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Flashcards in CH 6 - PRACTICE QUESTIONS Deck (123)
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QUESTION 1 Which of the following is the most common method of laundering money through a legal money services business? A. Purchasing structured money instruments. B. Smuggling bulk-cash. C. Transferring funds through Payable Through Accounts (PTAs). D. Exchanging Colombian pesos on the black market.

A. Purchasing structured money instruments.

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QUESTION 2 In general, the three phases of money laundering are said to be: Placement: A. Structuring and manipulation. B. Layering and integration. C. Layering and smurfing. D. Integration and infiltration.

B. Layering and integration.

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QUESTION 3 Which statement is true? A. Bust-out schemes are popular in creating large bankruptcy frauds where businesses secure increasing loans in excess of the actual value of the company or property and then run with the money, leaving the lender to foreclose and take a substantial loss. B. Cuckoo smurfing is a significant money laundering technique identified by the Financial Action Task Force, where 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.

A. Bust-out schemes are popular in creating large bankruptcy frauds where businesses secure increasing loans in excess of the actual value of the company or property and then run with the money, leaving the lender to foreclose and take a substantial loss.

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QUESTION 4 Which three of the following is an indication of possible money laundering in an insurance industry scenario? A. Insurance products sold through intermediaries, agents or brokers. B. Single-premium insurance bonds, redeemed at a discount. C. Policyholders who are unconcerned about penalties for early cancellation. D. Policyholders who redeem the policy within the “free look” period.

B. Single-premium insurance bonds, redeemed at a discount. C. Policyholders who are unconcerned about penalties for early cancellation. D. Policyholders who redeem the policy within the “free look” period.

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QUESTION 5 Which two activities are typically associated with the black market peso exchange (BMPE) money laundering system? A. Converting illicit drug proceeds from dollars or Euros to Colombian pesos. B. Converting illicit drug proceeds from Colombian pesos to dollars or Euros. C. Facilitating purchases by Colombian importers of goods manufactured in the United States or Europe through peso brokers. D. Facilitating purchases by European or U.S. importers of goods manufactured in Colombia through peso brokers.

A. Converting illicit drug proceeds from dollars or Euros to Colombian pesos. C. Facilitating purchases by Colombian importers of goods manufactured in the United States or Europe through peso brokers.

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QUESTION 6 What is the Right of Reciprocity in the field of international cooperation against money laundering? A. The legal principle that financial institutions that have referred customers to other financial institutions can share information about these customers with the other institutions. B. A rule of the Basel Committee allowing properly regulated financial institutes of another member state of the Basel Committee to do business without additional supervision to the degree that the other state grants the same right. C. The right of each FATF member country to delegate prosecution of a case of money laundering to another member that is already investigating the same case. D. 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

D. 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

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QUESTION 7 The greatest risk for money laundering is for casinos that A. Provide their customers with a wide array of gambling services. B. Operate in a non-Egmont member country. C. Allow customers with credit balances to withdraw funds by check in another jurisdiction. D. Only send suspicious transaction reports to the financial intelligence unit of the country it operates in.

C. Allow customers with credit balances to withdraw funds by check in another jurisdiction.

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QUESTION 8 Which statement is true regarding the risk of Politically Exposed Persons (PEPs)? A. PEPs provide access to third parties on whom the financial institution has not conducted sufficient due diligence. B. PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds. C. PEPs are foreign customers who inherently present additional risk as they are engaged in crossborder transactions. D. PEPs generally do not pose enhanced risks to an institution due to their political standing; rather, PEPs increase the prestige of an institution.

B. PEPs have significantly greater exposure to the politically corrupt funds, including accepting bribes or misappropriating government funds.

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QUESTION 9 In 2014 the Wolfsberg Group published their 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? A. The geographic risk. B. The ownership and management structure C. The resume of the Compliance Officer D. The customer base.

A. The geographic risk. B. The ownership and management structure D. The customer base.

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QUESTION 10 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 she is also interested in opening a personal investment account. The account representative refers the customer to their brokerdealer. 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? A. The customer asks many questions about the brokerage account, but none of them are related to investing. B. The customer is opening a commercial account and at the same time a personal investment account. C. The address of the account holder and the branch where the customer came to open the account are not close to each other. D. That the customer appears unconcerned about the fees.

A. The customer asks many questions about the brokerage account, but none of them are related to investing. C. The address of the account holder and the branch where the customer came to open the account are not close to each other. D. That the customer appears unconcerned about the fees.

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QUESTION 11 Trade Based Money Laundering requires the ability to: A. Over- or under-invoice the goods. B. Sell the imported goods for as little as possible. C. Use goods that do not need to be declared. D. Avoid the use of high-value assets such as luxury cars or boats.

A. Over- or under-invoice the goods.

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QUESTION 12 Which of the following statements is true? Correspondent banking is MOST vulnerable to money laundering when the correspondent account is: A. Maintained for foreign financial institutions that are banks. B. Not used to provide services directly to third parties. C. Maintained for a foreign bank that does not have a physical presence in any country. D. Maintained for a foreign private bank that is publicly traded and is a qualified intermediary.

C. Maintained for a foreign bank that does not have a physical presence in any country.

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QUESTION 13 Which statement is true? Lawyers: A. In FATF member countries can generally not be used to serve as formation agents to set up trusts, front companies or shell companies. B. And similar professional “gatekeepers” are called money services businesses. C. Can generally not be used to act as a nominee shareholder for a beneficial owner. D. Can be abused by launderers by using the accounts they set up for them for the placement and layering of funds.

D. Can be abused by launderers by using the accounts they set up for them for the placement and layering of funds.

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QUESTION 14 Which three of the following statements are true in respect of the Fourth EU Anti-Money Laundering Directive? A. Member countries can decide when and if the incorporate it into their own local laws. B. It repeals and replaces the Third EU Directive on Anti- Money Laundering. C. The beneficial owner is defined as having a minimum of 25% direct or indirect ownership of the company. D. The definition of a PEP is expanded to include domestic persons.

B. It repeals and replaces the Third EU Directive on Anti- Money Laundering. C. The beneficial owner is defined as having a minimum of 25% direct or indirect ownership of the company. D. The definition of a PEP is expanded to include domestic persons.

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QUESTION 15 According to the EU Directives an independent legal professional is obligated to report suspicion of money laundering in a client relationship when: A. Representing a client in a legal matter. B. Ascertaining the legal position for a client. C. Participating in financial or corporate transactions. D. Obtaining information associated with a judicial proceeding.

C. Participating in financial or corporate transactions.

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QUESTION 16 Which of the following is the most difficult regulatory challenge facing a foreign financial institution with a correspondent banking relationship in the U.S.? A. USA Patriot Act. B. Basel Due Diligence Principles for Banks. C. FATF Guidance on Terrorist Financing. D. UN Security Council Resolution on Correspondent Banking.

A. USA Patriot Act.

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QUESTION 17 Which were the Basel Committee’s two main motivations to encourage strong Know Your Customer programs in its paper “Customer Due Diligence for Banks”? A. Mirror FATF’s KYC Recommendations. B. Meet European Union guidelines. C. Protect the safety and soundness of banks. D. Protect the integrity of banking systems.

C. Protect the safety and soundness of banks. D. Protect the integrity of banking systems.

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QUESTION 18 What is the definition of a predicate offense? A. Lawful or unlawful activity that involves willful blindness, and if there is an international element to the crime, can lead to a suspicious activity report. B. Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of money laundering. C. An interface which is the underlying segment of a suspicious transaction monitoring system. D. A specified unlawful activity that is committed through concentration accounts deceiving customers that are not directly related to the account.

B. Unlawful activity whose proceeds, if involved in the transaction, can give rise to prosecution for the crime of money laundering.

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QUESTION 19 What is considered a beneficial owner of an account? A person or entity: A. That has direct signatory authority over an account, and whose name appears on the account. B. That is ultimately entitled to the funds in the account, even though his name may not appear on the account. C. That is the originator and the destination of most (but not all) transactions conducted within the account, but who does not ultimately control such funds. D. That is a gatekeeper, has the legal title to the account, and typically transfers the funds to a trust.

B. That is ultimately entitled to the funds in the account, even though his name may not appear on the account.

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QUESTION 20 The FinCen “Advisory to US Financial Institutions on Promoting a Culture of Compliance”, published in 2014, listed six areas of emphasis. Which three areas below are included in that list: A. Leadership Should Be Engaged. B. Information Should Be Shared Throughout the Organization. C. Leadership and Staff Should Understand How Their BSA Reports are Used. D. The Organization must have an Appropriately Qualified Compliance Officer.

A. Leadership Should Be Engaged. B. Information Should Be Shared Throughout the Organization. C. Leadership and Staff Should Understand How Their BSA Reports are Used.

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QUESTION 21 Which of the following should a national legislature consider when criminalizing money laundering in line with the CFATF 19 Recommendations (choose three)? A. Do not limit the number of specific predicate offenses for money laundering. B. Criminalize conspiracy or association to engage in money laundering. C. Indicate whether it is relevant that a predicate offense may have been committed outside the local jurisdiction. D. Require money laundering offenses to prove that the offender has actual knowledge of a criminal connection to the funds.

A. Do not limit the number of specific predicate offenses for money laundering. B. Criminalize conspiracy or association to engage in money laundering. C. Indicate whether it is relevant that a predicate offense may have been committed outside the local jurisdiction.

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QUESTION 22 Which three statements are true about the 4th EU Directive on Money Laundering? It: A. Updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. B. Repeats the definition of a politically exposed person in previous Directives. C. 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. D. Requires firms to apply the customer due diligence requirements to existing customers at appropriate times on a risk sensitive basis.

A. Updates European Community legislation to be further in line with the Financial Action Task Force (FATF) 40 Recommendations. C. 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. D. Requires firms to apply the customer due diligence requirements to existing customers at appropriate times on a risk sensitive basis.

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QUESTION 23 Which one of the following statements is correct in respect of the FATF 40 Recommendations which state that countries should: A. Not allow bearer shares and legal persons that are able to issue bearer shares. B. Gather statistics on STRs; prosecutions and convictions; on property frozen, seized and confiscated; and on mutual legal assistance, but not necessarily on other international requests for co- operation. C. Consider the feasibility of a system where banks and other financial institutions and intermediaries would report currency transactions without indicating a minimum fixed amount. D. Not approve the establishment or accept the continued operation of shell banks.

D. Not approve the establishment or accept the continued operation of shell banks.

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QUESTION 24 Among the Principles for Information Exchange Between Financial Intelligence Units for Money Laundering Cases, issued by the Egmont Group on June 13, 2001, we find which of the following? A. Information-sharing agreements must follow the model issued by the Egmont Group. B. Information which is shared under these agreements will be exempt from the local privacy laws of the countries involved. C. Information exchanged between FIUs may be used only for the specific purpose for which the information was sought or provided. D. The requesting FIU may make use of the information shared by a disclosing FIU for administrative purposes without the prior consent of the disclosing FIU.

C. Information exchanged between FIUs may be used only for the specific purpose for which the information was sought or provided.

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QUESTION 25 In which stage of money laundering would you classify depositing small amounts of cash into several related accounts? A. Integration. B. Structuring. C. Placement. D. Construction.

C. Placement.

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QUESTION 26 In which stage of money laundering would you classify the use of laundered funds to purchase high value assets and luxury items? A. Integration. B. Structuring. C. Placement. D. Construction.

A. Integration

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QUESTION 27 In most laws criminalizing money laundering, it is stated that: A. Financial institutions are not responsible for money laundering or suspicious transactions taking place within their accounts until the government places the customer on a watch list. B. Informing customers that their accounts and/or transactions are the subject of an AML investigation is not punishable. C. The dirty money undergoing money laundering will not be confiscated because of privacy laws. D. It is required that the institution identifies the beneficial owner(s) of the account.

D. It is required that the institution identifies the beneficial owner(s) of the account.

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QUESTION 28 The tactic in which individuals make multiple deposits in small quantities to avoid detection is called: A. Paralleling. B. Integration. C. Investing. D. Structuring.

D. Structuring.

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QUESTION 29 In which case might a Suspicious Transaction Report NOT be necessary? A. A customer who deposits money of suspicious origins and refuses to answer questions from the financial institution’s staff. B. A customer who tries to move money that is suspected of being derived from criminal activity. C. A customer who owns a large supermarket and deposits large amounts of cash several times a day. D. A customer whose account is showing transaction activities which are beyond his known financial capability.

C. A customer who owns a large supermarket and deposits large amounts of cash several times a day.

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QUESTION 30 As part of their role in fighting money laundering, financial institutions should: A. Designate a compliance officer. B. Depend solely on The State’s staff for combating money laundering. C. Refuse small cash deposits under the reporting threshold. D. Not open accounts for people from high risk jurisdictions.

A. Designate a compliance officer