ACAMS Exam Review 70 Questions with Verified Answers
Define "smurfing." - CORRECT ANSWER The use of multiple individuals and/or transactions for
... [Show More] 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? - CORRECT 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)? - CORRECT 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? - CORRECT 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? - CORRECT 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? - CORRECT 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? - CORRECT 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"? - CORRECT 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)? - CORRECT 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)? - CORRECT 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? - CORRECT 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? - CORRECT 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). - CORRECT 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. - CORRECT 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? - CORRECT 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"? - CORRECT 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? - CORRECT 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. - CORRECT 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. - CORRECT ANSWER 1.) Reputational risk
2.) Operational risk
3.) Legal risk
4.) Concentration risk
Describe the three phases of money laundering. - CORRECT 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? - CORRECT 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? - CORRECT 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? - CORRECT 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. - CORRECT 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? - CORRECT 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? - CORRECT 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). - CORRECT 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? - CORRECT 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
4.) Biennial plenary meetings for technical representatives
5.) Annual ministerial meetings
How does the scope of the EU's Third Money Laundering Directive differ from the Second Money Laundering Directive? - CORRECT ANSWER 1.) It specifically includes the category of trust and company service providers
2.) It covers all dealers trading in goods who trace in cash over 15,000 Euro
3.) The definition of financial institution includes certain insurance intermediaries
When categorizing risk, what are the four general levels? - CORRECT ANSWER 1.) *Prohibited* -- e.g., those mentioned on sanction lists
2.) *High-Risk* -- Countries noted for corruptions, PEPs, high-risk products & services. Enhanced due diligence and stringent controls should be used
3.) *Medium-Risk*) -- (Something not high nor low/standard)
4.) *Low- or Standard-Risk* -- The baseline risk of money laundering; normal business rules apply.
What ten types of customers might be considered high-risk for money laundering? - CORRECT ANSWER 1.) Casinos
2.) Offshore corps located in tax/baking havens
3.) Leather goods stores
4.) Vehicle dealerships (new & used)
5.) Machine parts manufacturers
6.) Travel agencies
7.) Brokers/dealers in securities
8) Jewel, gem, and precious metal dealers
9.) Import/export companies
10.) Cash-intensive businesses
What is the definition of a Financial Intelligence Unit (FIU) according to the Egmont Group (1996, amended 2004)? - CORRECT ANSWER • A central, national agency responsible for receiving (and, as permitted) requesting analyzing and disseminating to the competent authorities, disclosures of financial information
• Concerning suspected proceeds of crime and potential financing of terrorism, and
• Required by national legislation
In order to combat money laundering and terrorist financing.
According to the Wolfsberg Anti-Money Laundering Principles for Private Banking (2000), what are situations for private banking that require further due diligence? - CORRECT ANSWER Public officials -- current or former -- as well as their families and close associates
High-risk countries
High-risk activities involving clients and beneficial owners whose source of wealth "emanates from activities known to be susceptible to money laundering."
What are some characteristics of a successful AML compliance training program? - CORRECT ANSWER 1.) Should meet the standards set out in the laws and regulations that apply to the institution
2.) Should satisfy internal policies and procedures
3.) Should mitigate the risk of getting caught up in a money laundering scandal
4.) Should stress the importance of AML efforts
5.) Should educate employees about what to do if they encounter potential money laundering
Identify the basic elements behind the development of an effective AML compliance training program. - CORRECT ANSWER 1.) Whom to train
2.) On what to train
3.) How to train
4.) When to train
5.) Where to train
What steps should the independent audit take to evaluate the bank's ability to identify unusual activity? - CORRECT ANSWER 1.) Reviewing policies, procedures, and processes for suspicious activity monitoring
2.) Evaluating the system's methodology for establishing and analyzing expected activity or filtering criteria
3.) Evaluating the system's ability to generate monitoring reports, and
4.) Determining whether the system's filtering criteria are reasonable.
Are the costs of non-compliance with AML laws and regulations limited to fines and penalties levied by regulators? - CORRECT ANSWER No -- other significant additional costs include
• Legal bills
• Loss of business due to repetitional damage
• Extensive compliance review charges
• Consulting fees
• Costs for system and other compliance program enhancements
• Opportunity costs as compliance staff (and others) will be spend time addressing the consent order.
How can senior management show its commitment to compliance with AML laws and regulations? [6 ways] - CORRECT ANSWER 1.) Establishing a strong compliance plan that is approved by the board and is fully implemented
2.) Insisting that it be kept informed of compliance effort, audit reports, and any compliance failures, with corrective measures instituted
3.) Communicating compliance expectations to the institutional personnel
4.) Including regulatory compliance within the job descriptions and job performance evaluations of institution personnel
5.) Implementing procedures, processes, and controls to ensure compliance with the AML program
6.) Conditioning employment on regulatory compliance
Identify the responsibilities of the AML compliance officer. - CORRECT ANSWER Designs and implementing the compliance program
Makes necessary changes and disseminating information about the program's successes and failures to key staff members
Constructs AML content for staff training programs
Remains current on legal and regulatory developments in the field
Describe the steps a bank should consider taking upon receipt of the subpoena. - CORRECT ANSWER 1.) Senior management and/or counsel should review the subpoena
2.) Institution should take all appropriate measures to comply completely in a timely matter. (Failure to do so can result in adverse action and penalties.
3.) Shout *not* notify the custom who is being investigated
4.) If the government asks that certain accounts be kept open, such a request should be obtained in writing, on proper letterhead, and under proper authority from the government.
Identify several types of internal reports financial institutions may use to discover money laundering and terrorist financing. - CORRECT ANSWER • Daily cash activity in excess of the reporting threshold
• Daily cash activity just below the country's reporting threshold
• Cash activity aggregated over a period of time
• Wire transfer reports/logs (with geographic filters)
• Monetary instruments logs/reports
• Check kiting/drawing on uncollected funds
• Significant change reports
• New account activity reports
What steps should the bank consider when served with a search warrant? - CORRECT ANSWER 1.) Call the institution's counsel (inside or outside)
2.) Review the warrant to understand its scope
3.) Ask for and obtain a copy of the warrant
4.) Ask for a copy of the affidavit that supports the search warrant
5.) Remain present while the agents record an inventory of all items they seize and remove from the premises.
6.) Keep track of all records taken by law enforcement and ask for a copy of law enforcement's inventory
7.) Write down the names and agency affiliations of the agents who conduct the search.
Describe a typical suspicious or unusual transaction reporting process within a financial institution. - CORRECT ANSWER Varies from country to country but, in general
• Procedures to identity potential suspicious transaction or activity
• A formal evaluation of each instance, and continuation, of unusual transactions or activity
• Documentation of the suspicious transaction reporting decision, whether or not it has been filed with the authorities
•Procedures to notify periodically senior management or the board of directors of suspicious transaction filings
• Employee training on detecting suspicious transactions or activities.
What is the purpose of conducting an international investigation? - CORRECT ANSWER • To learn the nature and extent of any potential wrong doing
• To develop information sufficient to report -- when necessary -- to the authorities
• To enable the institution to minimize its liability
• To stop any potential money laundering
Identify the factors a prosecutor may consider when determining whether or not to bring a case against an institution involving money laundering-related charges. - CORRECT ANSWER Whether...
• The institution has a criminal history
• The institution has cooperated with the investigation
• The institution discovered and self-reported the money laundering related issues
• The institution has had a comprehensive and effective AML program
• The institution has taken timely and effective remedial action
• There are civil remedies available that can serve as punishment
• Deterring wrongdoing by others is needed and will be served by a prosecution
What is a commission rogatoire? - CORRECT ANSWER A written request for legal or judicial assistance sent by the central authority of one country to the central authority of another when seeking evidence from the foreign jurisdiction.
The letter typically specifies the nature of the request, the relevant criminal charges in the requesting country, the legal provision under which the request is made, and the information sought.
Identify the three gateways that assist with the AML cooperation between countries. - CORRECT ANSWER 1.) Mutual legal assistance treaties
2.) Financial Intelligence
3.) The Supervisory Channel
If an institution decides to file and STR, what should they do as soon as possible? - CORRECT ANSWER Notify the investigators or prosecutors
What is a nominee company? - CORRECT ANSWER A corporation that is formed for the express purpose of holding securities and other assets in its name on behalf of others, or providing nominee directors and/or officers on behalf of clients.
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?
In the money laundering context, what's the significance of a trust account (on- or offshore)? - CORRECT ANSWER It can be used as part of the first step in converting illicit cash into less suspicious assets
It can help hide criminal ownership of funds or other assets
It is often an essential link between different money laundering techniques.
What are the four related reasons to establish or control a shell company for money laundering purposes, according to the 2001 report, "Money Laundering in Canada: An Analysis of RCMP Cases"? - CORRECT ANSWER 1.) Shell companies accomplish the objective on converting the cash proceeds or crime into alternative assets;
2.) Through the use of companies, the launderer can create the perception that illicit funds have been generated from a legitimate source
3.) Once a shell company is established, a wide range of legitimate and/or bogus business transaction can be used to further the laundering process
4.) Shell companies can also be effective in concealing criminal ownership. (Nominees can be used as owners, directors, arrivers or shareholders.)
What is the difference in the money trail between terrorist financing and money laundering? - CORRECT ANSWER The money laundering trail is *circular* -- the money eventually winds up with the person who generated it.
The terrorist financing trail is *linear* -- the money generated is used to propagate terrorist groups and activities.
How does having a lawyer as trustee on an account at a financial institution create vulnerabilities to money laundering at an institution? - CORRECT ANSWER Sometimes illicit money is placed in a law firm's general trust account in a file set up in the name of the client, a nominee, or a company controlled by the client.
What general characteristics of terrorist financing can a financial institution look at to avoid becoming conduits for terrorist financing? - CORRECT ANSWER 1.) Use of an account as a front for a person with suspected terrorist links
2.) Appearance of an accountholder's name on a list of suspected terrorists
3.) Frequent large cash deposits in accounts of non-profit organizations
4.) High volume of transactions in the account
5.) Lack of a clear relationship between the banking activity and the nature of the accountholder's business
What are six principles set forth in the Basel Committee's Statement of Principles, "Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering"? - CORRECT ANSWER 1.) Customer identification
2.) Compliance with laws
3.) Conformity with high ethical standards and local laws and regulations
4.) Full cooperation with national law enforcement to the extent permitted without breaching with customer confidentiality
5.) Staff training
6.) Record keeping and audits
According tot he FATF 40 Recommendations, the complete set of countermeasures against money laundering and terrorist financing covers what five elements? - CORRECT ANSWER 1.) The identification of risks and development of appropriate policies
2.) The criminal justice system and law enforcement
3.) The financial system and its regulation
4.) The transparency of legal persons and arrangements
5.) International cooperation
According to § 312 of the USA PATRIOT Act, the due diligence program for correspondent and private banking accounts must address what three measures? - CORRECT ANSWER 1.) Determining whether enhanced due diligence is necessary
2.) Assess the money laundering risk presented by he correspondent account
3.) Applying risk-based procedures and controls reasonably designed to detect and report suspected money laundering
According the the Basel Committee's 2004 paper, "Consolidated KYC Risk Management," identify the elements that should be addressed in a global approach to KYC. - CORRECT ANSWER 1.) Risk management
2.) Customer acceptance and ID policies
3.) Ongoing monitoring of higher-risk accounts
How is a private banking account defined under § 312 of the USA PATRIOT Act? - CORRECT ANSWER An account with a minimum aggregate deposit of $1 million for one or more non-US persons and which is assigned to a bank employee acting as a liaison with the non-US person.
According to the Basel Committee's 2001 paper, "Customer Due Diligence for Banks," what are the four key elements of KYC? - CORRECT ANSWER 1.) Customer identification
2.) Risk management
3.) Customer acceptance
4.) Monitoring
What is a Memorandum of Understanding (MOU)? - CORRECT ANSWER An agreement between two parties establishing a set of principles that govern their relationship on a particular matter.
In the AML context, the model is established by the Egmont Group.
Unlike a Mutual Legal Assistance Treaty, this gateway is ordinarily used not for obtaining evidence, but for obtaining intelligence that might lead to evidence.
According to statements by the US Treasury and IRS, what are six patters financial institutions can look for as they investigate possible money laundering? - CORRECT ANSWER 1.) Unusually high monthly balances in comparison to known sources of income
2.) Unusually large deposits, deposits in round numbers, or deposits in repeated amounts that are not attributable to legitimate sources of income
3.) Multiple deposits made under reportable thresholds
4.) The timing of deposits. (This is particularly important when dates of illegal payments are known.)
5.) Checks written for unusually large amounts relative to a suspect's known practices
6.) A lack of account activity. (This might indicate transactions in currency or the existence of other unknown bank accounts.)
What type of documents would a financial institution have that could assist a financial investigator in tracking money movements? - CORRECT ANSWER Signature cards
Account statements
Deposit tickets
Checks & withdrawal items
Credit & debit memoranda
Loan records
Cashier's checks
Certified checks
Traveler's checks
Money orders
Currency exchange records
Wire transfer records
Safe deposit box records
Credit card records
A bank receives a subpoena about a checking account held at its institution. The bank has initiated an internal investigation. What factors should the bank consider when deciding whether to close the account? - CORRECT ANSWER 1.) The legal basis for closing the account
2.) The institution's state policies and procedures for closing an account
3.) The seriousness of the underlying conduct
4.) BUT if law enforcement requests that the account be kept open, the institution should request that the investigator or prosecutor make that request in writing and on proper letterhead.
How did the EC's (EU's) Second Directive on the Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) expand on the First Directive? - CORRECT ANSWER It expanded the cope of the First Directive beyond drug crimes.
The definition of "criminal activity" was expanded to include all serious crimes, including corruption and fraud against the financial interests of the European Community.
What is an International Business Company? - CORRECT ANSWER A variety of offshore corporate structures (alternately called "exempt companies"), which are dedicated to business use outside of the incorporating jurisdiction, normally in a jurisdiction with minimal filing and reporting requirements.
What is an exempt account? - CORRECT ANSWER A distinction available in some countries that permits a financial institution to waive its responsibility to report certain transactions that would otherwise be required.
Exempt accounts must be documented and the financial institutions that secure the exemptions must still monitor their transactions.
Describe an intermediary financial institution. - CORRECT ANSWER One that receives funds from a wire transfer transmitter's financial institution and relays or transmits the order of payment to the recipient's financial institution.
Describe a lockbox. - CORRECT ANSWER A service offered by banks to companies in which the company receives payments by mail to a post office box and the bank picks up the payments several times a day, despots them into the company's account, and notifies the company of the deposits. [Show Less]