AML Study Guide Question and answers
correctly solved
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 organization's business practices
and associations, whether accurate or not, will cause a loss of public
confidence in the integrity of the organization.
- Operational risk is described as the potential for loss resulting from
inadequate internal processes, personnel or systems or from external events.
- Legal risk is the potential for lawsuits, adverse judgments, unenforceable
contracts, fines and penalties generating losses, increased expenses for an
organization, or even the closure of the organization.
correctly solved
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 organization's business practices
and associations, whether accurate or not, will cause a loss of public
confidence in the integrity of the organization.
- Operational risk is described as the potential for loss resulting from
inadequate internal processes, personnel or systems or from external events.
- Legal risk is the potential for lawsuits, adverse judgments, unenforceable
contracts, fines and penalties generating losses, increased expenses for an
organization, or even the closure of the organization.
