AML Final Exam Study Guide.
Describe the elements that should be addressed in a global approach to KYC identified in the Basel
Committee's October 2004 paper called "Consolidated KYC Risk Management" - CORRECT ANSWER The
Basel Committee's October 2004 paper called "Consolidated KYC Risk Management" addresses the need
for banks to adopt a global approach and to apply the elements necessary for a sound KYC program on
both the parent bank or head office and all its branches and subsidiaries. These elements consist of:
- Risk Management
- Customer Acceptance and Identification Policies, and
- Ongoing Monitoring of Higher-Risk Accounts
What is one of the most important aspects of due diligence for a bank when establishing a relationship
with a money remitter? - CORRECT ANSWER Ensuring the money remitter is properly licensed.
Identify the seven specific customer identification issues as identified in the Basel Committee's October
2001 paper called "Customer Due Diligence for Banks" - CORRECT ANSWER - Trust, Nominee, and
Fiduciary Accounts
- Corporate Vehicles, particularly companies with nominee shareholders or entities with shares in bearer
form
- Introduced Businesses
- Client Accounts opened by professional intermediaries, such as "pooled" accounts managed by
professional intermediaries on behalf of entities such as mutual funds, pension funds, and money funds
- Politically exposed persons
- Non-face-to-face customers, i.e., customers who do not present themselves for a personal interview,
and
- Correspondent banking
If an institution decides to file an STR, what should they do as soon as possible? - CORRECT ANSWER
Notify the investigators or prosecutors. Suspicious Transaction Report
How does the Caribbean Financial Action Task Force (CFATF) monitor member's implementation of the
anti-money laundering recommendations? - CORRECT ANSWER The CFATF monitors members'
,implementation of the anti-money laundering recommendations identified in the Kingston Declaration
through the following activities:
- Self-assessment of the implementation recommendations
- An ongoing program of mutual evaluation of members
- Coordination of, and participation in, training and technical assistance programs
- Biennial plenary meetings for technical representatives, and
- Annual ministerial meetings
Identify the three gateways that assist with the AML cooperation between countries: - CORRECT
ANSWER - Mutual Legal Assistance Treaties
- Financial Intelligence Units
- The Supervisory Channel
Identify the Four Ways that good technology can equip organizations with improved defenses in the
fight against financial crime - CORRECT ANSWER - Transaction monitoring: scanning and analyzing data
for potential money laundering activity
- Watch list filtering: screening new accounts, existing customers, beneficiaries and transaction
counterparties against terrorist, criminal, and other blocked persons watch lists
- Automation of regulatory reporting: filing STRs, currency transaction reports (CTRs), or other
regulatory reports with the government
- A detailed audit trail: demonstrates compliance efforts to regulators
Define Know Your Customer - CORRECT ANSWER Know Your Customer (KYC) refers to anti-money
laundering policies and procedures used to determine the true identity of a customer and the type of
activity that is "normal and expected" and to detect activity that is "unusual" for a particular customer.
Many experts believe that a sound KYC program is one of the best tools in an effective anti-money
laundering program.
According to FATF's paper called "Money Laundering and Terrorist Financing Vulnerabilities of
Commercial Websites and Internet Payment Systems" what are the different classes of commercial
websites? - CORRECT ANSWER - Mediated Customer to Customer - private individuals sell to one
another via an online market place (eBay)
- Mediated Business to Customers - multiple merchants sell to customers via an online market place
(Amazon)
, - Non-mediated Customers to Customers - allows customers to advertise the goods they want to sell
(Craigslist)
- Director Business to Customer - merchants sell via their own website (gap.com)
- Direct Business to Business - merchants to merchants (Alibaba)
What is Tipping Off? - CORRECT ANSWER The improper or illegal act of notifying a suspect that he or she
is the subject of a STR or is otherwise being investigated or pursued by the authorities.
What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee's
October 2001 paper called "Customer Due Diligence for Banks?" - CORRECT ANSWER - Customer
Identification
- Risk Management
- Customer Acceptance
- Monitoring
What is the broad objective of UNODC model legislation on money laundering and financing of
terrorism? - CORRECT ANSWER UN Office of Drug and Crime
The broad objective of the Global Programme is to strengthen the ability of Member States to
implement measures against money-laundering and the financing of terrorism and to assist them in
detecting, seizing, and confiscating illicit proceeds, as required pursuant to United Nations instruments
and other globally accepted standards, by providing relevant and appropriate technical assistance upon
request.
Describe the three phases of money laundering. - CORRECT ANSWER - Placement is the physical
disposal of cash or other assets derived from criminal activity.
- Layering is the separation of illicit proceeds from their source by layers of financial transactions
intended to conceal the origin of the proceeds.
- Integration is supplying apparent legitimacy to illicit wealth through the re ‐entry of the funds into the
economy in what appears to be normal business or personal transactions.
Describe four types of risk associated with money laundering faced by a financial institution. - CORRECT
ANSWER - Reputational risk is described as the potential that adverse publicity regarding an
Describe the elements that should be addressed in a global approach to KYC identified in the Basel
Committee's October 2004 paper called "Consolidated KYC Risk Management" - CORRECT ANSWER The
Basel Committee's October 2004 paper called "Consolidated KYC Risk Management" addresses the need
for banks to adopt a global approach and to apply the elements necessary for a sound KYC program on
both the parent bank or head office and all its branches and subsidiaries. These elements consist of:
- Risk Management
- Customer Acceptance and Identification Policies, and
- Ongoing Monitoring of Higher-Risk Accounts
What is one of the most important aspects of due diligence for a bank when establishing a relationship
with a money remitter? - CORRECT ANSWER Ensuring the money remitter is properly licensed.
Identify the seven specific customer identification issues as identified in the Basel Committee's October
2001 paper called "Customer Due Diligence for Banks" - CORRECT ANSWER - Trust, Nominee, and
Fiduciary Accounts
- Corporate Vehicles, particularly companies with nominee shareholders or entities with shares in bearer
form
- Introduced Businesses
- Client Accounts opened by professional intermediaries, such as "pooled" accounts managed by
professional intermediaries on behalf of entities such as mutual funds, pension funds, and money funds
- Politically exposed persons
- Non-face-to-face customers, i.e., customers who do not present themselves for a personal interview,
and
- Correspondent banking
If an institution decides to file an STR, what should they do as soon as possible? - CORRECT ANSWER
Notify the investigators or prosecutors. Suspicious Transaction Report
How does the Caribbean Financial Action Task Force (CFATF) monitor member's implementation of the
anti-money laundering recommendations? - CORRECT ANSWER The CFATF monitors members'
,implementation of the anti-money laundering recommendations identified in the Kingston Declaration
through the following activities:
- Self-assessment of the implementation recommendations
- An ongoing program of mutual evaluation of members
- Coordination of, and participation in, training and technical assistance programs
- Biennial plenary meetings for technical representatives, and
- Annual ministerial meetings
Identify the three gateways that assist with the AML cooperation between countries: - CORRECT
ANSWER - Mutual Legal Assistance Treaties
- Financial Intelligence Units
- The Supervisory Channel
Identify the Four Ways that good technology can equip organizations with improved defenses in the
fight against financial crime - CORRECT ANSWER - Transaction monitoring: scanning and analyzing data
for potential money laundering activity
- Watch list filtering: screening new accounts, existing customers, beneficiaries and transaction
counterparties against terrorist, criminal, and other blocked persons watch lists
- Automation of regulatory reporting: filing STRs, currency transaction reports (CTRs), or other
regulatory reports with the government
- A detailed audit trail: demonstrates compliance efforts to regulators
Define Know Your Customer - CORRECT ANSWER Know Your Customer (KYC) refers to anti-money
laundering policies and procedures used to determine the true identity of a customer and the type of
activity that is "normal and expected" and to detect activity that is "unusual" for a particular customer.
Many experts believe that a sound KYC program is one of the best tools in an effective anti-money
laundering program.
According to FATF's paper called "Money Laundering and Terrorist Financing Vulnerabilities of
Commercial Websites and Internet Payment Systems" what are the different classes of commercial
websites? - CORRECT ANSWER - Mediated Customer to Customer - private individuals sell to one
another via an online market place (eBay)
- Mediated Business to Customers - multiple merchants sell to customers via an online market place
(Amazon)
, - Non-mediated Customers to Customers - allows customers to advertise the goods they want to sell
(Craigslist)
- Director Business to Customer - merchants sell via their own website (gap.com)
- Direct Business to Business - merchants to merchants (Alibaba)
What is Tipping Off? - CORRECT ANSWER The improper or illegal act of notifying a suspect that he or she
is the subject of a STR or is otherwise being investigated or pursued by the authorities.
What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee's
October 2001 paper called "Customer Due Diligence for Banks?" - CORRECT ANSWER - Customer
Identification
- Risk Management
- Customer Acceptance
- Monitoring
What is the broad objective of UNODC model legislation on money laundering and financing of
terrorism? - CORRECT ANSWER UN Office of Drug and Crime
The broad objective of the Global Programme is to strengthen the ability of Member States to
implement measures against money-laundering and the financing of terrorism and to assist them in
detecting, seizing, and confiscating illicit proceeds, as required pursuant to United Nations instruments
and other globally accepted standards, by providing relevant and appropriate technical assistance upon
request.
Describe the three phases of money laundering. - CORRECT ANSWER - Placement is the physical
disposal of cash or other assets derived from criminal activity.
- Layering is the separation of illicit proceeds from their source by layers of financial transactions
intended to conceal the origin of the proceeds.
- Integration is supplying apparent legitimacy to illicit wealth through the re ‐entry of the funds into the
economy in what appears to be normal business or personal transactions.
Describe four types of risk associated with money laundering faced by a financial institution. - CORRECT
ANSWER - Reputational risk is described as the potential that adverse publicity regarding an
