ACAMS Exam Review Questions and Answers with Complete Solution

Define "smurfing." - ANSWER The use of multiple individuals and/or transactions for making cash deposits, buying monetary transactions or banks drafts in amounts under the reporting threshold. (NB: Some equate this term with structuring) What are the sections of the USA PATRIOT Act pertaining to AML due diligence? - ANSWER *Section 312* -- Requirement that institutions create risk-based due diligence programs *Section 313* -- Prohibits US financial institutions from dealing with shell banks *Section 319* -- Requires US financial institutions to maintain records with names, contact info of the owners of foreign banks for which they maintain correspondent accounts. *Before establishing correspondent accounts, banks should be able to answer basic questions about the respondent bank, including owners and the nature of its regulatory oversight* What are the three indicators of a black market peso exchange (BMPE)? - ANSWER 1.) Payment made in cash by a third party with no connection to the underlying transaction; 2.) Payment made by wire transfers from third parties unconnected to the underlying transaction; and 3.) Payment made with checks, bank drafts, or money orders not drawn on the account of the purchaser. What are the four basic elements of a financial institution's AML program? - ANSWER 1.) *Policies* -- a system of internal policies, procedures, and controls; 2.) *Oversight* -- a designated compliance officer with day-to-day oversight of the AML program 3.) *Training* -- an ongoing employee training program 4.) *Audit* -- An independent audit function to test the AML program What are the seven elements of a sound customer due diligence (CDD) program? - ANSWER 1.) Identification of customer & business entities, including source of wealth 2.) Customer transaction & activity profiles (real & projected) 3.) Acceptance of customer in context of products & services 4.) Assessment and grading of risks that the customer/account present 5.) Transaction monitoring based on risks 6.) Investigation of unusual customer activity 7.) Documentation of findings According to the Wolfsberg Statement on AML Screening, Monitoring, and Searching (2009), what are the most appropriate and effective overall monitoring frameworks? - ANSWER Risk-based monitoring models and frameworks sufficiently flexible to meet the needs and nature of the individual financial institution. These may contain one or more of the following: - Dedicated automated transaction monitoring system - System-generated exception reports - Manual "line of business" incident reports - Scheduled periodic reviews/sampling - Event-driven reviews What is the broad objective of the UNODC model legislation on money laundering and the financing of terrorism? - ANSWER 1.) To strengthen the ability of MS to implement measures against money laundering and the financing of terrorism 2.) To assist them in detecting seizing, and confiscating illicit proceeds as required pursuant to UN instruments and other globally accepted standards 3.) To provide relevant and appropriate technical assistance upon request What are the permitted uses of information according to the Egmont Group's "Principles for Information Exchange between Financial Intelligence Units for Money Laundering and Terrorism Financing Cases"? - ANSWER 1.) Info exchanged between FIUs may be used only for the specific purpose for which the info was sought or provided 2.) The requesting FIU may not transfer the shared information to a third party, nor make use of the information for an administrative, investigative, prosecutorial, or judicial purpose without the prior consent of the supplying FIU According to the FATF's paper, "Risk-Based Approach Guidance for Casinos," what are the potential transaction risks for casinos (both land- and internet-based)? - ANSWER 1.) Use of casino accounts 2.) Redemption of chips, tickets, or tokens for currency 3.) Loan sharking 4.) Transfers between customers 5.) Cash 6.) Proceeds of crime What is a mutual legal assistance treaty (MLAT)? - ANSWER An agreement among countries allowing for 1.) mutual assistance in legal proceedings 2.) access to documents and witnesses 3.) other legal and judicial resources ... in the respective countries and in private and public sectors for use in official investigations and prosecutions What are the three tasks that the FATF focuses on? - ANSWER 1.) Spreading the AML message worldwide 2.) Monitoring implementation of the FATF Recommendations among FATF members, and 3.) Reviewing money laundering trends and countermeasures. What are the characteristics of charities and non-profit institutions that make them particularly vulnerable to misuse for terrorist financing? - ANSWER 1.) They enjoy the public trust 2.) They have access to considerable sources of funds 3.) They are cash-intensive 4.) They frequently have a global presence, often in (or adjacent to) areas exposed to terrorist activity 5.) They are often subject to little regulation and/or have few obstacles to their creation Identify the second specific customer ID issues identified in the Basel Committee's paper, "Customer Due Diligence for Banks" (Oct. 2001). - ANSWER 1.) Trust, nominee, and fiduciary accounts 2.) Corporate vehicles, especially if there are nominee shareholders or shares in bearer form 3.) Introduced businesses 4.) Client accounts opened by professional intermediaries 5.) Politically exposed purposes 6.) Non-face-to-face customers 7.) Correspondent banking Identify three ways money laundering can occur through vehicle sellers. - ANSWER 1.) Structuring cash deposit below the reporting threshold or purchasing vehicles with sequentially numbered checks or money orders 2.) Trading in vehicles and conducting successive transactions of buying and selling new and used vehicles to produce complex layers of transactions 3.) Accepting third-party payments, particularly from jurisdictions with ineffective money laundering controls. How can art & antiques dealers and auctioneers mitigate their money laundering risks? - ANSWER 1.) Require all art venders to provide names and addresses and ask that they sign and date a form stating that (a) the item is not stollen and (b) they are authorized to sell it 2.) Verify the identities of new venders and customers 3.) If there is reason to believe the item may be stollen, immediately contact the Art Loss Register 4.) Look critically when a customer asks to pay in cash 5.) Be aware of AML regulations 6.) Appoint a senior staff member to whom employees can report suspicious activities What is "cuckoo smurfing"? - ANSWER When money launderers transfer funds through the bank accounts of innocent, legitimate, third-party customers. According to the FATF, what three circumstances should be kept in mind when dealing with possible cuckoo smurfing activity? - ANSWER 1.) The existence of these deposits is not necessarily grounds to reconsider the relationship with the customer 2.) It could be the indicator of laundering; therefore, it should be examined carefully 3.) Law enforcement will need information on the depositor, so banks should seek to identify cash deposits made by their parties and should retain surveillance footage. Identify seven ways commodity and options accounts may be susceptible to money laundering. - ANSWER 1.) Withdrawal of assets through transfers to unrelated accounts or to high-risk countries. 2.) Frequent additions or withdrawals to/from accounts 3.) Transfers of funds from third-party accounts who have no relation to the client 4.) Clients who request custodial arrangements to allow them to remain anonymous 5.) Investing illegal proceeds for a client 6.) Movement of funds to disguise their origin 7.) Transfer of funds to the manager/advisor followed by transfers to accounts at other institutions (potential layering) What are the four types of risk face by a financial institution associated with money laundering. - ANSWER 1.) Reputational risk 2.) Operational risk 3.) Legal risk 4.) Concentration risk Describe the three phases of money laundering. - ANSWER 1.) *Placement* -- The physical disposal of cash or other assets derived from criminal activity 2.) *Layering* -- The separation of illicit proceeds from their source by layers of financial transaction intended to conceal the origin or the proceeds 3.) *Integration* -- Supplying apparent legitimacy to illicit wealth through the re-entry of funds into the economy in what appears to be normal business or personal transactions. What are the two main reasons corresponding banking is vulnerable to money laundering? - ANSWER 1.) *Indirect financial relationship* where the correspondent bank provides services for individuals/entities for which it has neither verified the identities nor obtained any first-hand knowledge 2.) *Volume of transactions/flow-through capital* makes it more difficult to identify suspect transactions, made worse by the fact the corresponding bank lacks information about the parties conducting the transactions. What steps should a bank have its employees follow if it is under investigation by a federal agency for possible money laundering? - ANSWER 1.) Employees should be informed of the investigation 2.) Employees should be told to inform senior management or counsel of all requests for documents and not to produce them themselves 3.) The institution can/should determine what (if any) requests should be contested. 4.) Employees should follow the same procedure where request for interviews are concerned. In what four ways can good technology equip organizations with improved defenses in the fight against financial crime? - ANSWER 1.) Transaction monitoring 2.) Watch list filtering 3) Automation of regulatory reporting 4.) Detailed audit trails Identify seven situations that may require a financial institution to initiate an internal investigation. - ANSWER 1.) Report of examination from regulators 2.) Information from third parties 3.) Information derived from surveillance or monitoring systems 4.) Information from employees or a company hotline 5.) Receipt of a subpoena or search warrant 6.) Learning that government investigators are asking questions of institution employees, business associates, customers, or competitors 7.) Filing of a civil lawsuit against the institution or a customer of the institution What is a PATRIOT Act certification? - ANSWER A formal assertion issued by US regulators including 1.) A written statement by respondent bank signed by its duly authorized representative certifying that the bank does not do business with shell banks. 2.) A written representation provided by a US federal agent stating the matter for which s/he is seeking information from a financial institution under Sec. 314(a). What steps are commonly taken to obtain mutual legal assistance (MLA) from a foreign government? - ANSWER 1.) Sending a "commission rogatoire" indicating the information sought, the nature of the request, the criminal charges in the requesting country, and the legal provision under which the request is made 2.) The authority that receives the commission rogatoire sends it to a local financial investigator to find out if the information is available 3.) An investigator from the requesting country then visits the country from which the info is sought and accompanies the local investigator during visits or when statements are made 4.) The investigator asks the central authority for permission to remove the evidence to the requesting country 5.) The central authority sends the evidence to the requesting central authority, thereby satisfying the MLA agreement 6.) Local witnesses may need to attend court hearings in the requesting country. Identify the seven topics of international standards incorporated into the FATF 40 Recommendations (2012). - ANSWER 1.) AML/CFT politics and procedures (Recs. 1-2) 2.) Money laundering & confiscation (Recs. 3-4) 3.) Terrorist financing and confiscation (Recs. 5-8) 4.) Financial and non-financial institution preventative measures (Recs. 9-23) 5.) Transparency and beneficial ownership of legal personas and arrangements (Recs. 24-25) 6.) Powers and responsibilities of competent authorities and other institutional measures (Recs. 26-35) 7.) International cooperation (Recs. 36-40) How does the Caribbean Financial Action Task Force (CFATF) monitor members' implementation of AML recommendations identified in the Kingston Declaration? - ANSWER 1.) Self-assessment of the implementation of the recommendations 2.) An ongoing program of mutual evaluation of members 3.) Coordination of, and participation in, training and technical assistance programs