CERTIFIED AML FINTECH COMPLIANCE ASSOCIATE
(CAFCA) Exam Questions With 100% Verified
Solutions
State two differences between tax avoidance and tax evasion. - ANSWER -Tax
avoidance uses legal practices to reduce taxes owed, whereas tax evasion uses
illegal practices to evade paying taxes owed.
Name an example of politically exposed persons (PEPs). - ANSWER -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.
State an example of high-risk customers that Fin Techs might encounter. -
ANSWER -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 some jurisdiction risks and red flags in the FinTech sector. - ANSWER -
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 are tax havens and those known to
host shell companies are also high risk.
Why are Fin Techs often considered to be high-risk companies? - ANSWER -
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? - ANSWER -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? - ANSWER -Faster
speed to market and overcoming regulatory complexities.
, What are card schemes? - ANSWER -Membership-based networks that enable a
payment method, such as Visa, JCB and MasterCard.
What are the three lines of defense in AML compliance? - ANSWER -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? - ANSWER -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? - ANSWER -In the prevention of financial crime, dual
controls can be applied during CDD (customer due diligence) to ensure it is
performed correctly.
Why is it important for the second line of defense to be independent from the
business line? - ANSWER -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). -
ANSWER -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? -
ANSWER -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? - ANSWER -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? - ANSWER -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.
(CAFCA) Exam Questions With 100% Verified
Solutions
State two differences between tax avoidance and tax evasion. - ANSWER -Tax
avoidance uses legal practices to reduce taxes owed, whereas tax evasion uses
illegal practices to evade paying taxes owed.
Name an example of politically exposed persons (PEPs). - ANSWER -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.
State an example of high-risk customers that Fin Techs might encounter. -
ANSWER -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 some jurisdiction risks and red flags in the FinTech sector. - ANSWER -
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 are tax havens and those known to
host shell companies are also high risk.
Why are Fin Techs often considered to be high-risk companies? - ANSWER -
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? - ANSWER -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? - ANSWER -Faster
speed to market and overcoming regulatory complexities.
, What are card schemes? - ANSWER -Membership-based networks that enable a
payment method, such as Visa, JCB and MasterCard.
What are the three lines of defense in AML compliance? - ANSWER -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? - ANSWER -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? - ANSWER -In the prevention of financial crime, dual
controls can be applied during CDD (customer due diligence) to ensure it is
performed correctly.
Why is it important for the second line of defense to be independent from the
business line? - ANSWER -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). -
ANSWER -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? -
ANSWER -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? - ANSWER -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? - ANSWER -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.
