AML QUIZ CHAPTER 1 EXAM
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
What is money laundering? - ANS Claiming illegal funds as a legitimate business transaction
Who oversees money laundering? - ANS federal regulations like the USA PATRIOT Act,
What is AML mean? - ANS AML refers collectively to laws, policies, and company programs
intended to deter and detect money laundering.
The first stage in the money laundering process is called? - ANS placement
What does placement mean? - ANS brings the illicit cash into the legal financial system
What is structuring? - ANS the practice of breaking up large cash transactions into multiple
smaller transactions (for the purpose of evading reporting or recordkeeping requirements
What is the 2nd step of money laundering? - ANS Layering
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,What is layering? - ANS cash equivalents obtained in the placement stage are used to
purchase a variety of financial instruments
What are some examples of sophisticated financial products - ANS can include cash value life
insurance and deferred annuity contracts.
What is the 3rd and final step in money laundering? - ANS Integration
What is integration? - ANS cleansed money is circulated back into the hands of the criminal
and ultimately into the financial system
Cash value life insurance and deferred annuity contracts provide owners access to funds
through? - ANS policy loans, partial withdrawals, or outright surrenders
What laundering technique looks appealing to those who launder because it avoids surrender
charges? - ANS Free-look surrenders
Tom and Raul case study - ANS Tom wrote a $500,000 universal life insurance policy. wrote
large cash value policies not only on Raul but also on Raul's business associates and personal
friends. A common denominator with every case was the buyer's interest in the policy's living
benefits. There were frequent withdrawals and partial surrenders, and several policies had
been canceled during the free-look period. Raul and his associates, agents for an international
drug cartel, were responsible for laundering the millions of dollars generated annually from
cocaine and heroin buyers in the U.S. and Europe
Tom and Dru - ANS Raul made substantial donations to the cultural center, mostly through
wire transfers from off-shore bank accounts owned by obscurely named business entities.There
the funds were available to clients with international connections.
The money laundering operation set up by Raul and his associates followed the standard three-
stage process characteristic of most money laundering schemes. - ANS Placement occurred
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, when the cash was deposited into off-shore bank accounts, where it was subsequently wired to
Tom's insurance company to pay premiums.
Layering was achieved through buying multiple life insurance and deferred annuity contracts
using cash payments and wire transfers from uncertain sources. Ownership changes helped
cover any audit trail.
Integration occurred through partial surrenders and withdrawals in the form of insurance
company checks, which moved the money back into the legal monetary system.
Operation Capstone involved the efforts of whom - ANS the action involved the coordinated
efforts of the U.S. Customs Service, the U.S. Attorney for the Southern District of Florida, and
several police departments in South Florida, as well as British and South American authorities.
Operation Capstone - ANS revealed that owners were heavily funding their policies just shy
of MEC levels to avoid IRS scrutiny and making early withdrawals to access the cleansed money
within. . Changes in policy ownership were common.
What are some ways to money launder? - ANS A money launderer could purchase a life
insurance policy and then cancel the policy during the free-look period to receive a refund of
the premium. The returned premium is used to purchase other assets or investments, thus
adding layers to the process and further integrating the money into the financial system.
A money launderer could purchase a life insurance policy and then use the policy values as
collateral for a loan to buy a piece of real estate. The loan is repaid by surrendering the policy,
and the launderer now owns property that can be retained or sold at a later date.
A money launderer could use illicit funds to purchase life insurance policies from terminally ill
insureds under viatical settlement agreements, naming an off-shore company or group of
foreign investors as beneficiaries of the policies. When the insureds die, the proceeds are paid
to the company or the investors as legitimate death benefits.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
What is money laundering? - ANS Claiming illegal funds as a legitimate business transaction
Who oversees money laundering? - ANS federal regulations like the USA PATRIOT Act,
What is AML mean? - ANS AML refers collectively to laws, policies, and company programs
intended to deter and detect money laundering.
The first stage in the money laundering process is called? - ANS placement
What does placement mean? - ANS brings the illicit cash into the legal financial system
What is structuring? - ANS the practice of breaking up large cash transactions into multiple
smaller transactions (for the purpose of evading reporting or recordkeeping requirements
What is the 2nd step of money laundering? - ANS Layering
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,What is layering? - ANS cash equivalents obtained in the placement stage are used to
purchase a variety of financial instruments
What are some examples of sophisticated financial products - ANS can include cash value life
insurance and deferred annuity contracts.
What is the 3rd and final step in money laundering? - ANS Integration
What is integration? - ANS cleansed money is circulated back into the hands of the criminal
and ultimately into the financial system
Cash value life insurance and deferred annuity contracts provide owners access to funds
through? - ANS policy loans, partial withdrawals, or outright surrenders
What laundering technique looks appealing to those who launder because it avoids surrender
charges? - ANS Free-look surrenders
Tom and Raul case study - ANS Tom wrote a $500,000 universal life insurance policy. wrote
large cash value policies not only on Raul but also on Raul's business associates and personal
friends. A common denominator with every case was the buyer's interest in the policy's living
benefits. There were frequent withdrawals and partial surrenders, and several policies had
been canceled during the free-look period. Raul and his associates, agents for an international
drug cartel, were responsible for laundering the millions of dollars generated annually from
cocaine and heroin buyers in the U.S. and Europe
Tom and Dru - ANS Raul made substantial donations to the cultural center, mostly through
wire transfers from off-shore bank accounts owned by obscurely named business entities.There
the funds were available to clients with international connections.
The money laundering operation set up by Raul and his associates followed the standard three-
stage process characteristic of most money laundering schemes. - ANS Placement occurred
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, when the cash was deposited into off-shore bank accounts, where it was subsequently wired to
Tom's insurance company to pay premiums.
Layering was achieved through buying multiple life insurance and deferred annuity contracts
using cash payments and wire transfers from uncertain sources. Ownership changes helped
cover any audit trail.
Integration occurred through partial surrenders and withdrawals in the form of insurance
company checks, which moved the money back into the legal monetary system.
Operation Capstone involved the efforts of whom - ANS the action involved the coordinated
efforts of the U.S. Customs Service, the U.S. Attorney for the Southern District of Florida, and
several police departments in South Florida, as well as British and South American authorities.
Operation Capstone - ANS revealed that owners were heavily funding their policies just shy
of MEC levels to avoid IRS scrutiny and making early withdrawals to access the cleansed money
within. . Changes in policy ownership were common.
What are some ways to money launder? - ANS A money launderer could purchase a life
insurance policy and then cancel the policy during the free-look period to receive a refund of
the premium. The returned premium is used to purchase other assets or investments, thus
adding layers to the process and further integrating the money into the financial system.
A money launderer could purchase a life insurance policy and then use the policy values as
collateral for a loan to buy a piece of real estate. The loan is repaid by surrendering the policy,
and the launderer now owns property that can be retained or sold at a later date.
A money launderer could use illicit funds to purchase life insurance policies from terminally ill
insureds under viatical settlement agreements, naming an off-shore company or group of
foreign investors as beneficiaries of the policies. When the insureds die, the proceeds are paid
to the company or the investors as legitimate death benefits.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
