Own Questions Flashcards
(108 cards)
1
Q
What are the five working groups of the Egmont Group?
A
Legal IT Operational Outreach Training
2
Q
In what area is “Flipping” an issue?
A
Real Estate.
3
Q
What is wire stripping?
A
It is the deliberate act of removing material information from wire transfers, thus making it difficult to identify and restrict payments to and from sanctioned individuals, entities or countries.
4
Q
How is the period called during which customers of an insurance can back out of a policy without any penalty?
A
Free-look period.
5
Q
What is a futures exchange?
A
A marketplace where a diverse range of commodities futures, index futures, and options on futures contracts are bought and sold.
6
Q
What are trust and company service providers?
A
They include persons and entities that, on a professional basiss, participate in the
1) creation
2) administration
or
3) management
of corporate vehicles.
7
Q
Persons and entities that participate in the creation, administration, and management of corpirate vehicles are called how?
A
Trust and company service providers
8
Q
What does redemption refer to?
A
The re-payment of any fixed-income security at or before the asset’s maturity date.
A bond is the most common fixed-income security.
9
Q
How does the early redemption method differ from the free look period in insurance policies?
A
The early redemption method allows a person to redeem the policy (i.e. to receive the money back) after paying a penalty.
The free look period allows a person to receive the money back without any penalty.
10
Q
What is the international money laundering information network (IMoLIN)?
A
It serves as the clearinghouse of money laundering information for the benefit of national and international AML agencies.
11
Q
Which five features does IMoLIN have?
A
- Anti-Money Laundering International Database
- Reference Data
- Country Page
- Calendar of Events
- International norms and standards
12
Q
Other name for concentration account
A
Internal nonclient account
13
Q
Who is responsible for creating, implementing, and maintaining policies and procedures?
1) Business (1LOD)
2) AML (2LOD)
3) Audit (3LOD)
A
1) Business (1LOD)
14
Q
What five levels of technical compniance does FATF have?
A
Compliant Largely Compliant Partially Compliant Noncompliant Not applicable
15
Q
What two assessments does the FATF conduct?
A
1) Technical Compliance Assessment
2) Effectiveness Assessment
16
Q
What is racketeering?
A
The acft of acquiring a business through illegal activity.
17
Q
Sourcing of terrorism (7)
A
Oil Trade Extortion Undetected Cash Couriers Kidnapping for Ransom Human Trafficking Arms Trafficking Racketeering
18
Q
What are two names for systems like Hawala
A
Alternative Remittance System
Informal Value Transfer Systems
19
Q
Legitimate reasons to use Hawala (4)
A
Cheaper and faster money transmission
Lack of banking access in the remittance-receiving country
Cultural preference
Lack of trust in the formal banking system
20
Q
When was FATF founded? By whom?
A
1989 by G7: Group of 7 Industralized Nations
USA, UK, France, Germany, Japan, Italy, Canada
21
Q
Important UN Convention
A
UN 2000 Convention Against Transnational Organised Crime
Also called the Palermo Convention
22
Q
To prove knowledge, which legal principle do some juristictions use?
A
The legal principle of willful blindness.
23
Q
Currency smuggling and repayment of legitimate loans using laundered cash.
Tow which stage of ML do they belong?
A
Placement (Stage 1)
24
Q
Placing money in stocks, bonds or life insurance products
To what stage of ML do these actions belong?
A
Layering (Stage 2)
25
Using shell companies to obscure ultimate beneficial ownership and assets.
To what stage of ML do they belong?
Layering (stage 2)
26
What are front companies?
Businesses that appear legitimate and engage in legitimate business but are in fact controlled by criminals who commmingle the proceeds of illegal activity with legitimate ones.
27
Criminal activity led to the downfall of which 3 banks?
First Internet Bank
European Union Bank
Riggs Bank
28
Two important government-related events in 2014 and 2015 in the US
2014: Financial Crime Enforcement Network (FinCEN) and US FIU issued advisory to FI that strong culture of compliance must be maintained and entire staff is responsible for AML/CTF.
2015: US DOJ: Yates Memo
29
How is the New York State stricter in the US than the Federal Laws?
When was this issued and implemented?
30.06.2016: New York State Department of Financial Services issued a rule that FI must maintain "Transaction Monitoring and Filtering Programs" to monitor compliance with the Bank Secrecy Act (US Federal Act) and AML laws and regulations + sanctions.
Entered into force 01.01.2017.
30
Two important facts about private banking
1) Their products and services to wealthy clients are highly confidential and personalized.
2) Private Banking operates semiautonomously from other banks of a bank
31
What are private investment companies?
They are established by individual bank customers (often non-residents) in secrecy havens to hold assets.
They are shell companies formed to maintain clients' confidentiality for various tax- or tax-related reasons.
They are excellent ML vehicles.
32
Most commonly used ML method
Structuring
33
What is smurfing?
Multiple individuals making multiple cash deposits and/or buying multiple monetary instruments or bank drafts in amounts under the reporting threshold in an attempt to evade detection.
34
How are the individuals called engaging in smurfing?
Smurfers or money mules
35
How to describe credit unions? Is there another word?
Non-profit, member-owned, member-operated, democratic financial cooperative.
Building Societies.
36
What do Credit Unions traditionally not do? (3)
Do not participate in trade-based financing
Do not facilitate correspondent banking relationships
Do not maintain large-corporation relationships
37
What is comprised in non-bank financial institutions? (4)
1) Credit card associations (AmEx..)
2) Issuing Banks
3) Acquiring Banks
4) TPPPs
38
What are issuing banks and acquiring banks?
Issuing banks: Solicit potential credit card customers and issue the credit cards
Acquiring banks: Process transactions for merchants who accept credit cards
39
Give an example how credit cards are used for layering and integration
Layering: Pre-paying credit cards bill, asking for refund
Integration: Uses refund to pay for kitchen
40
FinCEN in the US includes doing business in which capacities as money service business (MSB)? (6)
1) Dealer in forex
2) Check casher
3) Issuer of traveler's checks or money orders
4) Money transmitter (e.g., Western Union)
5) Provider and seller of prepaid access
6) US Postal Service
41
What types of prepaid cards exist?
1) Open loop prepaid cards
| 2) Closed loop prepaid cards
42
FinCEN extended the MSB definition in 2012 with a final rule. What was the rule?
An entity qualifies as MSB purely based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located there.
All MSBs are required to register with FinCEN (without exception).
43
Organizations can offer MSB as primary service or can offer MSB as ancillary service.
What kind of business offer MSB as ancillary service? (4)
1) Grocery Stores
2) Drug Stores
3) Restaurants
4) Bars
44
What are four competitive advantages of MSBs over financial institutions?
Cheaper costs
Faster
Access to underbanked customers
Many physical locations
45
What is the biggest misconception about the MSB industry?
There is minimal oversight.
1) Many MSBs are overseen by several national or local regulators
2) They are monitored by the banks they collaborate with
3) They have AML programs
46
Most attractive area for ML in insurance
Life Insurance
47
What is an annuity?
An instrument that provides a series of payments in the future in exchange for an up-front sum of money.
48
What are three vulnerabilities of the insurance sector?
1) Lack of oversight/controls over intermediaries: Insurance brokers have a great deal of control and freedom regarding policies.
2) Decentralized oversight over salesforce: Insurance companies may have employees (captive agents) who are subject to control. Noncaptive agents are not employed, hence lack of control.
3) Sales-driven objectives. Brokers receive premimums.
49
4 illegal activities within the securities market
1) Embezzlement
2) Insider Trading
3) Securities Fraud
4) Market Manipulation
50
What is a Wash Trade?
When a security trader buys and sells a security at the same time (in the same amount). This created the illusion of trading and is also used for ML. This is illegal under US Law.
51
How can money launderers use the securities industry to launder money? (2)
1) Hold accounts that are only used to hold funds and not for trade -> They are under weaker AML controls than bank accounts.
2) Wash Trading
52
FATF has identified a number of suspicious indicators within the global securities market.
In regards to customers, what do we have to pay attention to? (6)
(Factors to pay attention to)
1) A customer who has access to non-public information
2) A customer who is known to have friends/family at the issuer
3) A customer who suddenly liquidates all of their assets to remove them from the juristiction
4) A customer who opens an account with no regard to costs, commission or losses
5) A customer with transactions that show a pattern of sustained losses
6) A customer who is unfamiliar with financial products' performance but wants to invest anyway
53
FATF has identified a number of suspicious indicators within the global securities market.
In regards to transactions, what do we have to pay attention to? (3)
(Factors to pay attention to)
1) Transactions where one party purchases securities at a high price then seells them at a considerable loss
2) Acoounts with little to no securities activities
3) Transactions between two or more unrelated accounts at the same securities firms that trade an illiquid or low-priced security suddenly and simultaneously
54
Why are lotteries, casinos and horce racing popular among money launderers?
They provide an easy excuse for recently acquired wealth with no apparent legitimate source.
55
ML in casinos happens in which stages?
Placement and layering
56
What are three ways how money launderers can use online gambling?
1) A ML colludes with an offshore online gambling operations an deposits funds from illegal activities into gambling account and withdraws funds as winnings. Website operator keeps percentage as commission.
2) Same with professional gamblers.
3) ML use a stolen identity.
57
Dealers in high-value items. What are these items?
What are two important laws in that area?
Gold, diamonds, jewelry.
The European Directive on Money Laundering
US Patriot Act
58
What is the most common element in ML cases including cars?
The unreported use of currency to pay for the automobiles.
59
How does the "downgrade" work with cars dealers?
Drug dealer sells 37k USD car to car dealer for cheaper, e.g., 17k USD.
The difference is paid to the car dealer in cash or check.
60
What are the responsibilities of gate keepers? (5)
1) Identify clients
2) Conduct due diligence on clients
3) Maintain records on clients
4) Report suspicious client activities
5) Not inform clients who have been reported
61
What does litigation mean?
The process of taking legal action (Rechtsstreit).
62
What are commodities?
What is a commodity pool?
Commodities: Goods like foods, grains, metals that are usually trades in large amounts on a commodities exchange through futures contracts.
Commodity pool: combines funds from various investors to trade in future or options contracts.
63
What are futures / futures contracts?
What are options / options contracts?
Futures (Termingeschäfte)/Futures Contracts: Contracts to buy or sell a set quantity of a commodity at a future date at a set price.
Options (Optionsscheine)/Options Contracts: Contracts that create the right, but not the obligation to buy or sell the amount of something, such as a share or commodity, at a set price after a set expiration date.
64
In which countries/juristictions are the regulations regarding gatekepers the most stringent?
EU & UK
65
In a 2010 Report called Money Laundering Using Trust and Company Service Providers, what did the FATF find?
In many juristictions, the existence of Trust and Company Service Providers is not recognized.
66
Which five vulnerabilities and red flags did the 2010 Money Laundering Using Trust and Company Service Providers report provide?
1) Unknown or inconsistent application of regulatory guidelines regarding identification and reporting
2) Limited market restriction on practitioners to ensure adequate skills, competence, and integrity
3) Inconsistent record keeping across the industry
4) Potential for TCSP to operate in an unlicensed environment
5) Potential for TCSP's CDD to be performed by other financial institutions, depending on juristiction
67
What is the Loan Back Money Laundering Method?
Launderer gives illegitimate money to Associate
Associate gives Mortgage/Loan to Launderer
Launderer repays money
This creates the illusion of legitimate payments
68
According to the FATF's March 2010 Report on the Money Laundering Vulnerabilities in Free Trade Zones, which are the 4 systematic weaknesses for Free Trade Zones?
1) Inadequate AML/CTF safeguards
2) Miminal oversight by local authorities
3) Weak procedures to inspect goods and legal entities, including appropriate record keeping and IT systems
4) Lack of cooperation between FTZ and local custom authorities
69
Apart from over- and undershipping, which is the most common method of trade-based ML, what 5 trade-based ML techniques exist?
1. Overshipping or shortshipping
2. Ghost shipping (no goods are actually shipped)
3. Shell companies
4. Multiple invoicing
5. Black Market Trades (e.g., Black Market Peso Exchange)
70
What are letters of credit? In what ML schemes are they used?
Letters of credit are a credit instrument issued by a bank that guarantees payments on behalf of its customer to a third party when certain conditions are met.
Trade-based ML.
71
What is a funnel account?
An individual or business account in one geographic area that receives multiple cash deposits in amounts below the cash reporting threshold, and from which the funds are withdrawn in a different geographic area with little time elapsing between the deposits and withdrawals.
72
The 2013 FATF Guidance on New Payment methods made which four recommendations?
1. CDD
2. Limits on loading, value and geography
3. Limit source of funding
4. Record keeping, transaction monitoring, and reporting
73
What is fiat money?
Physical, government-issued currency
74
According to the 2014 FATF Report Virtual Currencies: 2 Key Definitions and Potential AML/CTF Risks, how are virtual currencies distinguished?
Convertible Virtual Currencies: Have an equivalent value and can be exchanged into real currency (e.g., Bitcon)
Non-convertible Virtual Currencies: Intended to be used in a specific domain (e.g., World of Warcraft)
75
What is new about virtual currencies?
Value can be transferred to anywhere in the world without the requirement of a centralized bank or institutional authority.
76
When was bitcoin established?
2009
77
In 2013, FinCen issued guidance on CVs that introduced three roles in the VC ecosystem. What are they?
User: Person who obtains virtual currency.
Exchanger: Person engaged as a business in the exchange of VC for real currency, funds, or other VC
Administrator: Person engaged in a business issing VC and who has the authority to redeem such VC
78
in 2013, FinCen issued guidance on Virtual Currencies. How did FinCen regulate VCs?
Exchangers and Administrators (roles defined by FinCEN) are Money Service Businesses engaging in money transmission and must, therefore, comply with the registration, reporting, record-keeping, and other regulations applicable to money transmitters such as maintaining an AML program.
79
Two main cases (sentences) in regard to Virtual Currencies
Liberty Reserve (Costa Rica)
Silk Road
80
Why are LLCs an attractive ML vehicle?
They can be managed and owned anonymously
Virtually anyone can own or manage them, including foreign persons or other business entities
81
What are the equivalents of members and managers in a LLC in a corporation?
Member: Shareholder
Manager: Executive Officer / Board Member
82
In what two ways do international business corporations reduce transparency?
1) Registration offshore
| 2) Require incorporation of a local agent (serve as nominee owner or director)
83
What are 5 benefits of international business corporations?
1) Asset protection
2) Access to multiple investment markets
3) Estate planning (management of assets in case of death or incapitation)
4) Legitimate tax benefits (tax avoidance)
5) Serving as holding companies
84
What is a holding company? What are other names?
Holding companies don't manufacture anything, sell products or services, or conduct any business operations.
Their sole purpose is to hold controlling stocks in other companies.
Umbrella or parent company.
85
What is double invoicing?
When criminals own two companies.
Company A orders goods from company B.
Company B delivers goods to company A.
The companies are in different countries.
Ideally, the goods are sold at a high price and a low profit margin to lower the taxes.
86
According to a Canadian report (2001), what are the 7 most common ML techniques used in conjunction with criminally owned companies?
1. Using nominees as owners or directors
2. Layering of ownership
3. Giving loans
4. Double invoicing
5. Sale of business
6. Buying company already owned by criminal enterprise
7. Paying out ficticious salaries
87
What 2 types of trusts are there?
Revocable: Grantor/settlor can terminate the trust
Irrevocable: Grantor/settlor cannot terminate the trust once created
88
What are asset protection trusts?
A special form of irrevocable trust usually created offshore for the protection and preservation of one's wealth from creditors.
89
What are monetary instruments? (7)
1. coin or currency
2. traveler's checks
3. Personal checks
4. Bank checks
5. Money orders
6. Investment security
7. Negotiable instruments
90
What is an escrow account?
A type of trust account.
The account is set up at a bank or other financial institution that can legally perform certain duties on behalf of the account owner.
91
What is the difference between a custodial/custody account and a trust account?
A custodial account is a type of trust account and is used to save money for children, their beneficiaries.
92
What kind of transactions do concentration accounts facilitate? (4)
Transactions for
1. Private banking
2. Trust and custody accounts
3. Funds transfers
4. International affiliates
93
What is the difference between electronic funds transfer and wire transfer?
A wire transfer is a type of electronic funds transfer.
94
Name 5 services that respondent banks provide
1. Cash management (e.g., interest-bearing accounts)
2. International wire transfer of funds
3. Check clearing
4. Payable-through accounts
5. Foreign exchange services
95
What are recommendations regarding concentration accounts? (8)
1. Requiring dual signatured on general ledger tickets
2. Prohibiting direct customer access to concentration accounts
3. Capturing customer transactions in their account statements
4. Prohibiting customers' knowledge of concentration accounts
5. Retaining appropriate transaction and consumer-identifying info
6. Reconciling accounts frequently by an independent indeividual
7. Establishing timely discrepancy reconciliation process
8. Identifying and monitoring recurring customer names
96
What are third-party payment processors? (3)
Bank customers that provide payment-processing services to merchants and other business entities.
They often use commercial bank accounts to conduct payment processing for merchant clients.
They are often not subject to AML/CTF requirements.
97
TPPPs can initiate payments for dubious merchants. Give 3 examples for such dubious merchants.
Abusive telemarketers
Deceptive online merchants
Orgnaizsations that engage in high risk or illegal activities
98
What type of transacitons are often associated with merchant and TPPPs?
Credit card payments
Automated clearing house
Remotely created checks (RCC)
99
What is a remotely created check?
What is a different name?
A order of payment created by the payee using a telephone or the internet.
Demand draft
100
How is an order of payment created by the payee using a telephone or the internet called?
A remotely created check or demand draft.
101
Who prohibited the use of concentration accounts? When?
Wolfsberg Group in 2001
102
What is the difference between Principals and Agents in MSB?
Principals primarily provide MSB services and act as issuers of money orders and traveler's checks or providers of money transmission. In the US, principal MSB are required to have written AML policies, procedures, internal controls, appoint a BSA officer, provide education and training, conduct independent reviews and audits, and monitor transactions for suspicious activity.
Agents are entities that seek to provide MSB-type services in addition to their existing products and services. For agents to use money-transmission services, they must enter into an agent service agreement with a principal MSB. Agents of a principal MSB are required to follow the same state and federal regulations as the principal MSB.
103
Loans: Repayment of legitimate loans using laundered cash
Which stage is this?
Placement (1st)
104
Currency smuggling: Cross-border, physical movement of cash or monetary instruments
What stage is this?
Placement (1st)
105
Both layering and integration can include the purchase of real estate and investments into legitimate businesses. What is the difference between the two stages?
For layering, the assets will not be kept, they serve the purpose of laundering.
For integration, the aim is to convert the laundered cash into assets that retain their value long-term.
106
What are four characteristics of money laundering havens?
* Limited numbers of predicate crimes for money laundering (i.e., criminal offenses that would permit a jurisdiction to bring a money laundering charge)
* Limited types of organizations and persons covered by money laundering laws and regulations
* Little to no enforcement of the laws and weak penalties or provisions that make it difficult to confiscate and freeze assets related to money laundering
* Limited regulatory capacity to effectively monitor and supervise compliance with money laundering and terrorist financing laws and regulations
107
What does MLRO stand for?
Money Laundering Reporting Officer
108
What does BSA stand for?
Bank Secrecy Act
