Module 3 (Part 1)

Question 1

What does this module cover

Answer 1

AML/CFT Compliance Programs

Question 2

what does FATF and numerous member countries urge for effective AML/CFT compliance

Answer 2

risk based controls

Question 3

What does a risk based approach require financial institutions to have

Answer 3

systems and controls that are commensurate with the specific risk of money laundering an terrorist financing facing them

Question 4

Per FATF, what has to be taken when the risk of money laundering or terrorist is higher

Answer 4

enhanced CDD measures

Question 5

what are the 3 risk factors FATF recommends considering when assessing risk

Answer 5

1. Customer risk factors
2. Country or geographic risks
3. Product, service, transaction or delivery channel risk

Question 6

What are the customer risk factors

Answer 6

Non-resident customers, cash intensive businesses, complex ownership structure of a company, companies with bearer shares

Question 7

what is the country or geographic risks

Answer 7

countries with inadequate AML/CFT systems, countries subject to sanctions or embargos, countries involved with funding or supporting of terrorist activities, or those with significant levels of corruption

Question 8

what about Product, service, transaction or delivery channel risk factors

Answer 8

such as private banking, anonymous transactions, and payments received from unknown third parties

Question 9

What are the four AML/CFT Risk categories

Answer 9

1. Prohibited.
2. High Risk
3. Medium Risk
4. Low Risk

Question 10

What does Prohibited level indicate

Answer 10

that the institution will not tolerate any dealings of any kind given the risk.

Question 11

What else could this category include

Answer 11

transactions with countries subject to economic sanctions or designated as state sponsors of terrorism

Question 12

What is the deal with high risk

Answer 12

the risks are significant but are not necessary prohibited

Question 13

what may high risk customers include

Answer 13

PEPs or certain types of MSBs or cash intensive businesses

Question 14

what about high risk products and services

Answer 14

may include correspondent banking and private banking

Question 15

what do medium risks merit

Answer 15

additional scrutiny

Question 16

but what

Answer 16

do not rise to the level of high risk

Question 17

what is an example

Answer 17

a retail business that accepts low to moderate levels of cash, but is not considered cash-intensive

Question 18

what does low risk represent

Answer 18

the baseline risk of money laundering

Question 19

what does low risk typically indicate

Answer 19

normal, expected activity

Question 20

what does a risk scoring model use

Answer 20

numeric values

Question 21

what do the numeric values to determine the risk of

Answer 21

a financial institutions

1. Customer type
2. Geographical location
3. Products/services

Question 22

What is the deal with assessing dynamic risk of customers

Answer 22

one critical component of a risk assessment is having a process to re-evaluate risks and to determine when the customer risk-ranking should be raised or lowered

Question 23

what is the deal with the importance of reevaluating customer risk

Answer 23

in addition to the initial assessment of the inherent risk of a customer, it is important to consider how a customer’s relationship, and risk, with the institution changes over time

Question 24

what is perhaps the most important consideration driving a customer’s risk rating

Answer 24

the actual activity that the customer conducts

Question 25

as every financial institution develops transaction history with customers, It should consider modifying the risk-rating of the customer based on what 4 factors

Answer 25

1. Unusual activity 2. Receipt of law enforcement inquiries such as subpoenas 3. transactions that violate economic sanctions programs 4. other considerations

Question 26

what are the other considerations

Answer 26

significant volumes of activity where it would not be expected, such as a domestic charity engaging in large international transactions or businesses engaged in large volumes of cash where this would not be expected

Question 27

what is a vital step in a risk assessment

Answer 27

the analysis of the users of the products and services that the institution or business offers

Question 28

what can customer types include

Answer 28

individuals listed companies private companies join ventures partnerships financial institutions

Question 29

basically what

Answer 29

anyone who wants to establish a relationship with the financial institution

Question 30

what have supervisory authorities in various countries stated

Answer 30

some customer types are inherently high risk for money laundering

Question 31

what 6 types are listed

Answer 31

1. casinos 2. offshore corporations and banks located in tax/banking havens 3. embassies 4. MSB's, including currency exchange houses, money remitters, check cashers 5. Import/Export companies 6. Cash intensive businesses (restaurants, retail stores, parking)

Question 32

what is a crucial step in devising a risk scoring model

Answer 32

involves jurisdictional risk

Question 33

what is the first key question to consider

Answer 33

in what countries or jurisdictions do your individual customers reside and what are the customers' countries of citizenship

Question 34

what is the second question to consider

Answer 34

where are your corporate customers headquartered and where do they conduct the majority of their business

Question 35

When assessing the money laundering risks of various territories and countries what should you do

Answer 35

1. scan the terrorism and sanctions lists published by governments and international organizations 2. consider the overall reputation of the countries in question 3. monitor major news media

Question 36

What is the deal with assessing the risk of products and services

Answer 36

An important element of assessing AML/CFT risk is to review new and existing products and services that the institution or business offers to determine how they may be used to launder money or finance terrorism

Question 37

what is the deal with the importance of risk rating

Answer 37

based on the type of product the customer seeks, a risk rating is calculated using a number of product-related factors.

Question 38

Among other things what

Answer 38

it depends on the likelihood that the product requested might be used for money laundering or terrorist financing

Question 39

is product scoring universal

Answer 39

no

Question 40

why

Answer 40

because different financial institutions face varying degrees of risk

Question 41

what are 5 risk rating considerations

Answer 41

does the particular new or current product or service: 1. Enable significant volumes of transactions to occur rapidly 2. allow the customer to engage in transactions with minimal oversight by the institution 3. afford significant levels of anonymity to the users 4. have an especially high transaction or investment value 5. allow payments to third parties