CAFCA UPDATED ACTUAL Questions and
CORRECT Answers
What is financial crime? - CORRECT ANSWER - Illegal activities that are usually
economically motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - CORRECT ANSWER - Certain countries are more
prone to financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - CORRECT ANSWER - Engaging in financial transactions to conceal the
identity, source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - CORRECT ANSWER - 1. Placement
2. Layering
3. Integration
What is placement? - CORRECT ANSWER - Putting "dirty money" into the financial system
What is Layering? - CORRECT ANSWER - Concealing the origin of the "dirty money"
,What is integration? - CORRECT ANSWER - Using the "dirty money" in the legitimate
economy
Terrorist Financing - CORRECT ANSWER - Terrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - CORRECT ANSWER - Foreign policy and security tool
Target individuals, organizations, jurisdictions, vessels
Main types: Financial, economic, trade
What are the features of fraud? - CORRECT ANSWER - An intentional act of criminal
deception in order to obtain an unjust advantage
Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - CORRECT ANSWER - Referred to as
the Fraud Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - CORRECT ANSWER - Tax avoidance uses legal practices to
reduce taxes owed
, Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - CORRECT ANSWER - A classic example of the use of shell
companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - CORRECT ANSWER - Financial crime
jeopardizes the soundness of financial institutions
What is the primary purpose of money laundering? - CORRECT ANSWER - To make
criminally derived property or funds appear to be legitimate
What is a feature of terrorist financing - CORRECT ANSWER - The money is not necessarily
derived from illicit proceeds
What is a red flag of fraud? - CORRECT ANSWER - A sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially those in
which commercial success is driven by getting approval, authority, or contracts from government
entities. - CORRECT ANSWER - True
What is sign of a jurisdiction that facilitates tax evasion? - CORRECT ANSWER - They levy
low or minimal taxation on the income of non-residents, and provide tax advantages to non-
residents
What is an example of higher risk? - CORRECT ANSWER - Customer: Non-resident,
complex owner
Jurisdiction: Low regulation, tax haven
CORRECT Answers
What is financial crime? - CORRECT ANSWER - Illegal activities that are usually
economically motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - CORRECT ANSWER - Certain countries are more
prone to financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - CORRECT ANSWER - Engaging in financial transactions to conceal the
identity, source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - CORRECT ANSWER - 1. Placement
2. Layering
3. Integration
What is placement? - CORRECT ANSWER - Putting "dirty money" into the financial system
What is Layering? - CORRECT ANSWER - Concealing the origin of the "dirty money"
,What is integration? - CORRECT ANSWER - Using the "dirty money" in the legitimate
economy
Terrorist Financing - CORRECT ANSWER - Terrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - CORRECT ANSWER - Foreign policy and security tool
Target individuals, organizations, jurisdictions, vessels
Main types: Financial, economic, trade
What are the features of fraud? - CORRECT ANSWER - An intentional act of criminal
deception in order to obtain an unjust advantage
Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - CORRECT ANSWER - Referred to as
the Fraud Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - CORRECT ANSWER - Tax avoidance uses legal practices to
reduce taxes owed
, Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - CORRECT ANSWER - A classic example of the use of shell
companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - CORRECT ANSWER - Financial crime
jeopardizes the soundness of financial institutions
What is the primary purpose of money laundering? - CORRECT ANSWER - To make
criminally derived property or funds appear to be legitimate
What is a feature of terrorist financing - CORRECT ANSWER - The money is not necessarily
derived from illicit proceeds
What is a red flag of fraud? - CORRECT ANSWER - A sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially those in
which commercial success is driven by getting approval, authority, or contracts from government
entities. - CORRECT ANSWER - True
What is sign of a jurisdiction that facilitates tax evasion? - CORRECT ANSWER - They levy
low or minimal taxation on the income of non-residents, and provide tax advantages to non-
residents
What is an example of higher risk? - CORRECT ANSWER - Customer: Non-resident,
complex owner
Jurisdiction: Low regulation, tax haven
