ACAMS Practice Test 2 (Flash Cards) 175 Questions with Verified Answers
When a financial institution is served with a search warrant by a law
... [Show More] enforcement agency, what are three things that the employees of the institution should do? - CORRECT ANSWER - They should cooperate fully with the law enforcement agents and remain calm and polite.
- They should try to obtain an inventory of the materials that the law enforcement agents take from the institution.
- They should review the warrant to determine its scope.
Which of the following is the most common method of laundering money through a legal money services business? - CORRECT ANSWER Exchanging currency and remitting money
In general, the three phases of money laundering are said to be: placement and: - CORRECT ANSWER layering and integration.
Which statement is true?
A. Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal oversight by local authorities and weak procedures to inspect goods.
B. Cuckoo smurfing is a significant money laundering technique identified by the Financial Action Task Force, wherein a form of structuring uses nested accounts with shell banks in secrecy havens.
C. In its 40 Recommendations, the FATF issued a list of designated categories of offense that asserts crimes for a money laundering prosecution.
D. E-cash is not attractive to the money launderer because it cannot be completely anonymous and does not allow for large amounts to be transported quickly and easily. - CORRECT ANSWER Systemic weaknesses in free trade zones include inadequate AML/CFT safeguards, minimal oversight by local authorities and weak procedures to inspect goods.
Which three of the following is an indication of possible money laundering in an insurance industry scenario? - CORRECT ANSWER - Single-premium insurance bonds, redeemed at a discount
- Policyholders who are unconcerned about penalties for early cancellation
- Policyholders who redeem the policy within the free look period
Which two activities are typically associated with the black market peso exchange (BMPE) money laundering system? - CORRECT ANSWER - Converting illicit drug proceeds from dollars or euros to Colombian pesos
- Facilitating purchases by Colombian importers of goods manufactured in the United States or Europe through peso brokers
What is the right of reciprocity in the field of international cooperation against money laundering? - CORRECT ANSWER A rule in the law of a country allowing its authorities to cooperate with authorities of other countries to the degree that their law allows them to do the same
The greatest risk for money laundering is for casinos that? - CORRECT ANSWER Allow customers with credit balances to withdraw funds by check in another jurisdiction.
Which statement is true regarding the risk of politically exposed persons (PEPs)? - CORRECT ANSWER PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds.
In 2014, the Wolfsberg Group published its Anti-Money Laundering Principles for Correspondent Banking. Which three of the following elements are recommended to be included in the due diligence of
a correspondent banking client? - CORRECT ANSWER - The geographic risk
- The ownership and management structure
- The customer base
A new customer approaches a bank to open a commercial account. The customer provides an address for the account located across the city from the branch. When asked by the account representative if
the customer requires any additional banking services, the customer responds that she is also interested in opening a personal investment account. The account representative refers the customer to the
broker-dealer. The customer tells the firm representative she has never had a brokerage account before and has a few questions about how an investment account works. The customer asks how deposits can be made into her account, if there are any reporting requirements, and how to go about moving balances out of the account using wire transfers. No questions are asked about fees associated with these transactions. Which three items would be considered suspicious? - CORRECT ANSWER - The customer asks many questions about the brokerage account but none of them is related to investing.
- The address of the account holder and the branch where the customer came to open the account are not close to each other.
- The customer appears unconcerned about the fees.
Trade-based money laundering requires the ability to: - CORRECT ANSWER Over- or under-invoice the goods.
Which of the following statements is true? Correspondent banking is most vulnerable to money laundering when the correspondent account is? - CORRECT ANSWER Maintained for a foreign bank that does not have a physical presence in any country.
Which statement is true?
A. Lawyers in FATF member countries generally cannot be used to serve as formation agents to set up trusts, front companies or shell companies.
B. Lawyers and similar professional gatekeepers are called money services businesses.
C. Lawyers generally cannot be used to act as nominee shareholders for a beneficial owner.
D. Lawyers can be abused by launderers by using the accounts they set up for them for the placement and layering of funds. - CORRECT ANSWER Lawyers can be abused by launderers by using the accounts they set up for them for the placement and layering of funds.
Which three of the following statements are true in respect to the Fourth EU Anti-Money Laundering Directive? - CORRECT ANSWER - It repeals and replaces the Third EU Directive on Anti-Money Laundering.
- Each member country must hold beneficial ownership information in a central registry and it must be made available to competent authorities.
- The definition of a PEP is expanded to include domestic persons
According to the EU Directives, an independent legal professional is obligated to report suspicion of money laundering in a client relationship when? - CORRECT ANSWER Participating in financial or corporate transactions.
Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the U.S.? - CORRECT ANSWER USA PATRIOT Act
Which were the Basel Committee's two main motivations to encourage strong know your customer programs in its paper Customer Due Diligence for Banks? (Choose two) - CORRECT ANSWER - Protect the safety and soundness of banks.
- Protect the integrity of banking systems.
What is the definition of a predicate offense? - CORRECT ANSWER Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of money laundering
What is considered a beneficial owner of an account? - CORRECT ANSWER A person or entity who is ultimately entitled to the funds in the account, even though his or her name may not appear on the account
FinCEN's Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance, published in 2014, listed six areas of emphasis. Which three areas are included in that list? - CORRECT ANSWER - Leadership should be engaged.
-Information should be shared throughout the organization.
- The organization must have an appropriately qualified compliance officer.
Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations? (Choose three.) - CORRECT ANSWER Indicating whether it is relevant that a predicate offense may have been committed outside the local jurisdiction
Which three statements are true about the Fourth EU Directive on Money Laundering? - CORRECT ANSWER - It updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations.
- It repeats the definition of a politically exposed person in previous directives.
- It repeats the customer due diligence requirements of the previous directives but adds more detail to the requirements by, for example, including a specific requirement to identify the beneficial
owner and includes ongoing monitoring requirements.
Which one of the following statements is correct in respect of the FATF 40 Recommendations? Countries should: - CORRECT ANSWER Not approve the establishment or accept the continued operation of shell banks.
The Egmont Training Group published FIUs in Action: 100 Sanitized Cases. Which two of the items noted below were listed in the report as part of the six most frequent indicators of money laundering?
A. Defensive stance to questioning
B. Use of precious stones for moving value
C. Unrealistic wealth compared to client profile
D. Significant use of prepaid cards - CORRECT ANSWER
In which stage of money laundering would you classify depositing small amounts of cash into several related accounts? - CORRECT ANSWER - Integration
- Placement
In which stage of money laundering would you classify the use of laundered funds to purchase high value assets and luxury items? - CORRECT ANSWER - Integration
In most money laundering international standards, it is stated that - CORRECT ANSWER The institution should identify the beneficial owner(s) of the account.
The tactic in which individuals make multiple deposits in small quantities to avoid detection is called? - CORRECT ANSWER Structuring.
In which case might a suspicious transaction report not be necessary?
A. A customer deposits money of suspicious origins and refuses to answer questions from the financial institution's staff.
B. A customer tries to move money that is suspected of being derived from criminal activity.
C. A customer owns a large supermarket and deposits large amounts of cash several times a day.
D. A customer's account is showing transaction activities that are beyond his known financial capability. - CORRECT ANSWER A customer owns a large supermarket and deposits large amounts of cash several times a day.
As part of their role in fighting money laundering, financial institutions should: - CORRECT ANSWER Designate a compliance officer.
Over lunch with a friend from the computer operations department, a junior compliance analyst learns that there was a problem during the previous week related to data being transmitted to the transaction monitoring application. The friend states that because it was purely a technical computer system issue, he was quietly proud that he was able to rectify it quickly himself during the early hours of the morning. What action should the analyst take? - CORRECT ANSWER Congratulate his friend and, as soon as possible, ensure that the compliance officer is aware of the situation.
What is willful blindness defined as? - CORRECT ANSWER Deliberate avoidance of knowledge of the facts or ignoring obvious money laundering red flags
In anti-money laundering terminology, a red flag is: - CORRECT ANSWER A warning sign indicating potentially suspicious, risky transactions or activities.
The money laundering reporting officer of a financial institution should? - CORRECT ANSWER Review all available information and file a suspicious transaction report in respect of any unusual or potentially suspicious activity.
Which of the following statements is true?
A. Credit cards are not likely to be used in the layering phase of money laundering because of restrictions in cash payments.
B. Credit cards are effective instruments for laundering money because the transactions do not create an audit trail.
C. A launderer can launder money by prepaying his or her credit card using funds that are already in the banking system, creating a credit balance on his account, and requesting a credit refund.
D. A launderer can use illicit funds that are already in the banking system to pay his or her credit card bill for goods purchased, which is an example of placement. - CORRECT ANSWER A launderer can launder money by prepaying his or her credit card using funds that are already in the banking system, creating a credit balance on his account, and requesting a credit refund.
Why is a payable through account vulnerable to money laundering? - CORRECT ANSWER It can be very difficult to conduct due diligence on the foreign institution customers who are ultimately using these accounts.
What is the reasoning behind implementing a risk-based anti-money laundering approach? - CORRECT ANSWER Institutions can best use their limited resources to focus on matters where the money laundering risks are highest.
According to the FATF 40 Recommendations, designated non-financial businesses and professions include? - CORRECT ANSWER Casinos, real estate agents and dealers in precious stones.
According to the European Union's Fourth Directive, the threshold for entities obliged to report suspicious transactions decreased to? - CORRECT ANSWER $10,000 euros.
Tom works as a compliance officer at ABC Bank. He is looking at the transactions of one of the bank's customers, Mr. Brown, the owner of a check cashing company. Over the last six months, Mr. Brown has
not made withdrawals of cash against check deposits. He also deposited two checks for $2,000 each that were issued by a casino. When checking the KYC file, Tom sees that, when opening the account, Mr. Brown had requested information about fees and commission that are charged by the bank. What should arouse Tom's suspicion the most? - CORRECT ANSWER Mr. Brown has not made cash withdrawals against check deposits.
A small broker-dealer has an AML compliance program that addresses procedures for filing suspicious transaction reports and includes policies, procedures and internal controls for customer identification, monitoring accounts and identifying money laundering red flags. Every employee of the broker dealer is trained via the Internet in January and in July on AML issues. The board does not take the Internet training. Instead, the compliance officer organizes a luncheon for them where an outsider comes in and trains them. The program provides for the appointment of a compliance officer, and once a year the compliance officer conducts an audit to test the program. In what respect does the program need improvement? - CORRECT ANSWER The AML program should be tested by an independent person, not the compliance officer.
The Basel Committee in Banking Supervision can be defined as a committee: - CORRECT ANSWER Of the G10 central bank governors, which issues guidance on subjects including customer due diligence, risk management and cross-border wire transfers.
Which of the following best describes the alternative remittance system?
A. The transfer of value between countries, outside of the legitimate banking system
B. A non-electronic data remittance system used in several foreign countries to report suspicious activities
C. Old-fashioned reporting requirements commonly used in non-cooperative countries and territories
D. The transfer of funds between two or more financial institutions using concentration accounts - CORRECT ANSWER The transfer of value between countries, outside of the legitimate banking system
An AML compliance officer was reviewing customers at XYZ Bank and one of the customers (Mr. Sam Tropicana) attracted her attention. During the recent months, the cash deposits and withdrawals that
were transacted through his account increased with amounts ranging between $7,500 and $17,000. In addition, Sam deposited two checks, issued by a casino, into his account for $32,000 each. When opening the account, Sam stated that he operated an import/export company. Which one of the following items should cause the compliance officer to launch an investigation? - CORRECT ANSWER Sam had a recent increase in large cash transactions for his import/export business.
Which three of the following statements are true?
A. Online gambling provides an excellent method of laundering because transactions are conducted primarily through credit or debit cards and the sites are typically unregulated offshore firms.
B. An institution can know when a credit card is used for online gambling transactions because the cards rely on codes that illustrate the type of transactions.
C Online gambling provides an excellent method of laundering because it lends itself to any type of cash movement and there is no face-to-face contact with the customer.
D. Some banks no longer allow the use of credit cards for online gambling transactions. - CORRECT ANSWER - Online gambling provides an excellent method of laundering because transactions are conducted primarily through credit or debit cards and the sites are typically unregulated offshore firms.
- An institution can know when a credit card is used for online gambling transactions because the cards rely on codes that illustrate the type of transactions.
- Some banks no longer allow the use of credit cards for online gambling transactions.
Which of the following statements is true?
A. The Egmont Group membership comprises national FIUs.
B. The Wolfsberg Group membership comprises central bank governors of the G10.
C. The European Union recommends legislation to be passed in the member countries.
D. The Basel Committee levies fines on the member countries for non-compliance with AML laws. - CORRECT ANSWER The Egmont Group membership comprises national FIUs.
Which three of the following statements are included in Section 313 of the PATRIOT Act definition of physical presence in respect to shell banks? - CORRECT ANSWER - There is a fixed address.
- It employs at least one full-time employee.
- Banking records are kept at the fixed address.
The FATF has consistently noted the use of casinos in money laundering schemes in its annual typologies reports. One laundering technique involving casinos is? - CORRECT ANSWER Asking for winners' checks to be made out in the name of third persons or without a payee.
Which of the following should an anti-money laundering specialist include on an internal investigation log? - CORRECT ANSWER Notes pertaining to activity that is unusual but for which a suspicious transaction report has not been filed
What are the three key criteria in AML risk rating? - CORRECT ANSWER Customer type, geographic location, products and services used
A financial institution is looking to establish an online account opening service. The institution plans to offer this product to new and existing customers within the country. Which of the following would
be the best plan of action for an AML specialist to recommend enabling the institution to verify the customer's identity? - CORRECT ANSWER Ensure that the institution has a reliable third-party source that will enable verification of the customers.
Which of the following controls would most effectively minimize the need to correct failures to collect required customer information in the account opening process? - CORRECT ANSWER An automated account-opening platform that requires data entry prior to allowing the account to be opened
Jane, an investigator in the AML section of a large financial institution, is given a wide-ranging case to investigate involving potential money laundering in a number of countries and entities. Which three public source documents or records could aid Jane in furthering her investigation? - CORRECT ANSWER - Domestic corporate filings
- Court records
- Licensing and registration files
When drafting an AML policy, which of the following internal parties must approve the policy? - CORRECT ANSWER Executive management
Suzy is an AML compliance officer at an institution that is looking to open treasury management services (e.g., wires, check clearing and foreign draft issuance) for correspondent banking customers.
Which of the following should Suzy be most concerned about regarding the institution's capabilities concerning these customers? - CORRECT ANSWER Whether the correspondent accounts will be able to be monitored by the institution's monitoring systems
What are three specific sources of funds for financing terrorism? - CORRECT ANSWER - Kidnapping for ransom
- Trafficking in humans and arms
- Contributions to charities
A customer wants to establish a sizable relationship with a financial institution. The AML officer is not comfortable with the client's explanation for the source of the funds, but the client manager vouches for the client and is eager to open the relationship quickly. What should the AML officer do to validate the client's sources of funds? - CORRECT ANSWER Perform a background investigation to determine whether the client's source of funds is credible.
An AML compliance officer is investigating unusual activity that she has noticed in a customer's accounts. The customer has a retirement account, a savings account in trust for his son, a joint checking account with his wife, a company checking account and an individual brokerage account. The compliance officer believes the customer may be embezzling funds from his business. Which is the best path for her to follow up on her suspicions? - CORRECT ANSWER Look at the movement of funds in all the accounts, as the customer may be using all of them to launder money.
Identify three risks to financial institution employees for violations of AML laws: - CORRECT ANSWER - Civil penalties
- Termination of employment
- Criminal penalties
A customer at a brokerage firm indicated that he was primarily a conservative, long-range investor. The customer has recently been engaging in day trading in penny stocks. What should an AML compliance officer do in such a situation? - CORRECT ANSWER Check with the account officer to see if the customer has indicated a change in his investment strategy.
A financial institution branch manager who has been in place for over 10 years has not taken a vacation for almost four years. The company does not allow employees to roll vacation over from year to year. An AML compliance officer has noticed unusual activity in several accounts at the branch location. What should the AML officer do? - CORRECT ANSWER Conduct an investigation to establish whether the manager has engaged in transactions in the accounts where the unusual activity has occurred.
An AML compliance officer is looking to establish a suspicious activity reporting process at her small institution. Which of the following should be incorporated into the procedures? - CORRECT ANSWER Have employees refer all unusual activity to her so that she may conduct an investigation into what needs to be reported to authorities.
After reporting suspicious activity to the appropriate authorities, they request additional follow-up on the reports. Which of the following actions should an AML compliance officer take? - CORRECT ANSWER Cooperate fully with the authorities, as permitted by law.
A compliance officer is looking to improve a compliance program for a financial institution that operates in several countries. The institution has developed consistent customer due diligence (CDD) requirements for all customers of the institution that exceed each of the individual country's requirements. When looking to provide management reporting on the CDD compliance efforts of the
institution, which of the following would make the most sense? - CORRECT ANSWER Report on compliance with the company's stated requirements.
What is the best way to establish compliance as a key responsibility for every employee of a financial institution? - CORRECT ANSWER Have senior management require compliance as a condition of employment.
The Annex IV General Guide to Account Opening Consultative Document published in February 2016 by the Basel Committee lists information that should be obtained for the identification of legal persons. Which three items are recommended? - CORRECT ANSWER - Name, legal form, status and proof of incorporation of the legal person
- Permanent address of principal place of the legal person's activities
- Identity of natural persons who have authority to operate the account and who exercise control of the legal person through ownership or other means
Robert is a compliance officer for a financial institution. He is looking to assess the effectiveness of the current AML program. Which of the following should Robert consider in his assessment of the program's effectiveness? - CORRECT ANSWER Customer due diligence error rates, quality assurance testing on STR filings and percentage of products and services monitored for suspicious activity
Joe, the compliance officer for a small bank, has noticed that new regulations now require reporting on cross-border transactions that exceed a certain threshold. What are the appropriate next steps for Joe to take to prepare his bank for the new requirements? - CORRECT ANSWER Provide training to impacted associates, work with technology partners to capture all cross-borders transaction for reporting and implement a testing plan to be sure appropriate transactions are
When documenting ongoing training efforts, which of the following should be documented to demonstrate the distribution of the training to appropriate employees? - CORRECT ANSWER The names of the employees who took the training with their department name
When assessing a new product, which of the following should be considered as part of the assessment from an AML perspective? - CORRECT ANSWER The inherent risk of the product, the control environment to mitigate the risks presented by the product and the residual risk of the product in light of the controls
Marie, a compliance officer at a financial institution, attends an annual AML-industry conference and learns of a new regulation that will impact her current AML processes. The regulatory environment
has been relatively stable within the industry for several years but Marie is glad she attended this conference to get news of the new requirements. What should Marie do to stay abreast of future
changes in requirements? - CORRECT ANSWER Implement a process to determine when new regulations are published and assess them for impacts to the AML program.
A compliance officer is looking to provide some way to report on the effectiveness of the AML program to senior management. Which of the following would be the most appropriate means to keep senior
management informed of these efforts? - CORRECT ANSWER Develop a report containing metrics that reflect the effectiveness of various key program elements [Show Less]