Money Laundering Flashcards
Under the Financial Action Task Force (FATF) Recommendations, which of the following should be subject to requirements for reporting suspicious transactions related to potential money laundering or terrorist financing?
A. Casinos
B. Securities brokers
C. Banks
D. All of the above
D. All of the above
The Financial Action Task Force (FATF) Recommendations advise that countries should require financial institutions to keep certain records and establish anti-money laundering (AML) policies.
A. True
B. False
True
Which of the following is NOT a favorite front business for laundering money?
A. Restaurants
B. Electronics stores
C. Wholesale distribution
D. Vending machines
B. Electronics stores
XYZ Bank has an anti-money laundering (AML) program that provides for internal controls and procedures to prevent money laundering, money laundering awareness training for employees, and a regular independent audit function to test the bank’s procedures. If these are the extent of XYZ’s AML measures, which of the following elements suggested under the Financial Action Task Force (FATF) Recommendations is missing from the AML program?
A. A mandatory thirty-day waiting period before cash deposits can be transferred
B. Reporting of all foreign bank transfers to the government
C. Prohibition of large consumer cash deposits
D. The designation of a compliance officer at the management level
D. The designation of a compliance officer at the management level
Which of the following documents is significant to the international money laundering control effort?
A. The Financial Action Task Force Recommendations
B. Model Money Laundering Crime Control Act
C. The Swiss Convention
D. The Hague Convention
A. The Financial Action Task Force Recommendations
Both Country A and Country B follow the Financial Action Task Force (FATF) Recommendations concerning cross-border transfers of currency. Jessica is about to travel from Country A to Country B while carrying $17,000 in cash, which exceeds Country A’s reporting threshold for cross-border currency transfers. Will Jessica be required to disclose to Country A the amount of currency she is carrying?
A. Yes, because she is transferring currency above the reporting threshold out of Country A.
B. No, because she is traveling to Country B, which also requires the disclosure of cross-border currency transportation.
C. Yes, because a disclosure is required for any amount of currency physically transferred out of the country.
D. No, because disclosure is only required for currency going into Country A.
A. Yes, because she is transferring currency above the reporting threshold out of Country A.
In an insurance prepayment scheme, a money launderer purchases life insurance or a similar policy with a redemption provision and redeems the policy with the intent to make the income appear legitimate.
A. True
B. False
False
Of the choices below, which is the proper sequence of cycles in a money laundering process?
A. Placement, bank complicity, and structuring
B. Integration, structuring, and placement
C. Layering, placement, and integration
D. Placement, layering, and integration
D. Placement, layering, and integration
If a subject has purchased several bearer instruments, each for less than the jurisdiction’s threshold for mandatory reports on currency transactions, then this could be an indication of which of the following?
A. Counterfeit checks scheme
B. Structuring scheme
C. Entrapment scheme
D. Forged check scheme
B. Structuring scheme
To launder funds, a consultant reports payments for services that they never actually provided. They then deposit unrelated illicit assets disguised as payments for the fake services. This laundering technique is called overstating revenues.
A. True
B. False
True
Which of the following does NOT accurately reflect the customer due diligence (CDD) procedures for financial institutions under the Financial Action Task Force (FATF) Recommendations?
A. The customer’s identity should be verified through reliable, independent sources.
B. The institution should discover the intended nature of the customer’s account or service.
C. The institution should identify the beneficial owner of the account.
D. The customer’s business relationships and transactions should be checked once to ensure that they are consistent with the customer’s profile.
D. The customer’s business relationships and transactions should be checked once to ensure that they are consistent with the customer’s profile
Structuring is a money laundering scheme where a criminal purchases multiple life insurance contracts and exercises the redemption clauses in each of them.
A. True
B. False
False
Which of the following statements concerning digital currencies, such as bitcoin, is INCORRECT?
A. Digital currencies are appealing to money launderers because they rely on payment systems that are untraceable.
B. Digital currencies generally face regulations that are less strict than regulations for payments made through traditional financial institutions.
C. Money launderers often distribute digital currencies among many addresses or digital wallets to create a series of complex transactions that are difficult to trace.
D. Many jurisdictions require service providers that exchange or otherwise deal with digital currencies to have effective customer identification or recordkeeping practices.
A. Digital currencies are appealing to money launderers because they rely on payment systems that are untraceable.
The Financial Action Task Force (FATF) Recommendations state that countries should require certain organizations to monitor suspicious activity and file a report to disclose known or suspected criminal offenses or transactions that involve money laundering or terrorist financing. Which of the following scenarios would NOT require such a report to be filed under the FATF Recommendations?
A. Money that appears to be proceeds from illegal drug sales is deposited in a bank account.
B. A transaction that appears to involve proceeds of an illegal bribe is conducted through a bank.
C. A customer who is shopping in a jewelry store purchases an expensive ring using cash.
D. A casino customer appears to be depositing cash for money laundering purposes rather than to gamble.
C. A customer who is shopping in a jewelry store purchases an expensive ring using cash.
Bars, restaurants, and nightclubs are favorite businesses through which to launder funds because:
A. Sales are generally in cash.
B. They charge relatively low prices for services.
C. It is easy to match the cost of providing food, liquor, and entertainment with the revenues they produce.
D. All of the above choices are correct.
A. Sales are generally in cash.
Paige, a Certified Fraud Examiner (CFE), is investigating a suspect’s sources of income. Paige notices that funds available to the suspect include the suspect’s interest in a restaurant/bar. Paige has surveilled the establishment several times and notices that the business has very few customers, even during peak times. Yet the income reported from this restaurant/bar is substantial. Of the following list, in which money laundering scheme might the suspect be involved?
A. Bankruptcy scheme
B. Trade-based laundering scheme
C. Alternative remittance system scheme
D. Front business scheme
D. Front business scheme
The stage in which money laundering schemes are MOST OFTEN detected is called:
A. Integration
B. Washing
C. Placement
D. Layering
C. Placement
Assuming a jurisdiction is adhering to the Financial Action Task Force (FATF) Recommendations, if a securities broker suspects that a client might be engaging in transactions to launder money, then the broker is required to report the suspicious transactions.
A. True
B. False
True
Which of the following statements concerning the Financial Action Task Force (FATF) Recommendations is TRUE?
A. They suggest that countries should enable authorities to trace, suspend, and confiscate assets suspected in money laundering and terrorist financing
B. They suggest that countries should adopt a risk-based approach when setting anti-money laundering policies
C. They suggest that countries should create policies that increase cooperation and coordination with other countries
D. All of the above
D. All of the above
The Financial Action Task Force (FATF) Recommendations regarding cross-border cash transfers state that countries should require individuals to disclose currency or currency equivalents (i.e., bearer instruments) that are above the country’s designated reporting threshold only if they are transporting money out of the country.
A. True
B. False
False
Over time, Annika stole $500,000 in cash from her employer. She deposited the cash in small increments into a bank account to avoid reporting requirements. She then transferred the stolen funds to an overseas account and proceeded with several additional transfers and fake loans to foreign entities that she controlled. Finally, she moved the funds back home, disguising them as profits from investments. Which of the following stages of money laundering was Annika performing when she engaged in transfers and fake loans to foreign entities?
A. Placement
B. Layering
C. Integration
D. Structuring
B. Layering
Which of the following is an example of the use of a digital currency?
A. Bitcoin transactions
B. Credit card transactions
C. Wire transfers
D. All of the above
A. Bitcoin transactions
According to the Financial Action Task Force (FATF) Recommendations, which of the following should financial institutions implement as part of their anti-money laundering (AML) programs?
A. Employee screening procedures
B. A designated compliance officer
C. An ongoing employee training program
D. All of the above
D. All of the above
A criminal is attempting to launder stolen funds. To confuse the money trail for the funds, the criminal purchases an expensive insurance contract with the illicit funds, cancels the policy shortly after, and receives a refund in a foreign bank account. Which of the following BEST describes the criminal’s money laundering scheme?
A. Canceled policy scheme
B. Redemption scheme
C. Integration scheme
D. Prepayment scheme
A. Canceled policy scheme
The operation of alternative remittance systems involves inherently illegal activities.
A. True
B. False
False
Which type of trade-based money laundering scheme involves understating the quantity of goods in a shipment?
A. Inflated shipment scheme
B. Duplicate invoicing scheme
C. Over-shipment scheme
D. Over-invoicing scheme
C. Over-shipment scheme
Transactions involving money services businesses (MSBs) generally have a lower money laundering risk than those at other financial institutions because MSBs have stricter regulatory requirements.
A. True
B. False
False
A money laundering scheme cannot be successful until the _________ is eliminated or made so complex that individual steps cannot be easily traced.
A. Evidence of the initial fraud
B. Placement
C. Paper trail
D. Modus operandi
C. Paper trail
A criminal wants to launder money by sending it to a co-conspirator in a foreign country. Rather than sending funds through a financial institution, the party pays Broker A the funds, and Broker A then directs Broker B, who lives in the foreign country, to pay the co-conspirator. Later, Broker A offsets the debt to Broker B by paying someone at the direction of Broker B. Which of the following BEST describes this payment scheme?
A. Money services business
B. Alternative remittance system
C. Prepaid access
D. Back-to-back loan
B. Alternative remittance system
Which of the following crimes would BEST be described as money laundering?
A. A criminal engages in a process to disguise the criminal nature of stolen funds to make it seem as though they earned the funds legitimately.
B. A corrupt employee accepts a kickback from their organization’s vendor in return for rewarding the vendor a contract.
C. A corporate officer is entrusted with assets that belong to the organization, but they fraudulently sell the assets for personal gain.
D. A person who is applying for a loan provides fraudulent data to the bank to make their credit seem better than it really is.
A. A criminal engages in a process to disguise the criminal nature of stolen funds to make it seem as though they earned the funds legitimately.
In alternative remittance systems, which of the following types of information are typically found in the ledgers that the brokers use to keep track of amounts owed to each other?
A. The names of the receivers
B. The bank account numbers of the senders and receivers
C. The names of the senders
D. None of the above
D. None of the above
Which of the following is an example of a structuring scheme?
A. A criminal disguises illicit assets by making them appear to have originated from various small loans.
B. A criminal pays down debt in small amounts using electronic transfers from foreign accounts.
C. A criminal makes large cash deposits that exceed the jurisdiction’s cash transaction threshold on a regular basis to avoid suspicion.
D. A criminal habitually deposits cash or purchases bearer instruments in amounts just under the jurisdiction’s currency reporting requirements.
D. A criminal habitually deposits cash or purchases bearer instruments in amounts just under the jurisdiction’s currency reporting requirements.
The Financial Action Task Force (FATF) Recommendations provide that countries should take certain measures to reduce the prevalence of money laundering and terrorist financing, but they do NOT specifically advise countries to criminalize such activities.
A. True
B. False
False
Digital currencies are appealing to money launderers because payments often cross jurisdictional boundaries, making it difficult for authorities to pursue enforcement or legal actions.
A. True
B. False
True
Greg purchased restaurant supplies from a supplier in a single cash payment of $15,000. Under the best practices in the Financial Action Task Force (FATF) Recommendations concerning large cash transactions with customers, the restaurant supplier would be required to report the transaction to the government.
A. True
B. False
False
The placement stage of the money laundering process occurs when a criminal first steals or obtains illicit proceeds.
A. True
B. False
False
Digital currencies are appealing to money launderers because they are a payment method that can be used to make the tracing of funds more complicated.
A. True
B. False
True
Under the best practices listed in the Financial Action Task Force (FATF) Recommendations, which of the following should be required to submit reports to the government when they engage in large cash transactions with customers?
A. Dealers in precious metals and stones
B. Casinos
C. Depository institutions (banks)
D. All of the above
D. All of the above
A fraud examiner discovers that Nakia, a fraud suspect, has made dozens of cash deposits over the last few months into a bank account. None of her deposits have been $10,000 or more, and none of them have been below $8,500, either. The currency reporting threshold for cash deposits at financial institutions in the jurisdiction is $10,000. Based on this information, which of the following schemes is Nakia MOST LIKELY committing?
A. Check tampering
B. Sizing currency transactions
C. Structuring
D. Channel stuffing
C. Structuring
One of the most common methods of laundering funds is to filter the money through a front business. A front business can be useful to a criminal for which of the following reasons?
I. It provides a safe place for organizing and managing criminal activity.
II. It provides a base of operations where the comings and goings of large numbers of people will not arouse undue suspicion.
III. It is an easy way for the criminal to avoid paying taxes on illegal sources of revenue.
IV. The front that does the legitimate business provides cover for delivery and transportation related to illegal activity.
A. II and IV only
B. I, II, and IV
C. I, II, and III
D. II, III, and IV
B. I, II, and IV
Which of the following financial institutions is NOT considered a money services business (MSB)?
A. A depository investment bank
B. A currency exchange
C. A prepaid access card provider
D. A check-cashing company
A. A depository investment bank
In collusion with an importer, an exporter bills the importer for goods at a price below their market value. The importer then sells the goods to a third party at market value. Which of the following trade-based money laundering schemes does this scenario MOST ACCURATELY describe?
A. Under-shipment scheme
B. Over-invoicing scheme
C. Duplicate invoicing scheme
D. Under-invoicing scheme
D. Under-invoicing scheme
Which of the following BEST describes the reporting requirement regarding large cash transactions with customers for financial institutions and designated nonfinancial businesses and professions (DNFBPs) under the Financial Action Task Force (FATF) Recommendations?
A. Only international transactions over the designated threshold should require a report to the government.
B. Only domestic transactions over the designated threshold should require a report to the government.
C. Domestic and international transactions over the designated threshold should require a report to the government.
D. All transactions between financial institutions should require a report to the government.
C. Domestic and international transactions over the designated threshold should require a report to the government.
Molly operates a movie theater, but she also has a stream of illegal cash income. To launder the cash, she overreports the amount of tickets she sells and disguises the illicit cash as proceeds from those fake sales. Which of the following BEST describes Molly’s scheme?
A. Overstating revenues
B. Fictitious liabilities
C. Skimming
D. Depositing but not recording revenue
A. Overstating revenues
In trade-based money laundering schemes, importers and exporters collude to misrepresent the price, quantity, or quality of imported or exported goods or services.
A. True
B. False
True
