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Flashcards in Chapter 4/5/6 Deck (61)
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According to Section 312 of the USA Patriot Act, the due
diligence program for correspondent and private banking
accounts must address what three measures?

The due diligence program for foreign correspondent and private
banking accounts for non‐U.S. persons must include “appropriate,
specific and risk‐based,” and, where necessary, enhanced policies,
procedures and controls reasonably designed to identify and report
suspected money laundering in a correspondent account
maintained in the United States. This due diligence program must
also be included in the institution’s anti‐money laundering program.
The due diligence program must address three measures:  
• Determining whether enhanced due diligence is necessary,  
• Assessing the money laundering risk presented by the
correspondent account,  
• Applying risk‐based procedures and controls reasonably designed
to detect and report suspected money laundering.


When categorizing risks, what are the four  
general levels of risk?

• Prohibited — The company will not tolerate any dealings of any kind
given the risk. Countries subject to economic sanctions or designated as
state sponsors of terrorism, such as Sudan or Iran, are prime candidates for
prohibited transactions. Prohibited customers would include shell banks,  
• High‐Risk – The risks here are significant, but are not necessarily
prohibited. To mitigate the heightened risk presented, the firm should
apply more stringent controls to reduce the risk, such as conducting
enhanced due diligence and more rigorous transaction monitoring.
Countries that are noted for corruption or drug trafficking are generally
deemed high risk. High‐risk customers may include PEPs; high‐risk products
and services may include correspondent banking and private banking,  
• Medium‐Risk — Medium risks are more than a low‐ or standard‐risk of
money laundering, and merit additional scrutiny, but do not rise to the
level of high‐risk, and  
• Low‐ or Standard‐Risk — This represents the baseline risk of money
laundering; normal business rules apply. FATF member countries and
domestic retail customers are frequently, but not always, considered to be
standard‐ or low‐risk.


How is a private banking account defined under  
Section 312 of the USA Patriot Act?

Under Section 312 of the USA Patriot Act, a  private banking
account is defined as an account with a minimum aggregate
deposit of $1 million for one or more non‐U.S. persons and
which is assigned to a bank employee acting as a liaison with
the non‐U.S. person.


What types of customers might be considered  
high‐risk for money laundering?

• Casinos,  
• Offshore corporations and banks located in tax/banking havens,  
• Leather goods stores,  
• Currency exchange houses, money remitters, check cashers,  
• Car, boat and plane dealerships,  
• Used‐car and truck‐dealers and machine parts manufacturers,  
• Travel agencies,  
• Brokers/dealers in securities,  
• Jewel, gem and precious metals dealers,  
• Import/ export companies, and  
• Cash‐intensive businesses (restaurants, retail stores, parking).


Why is the risk‐based approach more preferable than a
prescriptive approach in the area of anti‐money laundering
and counter‐terrorist financing?

• Flexible — as money laundering and terrorist financing risks
vary across jurisdictions, customers, products and delivery
channels, and over time,  
• Effective — as companies are better equipped than
legislators to effectively assess and mitigate the particular
money laundering and terrorist financing risks they face, and
• Proportionate — because a risk‐based approach promotes a
common sense and intelligent approach to fighting money
laundering and terrorist financing as opposed to a “check the
box” approach. It also allows firms to minimize the adverse
impact of anti‐money laundering procedures on their  
low‐risk customers.


What banking functions or products are considered  

• Private banking,  
• Offshore international activity,  
• Deposit‐taking facilities,  
• Wire transfer and cash‐management functions,  
• Transactions in which the primary beneficiary is undisclosed,  
• Loan guarantee schemes,  
• Travelers checks,  
• Official bank checks,  
• Money orders,  
• Foreign exchange transactions,  
• Trade‐financing transactions with unusual pricing features, and  
• Payable Through Accounts (PTAs)


What are the basic elements of financial institution's  
anti‐money laundering program?

• A system of internal policies, procedures and controls,
• A designated compliance officer with day‐to‐day oversight
over the AML program,
• An ongoing employee training program, and  
• An independent audit function to test the AML program.


What are some characteristics of a successful  
anti‐money laundering compliance training program?

Regulations and laws require financial institutions to have
formal, written AML compliance programs that include
“training for appropriate personnel.” A successful training
program not only should meet the standards set out in the
laws and regulations that apply to an institution, but should
also satisfy internal policies and procedures and should
mitigate the risk of getting caught up in a money laundering
scandal. Training is one of the most important ways to stress
the importance of anti‐money laundering efforts, as well as
educating employees about what to do if they encounter
potential money laundering.


Identify, in general, who should approve  
policies and procedures.

Policies and procedures should be in writing, and must be
approved by appropriate levels of management. In general,
institution‐level policies should be approved by the board,
while business unit procedures can be approved by business
unit management.


Identify the basic elements behind the development of  
an effective anti‐money laundering compliance  
training program.

• Who to train,  
• What to train on,  
• How to train,  
• When to train, and  
• Where to train


Identify the responsibilities of the anti‐money  
laundering compliance officer.

A person should be designated as the anti‐money laundering
compliance officer. This individual should be responsible for
designing and implementing the program, making necessary
changes and disseminating information about the program’s
successes and failures to key staff members, constructing
anti‐money laundering‐related content for staff training
programs and staying current on legal and regulatory
developments in the field.


What steps should the independent audit take to evaluate
the bank's ability to identify unusual activity?

• Reviewing policies, procedures, and processes for
suspicious activity monitoring,  
• Evaluating the system’s methodology for establishing and
analyzing expected activity or filtering criteria,  
• Evaluating the system’s ability to generate monitoring
reports, and
• Determining whether the system’s filtering criteria  
are reasonable.


Describe how the independent audit should review
Suspicious Transaction Reporting (STR) systems.

The independent audit should review Suspicious Transaction
Reporting (STR) systems, which should include an evaluation
of the research and referral of unusual transactions. Testing
should include a review of policies, procedures and processes
for referring unusual or suspicious activity from all business
lines (e.g., legal, private banking, foreign correspondent
banking) to the personnel or department responsible for
evaluating unusual activity.


Where does the ultimate responsibility for the  
AML compliance program rest with?

The ultimate responsibility for the AML compliance program
rests with the board of directors. Members must set the tone
from the top by openly voicing their commitment to the
program, ensuring that their commitment flows through all
service areas and lines of business, and holding responsible
parties accountable for compliance.


Are the costs of non‐compliance with anti‐money laundering
laws and regulations limited to fines and penalties levied by

The cost of the fines and penalties levied by regulators  
due to non‐compliance with anti‐money laundering laws and
regulations is only part of the overall expense.  Significant
additional costs include legal bills, potential  
loss of business due to reputational damage, extensive
compliance review charges, consulting fees, costs for system
and other compliance program enhancements, as well as the
opportunity costs as the compliance staff and others will be
spending the bulk of their time addressing the consent order.


What are the seven elements of a sound customer due
diligence (CDD) program?

Full identification of customer and business entities, including source
of funds and wealth when appropriate,  
• Development of transaction and activity profiles of each customer’s
anticipated activity,  
• Definition and acceptance of the customer in the context of specific
products and services,  
• Assessment and grading of risks that the customer or the account
• Account and transaction monitoring based on the risks presented,  
• Investigation and examination of unusual customer or account
activity, and  
• Documentation of findings.


How can senior management show its commitment  
to compliance with anti‐money laundering laws  
and regulations?

• Establishing a strong compliance plan that is approved by
the board of directors and is fully implemented,  
• Insisting that it be kept informed of compliance efforts,
audit reports and any compliance failures, with corrective
measures instituted,  
• Communicating compliance expectations to the institution
• Including regulatory compliance within the job descriptions
and job performance evaluations of institution personnel,  
• Implementing procedures, processes and controls to ensure
compliance with the AML program, and  
• Conditioning employment on regulatory compliance.


Describe a sound Know Your Employee program.

A Know Your Employee (KYE) program means that  
the institution has a program in place that allows it to
understand an employee’s background, conflicts of interest
and susceptibility to money laundering complicity.  
Policies, procedures, internal controls, job descriptions, code
of conduct/ethics, levels of authority, compliance with
personnel laws and regulations, accountability, monitoring,
dual control, and other deterrents should  
be firmly in place.


Identify several types of internal reports financial institutions
may use to discover money laundering  
and terrorist financing.

• Daily cash activity in excess of the country’s reporting threshold,  
• Daily cash activity just below the country’s reporting threshold  
(to identify possible structuring),  
• Cash activity aggregated over a period of time (e.g., individual
transactions over a certain amount, or totaling more than a certain
amount over a 30‐day period) to identify possible structuring,  
• Wire transfer reports/logs (with filters using amount  
and geographical factors),  
• Monetary instrument logs/reports,  
• Check kiting/drawing on uncollected funds  
(significant debit/credit flows),  
• Significant change reports, and  
• New account activity reports.


Identify the four ways that good technology can  
equip organizations with improved defenses  
in the fight against financial crime.

• Transaction monitoring: scanning and analyzing data  
for potential money laundering activity,  
• Watch list filtering: screening new accounts,  
existing customers, beneficiaries and transaction
counterparties against terrorist, criminal and other blocked‐
persons watch lists,  
• Automation of regulatory reporting: filing suspicious
transaction reports (STRs), currency transaction  
reports (CTRs), or other regulatory reports  
with the government, and  
• A detailed audit trail: demonstrates compliance  
efforts to regulators.


Describe a typical suspicious or unusual transaction reporting
process within a financial institution.

While reporting procedures vary from country to country,  
a typical suspicious or unusual transaction reporting process  
within a financial institution includes:  
• Procedures to identify potential suspicious transactions or
• A formal evaluation of each instance, and continuation,  
of unusual transactions or activity,  
• Documentation of the suspicious transaction reporting decision,
whether or not filed with the authorities,  
• Procedures to periodically notify senior management or the board
of directors of suspicious transaction filings, and  
• Employee training on detecting suspicious transactions or


Define a search warrant and describe how it is issued.

A search warrant is a grant of permission from a court for  
a law enforcement agency to search certain designated
premises and to seize specific categories of items or
documents. Generally, the requesting agency is required  
to establish that probable cause exists to believe that
evidence of a crime will be located. The warrant is authorized
based on information contained in an  
affidavit submitted by a law enforcement officer.


According to the 1999 U.S. Customs "trade advisory" titled
"The Black Market Peso Exchange," what are the three  
red flags as indicators of BMPE?

• Payment made in cash by a third party with no connection
to the underlying transaction,  
• Payment made by wire transfers from third parties
unconnected to the underlying transaction, and  
• Payment made with checks, bank drafts or money  
orders not drawn on the account of the purchaser.


Identify the factors a prosecutor many consider when
determining whether or not to bring a case against an
institution involving money laundering‐related charges.

• 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
• The institution has taken timely and effective remedial
• There are civil remedies available that can serve as
punishment, or  
• Deterring wrongdoing by others is needed and will be  
served by a prosecution.


ABC Bank was served with a subpoena compelling the
production of certain documents on a personal checking
account.  Describe the steps the bank should consider taking
upon receipt of the subpoena.

If an institution is served with a summons or subpoena
compelling the production of certain documents, the
institution should have its senior management and/or
counsel review the summons or subpoena. If there are no
grounds for contesting the summons or subpoena, the
institution should take all appropriate measures to comply
with the summons or subpoena on a timely and complete
basis. Failure to do so can result in adverse action and
penalties for the institution.  Also, the financial institution
should not notify the customer who is being investigated.  If
the government asks the bank to keep certain accounts open,
such a request should be obtained in writing under proper
letterhead and authority from the government.


If a bank is  under investigation by a government agency for
possible money laundering, what steps should the  
Bank have  for its employees follow?

With regard to investigations conducted by the government,
employees should be informed of the investigation and
should be instructed not to produce corporate documents
directly, but, rather, should inform senior management or
counsel of all requests for documentation and should provide
the documents to them for production. In that way, the
institution will know what is being requested and what has
been produced. In addition, the institution can determine
what, if any, requests should be contested. The same  
procedure should be followed with regard to  
requests for employee interviews.


ABC Bank was served with a search warrant.   
What next steps should the Bank consider?

1. Call the financial institution's in‐house or outside counsel,  
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 (the
agents are not obligated to provide a copy of the affidavit, but, if a financial
institution is allowed to see the affidavit, the financial institution can learn
more about the purpose of the investigation),  
5. Remain present while the agents record an inventory of all items they
seize and remove from the premises. Keep track of the records taken by
the agents,  
6. Ask for a copy of law enforcement's inventory of what they have seized,
7. Write down the names and agency affiliations of the agents  
who conduct the search.


Identify several situations that may require a financial
institution to initiate an internal investigation?

• A report of examination from the regulators,
• Information from third parties, such as customers,  
• Information derived from surveillance or monitoring systems,  
• Information from employees or a company hotline,  
• Receipt of a governmental subpoena or search warrant,  
• Learning that government investigators are asking questions of
institution employees, business associates, customers or even
competitors, and  
• The filing of a civil lawsuit against the institution or a  
customer of the institution.


How should a financial institution monitor the receipt of a
subpoena, summons, or other government request?

When an institution receives a subpoena, summons or other
government request, the institution should do more than just
produce the records or information being sought. Financial
institutions should ensure that all grand jury subpoenas, as well as
other information requests from government agencies, are
reviewed by senior management, an investigations group or
counsel to determine how best to respond to the inquiry and to
determine if the inquiry or the underlying activity might pose a risk
to the institution. In addition, the institution should maintain a
centralized control over all requests and responses in order to
ensure that the requests are responded to on a complete and
timely basis and to establish a complete record of what is provided.
This centralized record will also assist with regard to the
institution’s own internal investigation.


What is the purpose of conducting  
an internal investigation?

The purpose of the investigation will be to learn the nature
and extent of any potential wrongdoing, to develop
information sufficient to report ‐ when necessary ‐ to the
authorities, to enable the institution to minimize its liability,
and to stop any potential money laundering.


The checking account for XYZ Trading LTD, a company
registered in the British Virgin Islands, was identified on a
government subpoena issued to International Bank.  The
Bank has initiated an internal investigation on the account
and its beneficial owners.  What factors should the Bank
consider on whether to close the account?

Based on its internal investigation, the institution should make an
independent determination as to whether to close the account in
issue. Some of the factors that the institution should  
consider are as follows:  
• The legal basis for closing an account,  
• The institution’s stated policies and procedures  
for closing an account,  
• How serious is the underlying conduct. If the conduct is serious
and rises to the level where the account would ordinarily be closed,
then the institution should consider closing the account, or  
• As stated above, if law enforcement requests the institution to
keep the account open, the institution should request that  
the investigator or prosecutor make that request in writing  
on proper government agency letterhead with the  
appropriate authorized signature.


According to statements by the U.S. Treasury and Internal
Revenue Service (IRS), what are some patterns  
financial institutions can look for as they investigate possible
money laundering?

• Unusually high monthly balances in comparison to known sources
of income,  
• Unusually large deposits, deposits in round numbers or deposits
in repeated amounts that are not attributable to legitimate sources
of income,  
• Multiple deposits made under reportable thresholds,  
• The timing of deposits. This is particularly important when dates
of illegal payments are known,  
• Checks written for unusually large amounts (in relation to the
suspect’s known practices), or  
• A lack of account activity. This might indicate transactions in
currency or the existence of other unknown bank accounts.


If an institution decides to file an STR,  
what should they do as soon as possible?

Notify the investigators or prosecutors.


Why is it important to interview knowledgeable  
employees as soon as practical?

When performing an internal investigation,  
it is important to secure and review all relevant
documentation and to interview all knowledgeable
employees. It is important to interview these employees as
soon as practicable so that their memories are the freshest
and so that they can direct management or counsel to
relevant documents and people on a timely basis.


What type of documents would a financial institution  
have that could assist a financial investigator in tracking
money movements?

A financial investigator’s main objective is to track the
movement of money, whether through a bank, broker‐dealer,
money services business or casino.  For example, banks
maintain signature cards, which are collected at the opening
of an account, account statements, deposit tickets, checks
and withdrawal items and credit and debit memorandums.
Banks also keep records on loans, cashier’s checks, certified
checks, traveler’s checks and money orders. They exchange
currency, cash third‐party checks, and conduct wire transfers,
as do most money services businesses. Banks also keep safe‐
deposit boxes and issue credit cards.


What steps should the institution take to ensure a  
written report on the internal investigation retains  
the attorney‐client privilege?

If counsel for the institution prepares a written report of an
investigation, the institution should take steps to not
inadvertently waive the attorney‐client privilege by
distributing the report to persons who should not receive it.
Every page of the report should contain a statement that it is
confidential and is subject to the attorney‐client privilege and
work‐product privilege.  Copies of the report should be
numbered, and a list of persons who are given copies to read
should be maintained. After a set period of time, all copies
should be returned. Persons obtaining the report should be
instructed not to make notes on their copies. All copies
should be maintained in a file separate from regular
institution files in a further effort to maintain the highest
level of protection.


What are the steps commonly taken to obtain  
mutual legal assistance?

1. The central authority of the requesting country sends a “commission
rogatoire” (letter rogatory, or letter of request) to the central authority
of the other country. The letter includes 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 central authority that receives the request 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
where the information is sought, and accompanies the local
investigator during visits or when statements are taken,  
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 request for mutual legal assistance,
6. Local witnesses may need to attend court hearings in the  
requesting country.


What are bearer negotiable instruments?

Bearer negotiable instruments Include monetary instruments
in bearer form such as: negotiable instruments (including
checks, promissory notes and money orders) that are either
in bearer form, are endorsed without restriction, are made
out to a fictitious payee, or are otherwise in such form  
that title there to passes upon delivery.


Identify the three gateways that assist with the  
AML cooperation between countries.

• Mutual Legal Assistance Treaties,  
• Financial Intelligence Units, and  
• The Supervisory Channel.


What is a Memorandum of Understanding (MOU)?

An agreement between two parties establishing a set of
principles that govern their relationship on a particular matter.
An MOU is often used by countries to govern their sharing of
assets in international asset‐forfeiture cases or to set out their
respective duties in anti‐money laundering initiatives. Financial
Intelligence Units (FIUs), with the task of receiving and analyzing
suspicious transaction reports on an ongoing basis and
maintaining close links with police and customs authorities,
share information among themselves informally in the context
of investigations, usually on the basis of an MOU. The Egmont
Group of FIUs has established a model for such MOUs. Unlike
the Mutual Legal Assistance Treaty (see below), this gateway is
ordinarily used not for obtaining evidence, but for obtaining
intelligence that might lead to evidence.


Recommendations 36‐40 from FATF's 40 Recommendations
pertain specifically to the international aspects of money
laundering and terrorist financing investigations.  What are
Recommendations 36‐40?

Recommendations 36‐40 deal with mutual legal assistance
treaties, extradition, confiscation of assets and mechanisms
to exchange information internationally.


Describe a Patriot Act certification

A certification is a formal assertion in writing which,  
under the USA Patriot Act, is used by U.S. regulators in
different contexts, including a written statement by a
respondent bank signed by its duly authorized representative
certifying that the bank does not do business with shell banks
(under Section 313 of the USA Patriot Act). It can also be a
written representation provided by a U.S. federal agent
stating that the matter for which he or she is seeking
information from financial institutions under Sec. 314(a) of
the USA Patriot Act regulations is linked to money  
laundering or terrorist financing.


What is a commission rogatoire?

Also known as letter rogatory, commission rogatoire is 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.


What is an exempt account?

In some countries, a distinction is granted to certain
customers of a financial institution permitting the institution
to waive its responsibility to report certain transactions that
are otherwise required. Exempt accounts must be
documented and the financial institutions that secure the
exemptions must still monitor their transactions.


What is a country's extraterritorial reach?

The extension of one country’s policies and laws to the
citizens and institutions of another. U.S. money laundering
laws contain several provisions that extend its prohibitions
and sanctions into other countries. For example, the
“extraterritorial jurisdiction” of the principal U.S.  
anti‐money laundering law can apply to a non‐U.S. citizen  
if the “conduct” occurs “in part” in the U.S.  
(Title 18, USC Sec. 1956(f)).


Describe a Financial Intelligence Unit (FIU).

A central governmental office that obtains information from
financial reports, processes it and then discloses  
it to an appropriate government authority in support of a
national anti‐money laundering effort. The activities
performed by an FIU include receiving, analyzing and
disseminating information and, sometimes,  
investigating violations and prosecuting  
individuals indicated in the disclosures.


Describe a cross‐border transfer.

A cross‐border transfer is any wire transfer in which the
originator and beneficiary institutions are located in different
jurisdictions. A cross‐border transfer also  
refers to any chain of wire transfers that has at least  
one cross‐border element.


What is a front company?

A business that commingles illicit funds with revenue
generated from the sale of legitimate products or services.
Criminals use front companies to launder illicit money by
giving the funds the appearance of legitimate origin.
Organized crime has used pizza parlors to mask proceeds
from heroin trafficking. Front companies may have access to
substantial illicit funds, allowing them to subsidize front
company products and services at levels well below market
rates or even below manufacturing costs. Front companies
have a competitive advantage over legitimate firms that must
borrow from financial markets, making it difficult for
legitimate businesses to compete with front companies


Describe a lockbox.

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, deposits
them into the company’s account, and notifies the company
of the deposits. The service enables the company to put the
money to work as soon as it is received, but the amounts
must be large in order for the value obtained to exceed the
cost of the service. In the insurance industry there is also
widespread use of “lock boxes” for payment  
of life insurance and annuities products.


What is a Mutual Legal Assistance Treaty (MLAT)?

An agreement among countries allowing for mutual
assistance in legal proceedings and access to documents and
witnesses and other legal and judicial resources in the
respective countries, in private and public sectors, for use in
official investigations and prosecutions.


What is an International Business Company (IBC)?

A variety of offshore corporate structures, alternately called
“exempt companies,” which are dedicated to business use
outside the incorporating jurisdiction, rapid formation,
secrecy, broad powers, low cost, low to zero taxation, and
minimal filing and reporting requirements.


Describe a nostro account.

Nostro and vostro accounts are mirror correspondent
accounts maintained by two banks in different jurisdictions to
facilitate transactions in each other’s local  
currency—essentially, clearing accounts that balance foreign
currency transactions between the two institutions. For
example, Bank X from Brazil might open a U.S.‐dollar account
at Bank Y in the U.S., called a “nostro”  
(literally “our”) account; Bank Y might open a mirror account
in Brazilian reals with Bank X in Brazil—a “vostro” (“your”)
account. Financial regulators have expressed concern over
the transparency of nostro and vostro account relationships,
especially when there are multiple layers of accounts within
primary relationships.


What are remittance services?

Remittance services are also referred to as giro houses or
casas de cambio. Remittance services are businesses that
receive cash or other funds that they transfer through the
banking system to another account.  The account is held by
an associated company in a foreign jurisdiction where the
money is made available to the ultimate recipient.


What is a safe harbor for reporting suspicious activity?

Safe harbor is defined as legal protection for financial
institutions, their directors, officers and employees from
criminal and civil liability for breach of any restriction on
disclosing information imposed by contract or by any
legislative, regulatory or administrative prohibition, if they
report their suspicions in good faith to the Financial
Investigation Unit (FIU), even if they did not know precisely
what the underlying criminal activity was, and regardless  
of whether illegal activity actually occurred.


What is the broad objective of the UNODC model legislation
on money laundering and financing of terrorism?

The broad objective of the Global Programme is to
strengthen the ability of Member States to implement
measures against money‐laundering and the financing of
terrorism and to assist them in detecting, seizing and
confiscating illicit proceeds, as required pursuant to United
Nations instruments and other globally accepted standards,
by providing relevant and appropriate technical assistance
upon request.


According to FATF's paper called "Risk‐Based Approach
Guidance for Casinos," what are the potential transaction
risks for land‐based and internet casinos?

According to FATF's paper called "Risk‐Based Approach Guidance
for Casinos,"casinos should consider operational aspects (i.e.
products, services, games, and accounts/account activities) that can
be used to facilitate money laundering and terrorist financing
activities. In addition,  land‐based and Internet casinos have the
following potential transaction risks:   
• Proceeds of crime,  
• Cash,  
• Transfers between customers,  
• Loan sharking,  
• Use of casino deposit accounts, and  
• Redemption of chips, tickets, or tokens for currency.


According to the Basel Committee on Banking Supervision's
paper entitled "Compliance and the compliance  
function in banks," what are the responsibilities  
of the board of directors for compliance?

According to the Basel Committee on Banking Supervision's
paper entitled "Compliance and the compliance function in
banks," the bank's board of directors is responsible for
overseeing the management of the bank's compliance risk.  
The board should approve the bank's compliance policy,
including a formal document establishing a permanent and
effective compliance function.  At least once a year,  
the board or a committee of the board should assess the
extent to which the bank is managing its compliance  
risk effectively.


According to the Egmont Group's "Principles for Information
Exchange Between Financial Intelligence Units for Money
Laundering and Terrorism Financing Cases," what are the
permitted uses of information?

• Information exchanged between FIUs may be used only for
the specific purpose for which the information was sought or
• The requesting FIU may not transfer information shared by
a disclosing FIU to a third party, nor make use of the
information in an administrative, investigative, prosecutorial,
or judicial purpose without the prior consent of the FIU that
disclosed the information.


According to FATF's paper called "Money Laundering and
Terrorist Financing Vulnerabilities of Commercial Websites
and Internet Payment Systems," what are the different
classes/types of commercial websites?

• Mediated customer‐to‐customer, sites that allow private
individuals to sell to one another via an online marketplace,  
• Mediated business‐to‐customer, sites that allow multiple
merchants to sell to consumers via an online marketplace,  
• Non‐mediated customer‐to‐customer (i.e. Bulletin board services
and online classifieds),  sites that only allow customers to advertise
goods they want to sell,  
• Direct business‐to‐customer, merchants that sell goods to
consumers via their own websites, and  
• Direct business‐to‐business websites,  
merchants selling to merchants.


According to the Wolfsberg Statement on AML Screening,
Monitoring, and Searching (2009), what are the most
appropriate and effective overall monitoring frameworks?

The Wolfsberg Group believes that a risk‐based approach enhances the
effectiveness of monitoring for unusual and potentially suspicious
activity, to the extent that such activity is distinguishable from
legitimate activity. It is for this reason that the Wolfsberg Group
supports the introduction of risk‐based monitoring models and
frameworks that are sufficiently flexible to meet the needs and nature
of individual financial institutions.  The most appropriate and effective
overall monitoring framework may contain one or more of the  
following elements:  
• A dedicated automated transaction monitoring system,  
• System‐generated exception reports,  
• Manual “line of business” incident reports,  
• Scheduled periodic reviews/sampling, and  
• Event‐driven reviews (e.g., following issuance of new typologies).


According to the Basel Committee on Banking Supervision's
paper entitled "Customer Due Diligence for Banks," how are
sound KYC procedures relevant to the safety and soundness
of banks?

• They help to protect banks’ reputation and the integrity of
banking systems by  reducing the likelihood of banks
becoming a vehicle for or a victim of financial crime  and
suffering consequential reputational damage, and  
• They constitute an essential part of sound risk management
(e.g. by providing the basis for identifying, limiting and
controlling risk exposures in assets and liabilities,  including
assets under management).