in a
Fin Tech? Right Ans - The organization's employees and
internal processes.
Aside from the legal requirement, why is good
recordkeeping important to Fin Techs? Right Ans - It could help to
defend your
organization against a money laundering or a terrorist financing offense. It
also
supports law enforcement agencies to fight
financial crime.
With whom can financial institutions share
customer data? Right Ans - Data you hold about a customer
should be shared only with others
who need to know. Many jurisdictions have
privacy and data security laws and regulations
that apply to financial institutions.
What is the advantage of independently
collecting customer information in addition to
customer-completed digital forms? Right Ans - It can be more reliable
and less
prone to fraud and manipulation.
Name some common red flags when
