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Exam

Question 1

What is the goal of the Egmont Group in providing a forum for Financial Intelligence Units (FIUs) around the world?

A. To improve international laws to combat money laundering and the financing of terrorism and foster the implementation of domestic programs. B. To provide a forum for FIUs to improve cooperation in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field. C. To improve communication with law enforcement in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field. D. To improve cooperation with state and federal governments in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field.

The Correct Answer is B

Question 2

The Wolfsberg Anti-Money Laundering Principles for Private Banking require new clients to be approved by whom?

A. The board of directors B. Only the private banker C. The private banker's supervisor D. At least one person other than the private banker

The Correct Answer is D

Question 3

An auction house dealing in fine art and antiques sells a well-known painting at a price of $12 million to an agent bidding for a group of local investors. The same painting sold ten years prior at auction for $5 million. The auction house receives payment for the painting via wire transfer from an account maintained in an offshore jurisdiction by the investor group. No beneficial ownership information is available for the account. What are the two money laundering red flags? (Choose two.)

A. The payment is received via wire transfer. B. An agent bids on the painting for a group of investors. C. The painting has more than doubled its value in ten years. D. Payment is received from an account in an offshore jurisdiction. E. Lack of beneficial ownership details for the originating account.

The Correct Answer is DE

Question 4

What is a method of placement that can be used by a money launderer in a deposit taking institution?

A. Depositing cash into the money launderer's account B. Sending a large number of funds transfers between accounts C. Withdrawing large amounts of cash from the money launderer's account D. Depositing cashier's checks and money orders into the money launderer's account

The Correct Answer is D

Question 5

The branch manager notices that a number of customers come in weekly and always use the same teller to process their deposits. The manager notices that the customers and the teller, who are from the same ethnic group, are speaking in a foreign language and every once in a while the customers from local ethnic restaurants will bring the teller lunch. The commercial customers that visit the teller generally deposit the same amount of cash each time they come in. How should the branch manager respond to this activity?

A. Transfer the teller to another branch B. Conduct further investigation before taking any other action C. Encourage the teller to bring in more business from the ethnic community D. Suggest to the teller to send the customers to other tellers to avoid the opportunity for collusion

The Correct Answer is B

Question 6

An institution receives a request for credit from a local company that has been a client for many years. The information provided by the company indicates that its assets have increased substantially with the addition of several new subsidiaries. Further research performed by the institution indicates the new subsidiaries are recently created shell companies. Could this indicate potential money laundering?

A. No, the company has been a client for many years. B. Yes, shell companies are typically created to manage tax liabilities. C. No, it is normal for a business to diversify by creating shell companies. D. Yes, the shell companies could have been created to hide beneficial ownership.

The Correct Answer is D

Question 6

A bank employee reviews wire transactions looking for indications of wire stripping. Which two actions should the employee take to complete appropriate bank procedures? ( Choose two. )

A. Compare the wire transaction as it enters and after it leaves the bank B. Check for suspicious phrases usually used to conceal originator or beneficiary identity C. Identify large incoming wire transactions received on behalf of a foreign client with no explicit reason D. Identify wire transaction activity to or from a financial institution located in a higher risk jurisdiction

The Correct Answer is C & D

Question 7

A new compliance officer is reviewing the bank's anti-money laundering program and notices that the risk assessment was completed six months ago. Since that time, the bank acquired another financial institution, re-named the internal records group, and streamlined cash handling procedures. Which factor causes the compliance officer to update the bank's risk assessment?

A. The bank acquired another institution B. The internal records group has been re-named C. The cash handling procedures were streamlined D. The risk assessment was completed six months ago

The Correct Answer is A

Question 8

A compliance officer identifies a potentially significant risk in a popular financial product. Further investigation reveals there is no mitigating control. Which course of action should the compliance officer take?

A. Launch a long-term project to remediate the control deficiency B. Note the risk and address it during the next round of policy and procedure review C. Immediately cease providing the product and only offer it after effective permanent mitigation is implemented D. Implement a temporary mitigation plan that enables effective management of the risk until a permanent plan can be developed

The Correct Answer is D

Question 9

Which method is used to launder money via wire remittances sent through a bureau de change or money services business?

A. A customer in country A makes a weekly small wire transfer to the bank account of an individual in country B. B. A customer in country A makes frequent wire transfers to a single customer in country B that are slightly under the legal reporting threshold. C. A large number of wire transfers are sent from a large number of senders in country A to a large number of recipients in country B during the period of December 1 to December 15. D. A customer in country A receives four small wire transfers from four different individuals located in country B on December 21. The aggregate of the wire transfers falls below the legal reporting threshold.

The Correct Answer is A

Question 10

Which method is used to launder money via wire remittances sent through a bureau de change or money services business?

The Correct Answer is B

Question 11

What is a key objective of the Egmont Group?

A. To find ways to promote the development of Financial Intelligence Units and the sharing of expertise. B. To safeguard the financial system from illicit use and combat money laundering and promote national security. C. To issue binding standards that establish consistently operated Financial Intelligence Units in member jurisdictions. D. To provide best practices for financial institutions on how to report suspicious activity to best share the information with law enforcement.

The Correct Answer is B

Question 12

What are two reasons physical certificates present a money laundering risk to brokerdealers? (Choose two.)

A. The trade information on a physical certificate can be easily altered B. Physical certificates do not expire and may be held by the owner for perpetuity C. There is little information readily available to the broker confirming the source of the funds D. Physical certificates may be provided to nominees for deposit or settled in off-market transactions

The Correct Answer is C & D

Question 13

A bank maintains a number of United States (U.S.) dollar correspondent accounts for foreign financial institutions. Upon a routine review of a U.S. dollar correspondent account owned by Foreign Bank A, a number of transactions appear to have been originated by Foreign Bank B outside the expected activity for this account. These transactions appear suspicious and a suspicious transaction report was filed by the compliance officer. Which step should the compliance officer take?

A. File a report with the appropriate tax authorities in the jurisdictions of Foreign Bank A and Foreign Bank B B. Notify senior management of the money laundering risks by allowing Foreign Bank A to maintain its U.S. dollar correspondent account C. Notify Foreign Bank A of the discovery and seek documentation supporting Foreign Bank A was collusive and a willing partner with Foreign Bank B in the activity D. Notify other U.S. financial institutions who maintain U.S. dollar correspondent accounts for Foreign Bank A and Foreign Bank B in an effort to shut down the activity

The Correct Answer is C

Question 14

An organization uses an automated surveillance system that generates a very large volume of anti-money laundering alerts. The monthly volume of alerts has increased over the last year causing the compliance staff to fall significantly behind reviewing the alerts. As a result, the system settings are under review to determine if they are appropriate. Which action should be included in the evaluation of system settings?

A. Compare settings to organizations within its peer group B. Flag filters with no history of generating an alert for removal C. Review parameter settings based on the latest risk assessment D. Calibrate parameters based on staffing capabilities to clear alerts

The Correct Answer is C

Question 15

Which red flag indicates high potential for money laundering in a real estate purchase?

A. The purchaser is a nominee B. The purchaser had a previous bankruptcy C. The purchaser owns a cash intensive business D. The purchaser is not a resident where the property is located

The Correct Answer is C

Question 16

What is the currency threshold under the European Union Fourth Anti-Money Laundering Directive?

A. 3,000 Euros B. 5,000 Euros C. 10,000 Euros D. 15,000 Euros Answer

The Correct Answer is C

Question 17

Which two aspects of precious metals pose the highest risk of money laundering? (Choose two.)

A. Some precious metals can be formed into other objects, making them easier to transport B. Precious metals have high intrinsic value in a relatively compact form and are easy to convert into currency C. The value of precious metals can be inflated easily, making it easy to increase the amount of money laundered D. Precious metals can be readily used in many high-tech commercial applications, making them all the more valuable

The Correct Answer is AB

Question 18

A local law enforcement officer, who is conducting a criminal investigation, requests information about a customer. Which two actions should the bank take? (Choose two.)

A. Close the account immediately B. File a suspicious transaction report C. Monitor the account for suspicious activity D. Review the money laundering risk posed by the account

The Correct Answer is C & D

Question 19

Which product is considered to be of highest money laundering risk?

A. Credit cards B. Savings accounts C. Time deposit accounts D. International wire transfers

The Correct Answer is D

Question 20

Bank A is a non-United States (U.S.) bank that has $5 million in a correspondent account at a bank in New York City. The Worldwide Terrorist Syndicate (WTS) has $1 million in its account at a non-US branch of Bank A. The U.S. government has initiated forfeiture action against the WTS. Which potential action can the U.S. take under the USA PATRIOT ACT pursuant to the issuance seizure warrant?

A. Seize Bank A's $5 million correspondent account in the U.S. B. Seize WTS' $1 million account at the non-U.S. branch of Bank A. C. Seize $1 million from Bank A's correspondent account in the U.S. D. Seize $5 million from the non-U.S. branch of Bank A where the WTS' account is located.

The Correct Answer is A

Question 21

A politically exposed person (PEP) maintains an account at a bank. Last month a money laundering analyst filed a suspicious transaction report about unusual wire deposits originated by unknown individuals in the home country of the official. To whom should this situation be escalated?

A. The board of directors B. The line of business executive C. The bank's anti-money laundering officer D. The Financial Action Task Force's PEP Hotline

The Correct Answer is C

Question 22

What does the Basel Committee's Customer Due Diligence for Banks paper suggest that a bank needs to have in place when establishing an account for a corporate business entity?

A. An understanding of the structure of the company B. A policy requiring all identified beneficial owners to undergo a national police check C. A process to ensure that the approval of senior management is obtained prior to opening the account D. A fee structure that reflects the banks' costs in monitoring the risks associated with entity's business activities

The Correct Answer is A

Question 23

In which two ways do Financial Action Task Force-style regional bodies influence anti-money laundering and terrorist financing standards within their respective regions? (Choose two.)

A. They issue typologies specific to their geographical region. C. They enforce the laws of the member countries in their geographic region. D. They require participating countries to adopt laws in line with their recommendations B. They administer mutual evaluations of participating members.

The Correct Answer is BD

Question 24

What does the Financial Action Task Force 40 Recommendations address on transparency of beneficial ownership?

A. Gatekeepers B. Correspondent banking C. Payable through accounts D. Legal persons and arrangements

The Correct Answer is D

Question 25

A customer brings $15,000 worth of chips into a casino and plays various games. The customer redeems all the remaining chips and requests a wire transfer of the proceeds to an unrelated third party.What are two red flags that indicate money laundering? (Choose two.)

A. Customer redeeming all remaining chips B. Playing various games before cashing out C. Bringing $15,000 worth of chips into the casino D. Requesting a wire transfer to an unrelated third party

The Correct Answer is AD

Question 26

A law enforcement agent calls a bank anti-money laundering investigator for supporting information about a suspicious transaction report that was filed the previous month. How should the investigator respond?

A. Refer the agent to the bank's compliance officer B. Send the information to an address provided by the agent C. Share the requested information during the telephone call D. Require a search warrant before releasing the information

The Correct Answer is A

Question 27

How should a financial institution respond to a verbal request from a law enforcement agency to keep an account open to assist in an investigation?

A. Agree to keep the account open B. Request a subpoena to maintain the account C. Request a letter on the agency's letterhead D. Request a search warrant from the local court

The Correct Answer is C

Question 28

A bank employee recently opened an account for a new restaurant. Daily cash deposits over a three-month period are close to $9,500. What are two red flags that indicate possible money laundering or terrorist financing? ( Choose two. )

A. The restaurant is located in a different city B. The daily cash deposits are so close in amount C. It is a new account that has daily cash deposits D. The new account demonstrates a steady flow of income

The Correct Answer is BD

Question 29

Which action should financial institutions with cross border correspondent banking activity be required to perform according to the Financial Action Task Force 40 Recommendations?

A. Gather a list of their politically exposed customers B. Identify natural persons who own or control more than 5% C. Obtain senior management approval before establishing the relationship D. Obtain a third party independent review of the respondent's anti-money laundering program

The Correct Answer is C

Question 30

An anti-money laundering analyst is reviewing a new customer list to confirm potentially high risk customers have been identified and subject to enhanced due diligence. Which new customer warrants enhanced due diligence?

A. A non-profit hospital B. A fundraising organization C. An employee benefit plan trust D. A medical practice limited partnership

The Correct Answer is B

Question 31

Findings from a regulatory examination report states that the job descriptions of personnel outside of the compliance department do not include references to anti-money laundering responsibilities. Which action should the firm take?

A. Update all job descriptions to include anti-money laundering responsibilities B. Respond that only compliance personnel have anti-money laundering responsibilities C. Send an email to all staff stating that personnel must observe the anti-money laundering policy D. Reply that a description of anti-money laundering responsibilities is included in the annual training

The Correct Answer is C

Question 32

The new compliance officer has reviewed the bank's anti-money laundering training program. The program consists of online training for all new employees within 30 days of hire date and annual refresher training to all employees. In addition, there is specialized training for areas that deal with higher risk products and customers. Over the last year, there have been no regulatory changes and no new products or services have been introduced. The compliance officer wants to propose to the board of directors that the annual refresher training is still current and can be delivered unchanged to all employees. Which two critical pieces of information could be missed by taking this approach? (Choose two.)

A. Any new trends, developments, or risks B. Results of the previous year's risk assessment C. Changes to internal policies, procedures, and processes D. Links to enforcement actions identifying violations in other financial institutions

The Correct Answer is BC

Question 33

What are two risks to institutions for violating anti-money laundering laws as demonstrated by the 2012 HSBC settlement with United States authorities? (Choose two.)

A. Forfeiture of assets B. Civil money penalties C. Loss of bank charter/license D. Imprisonment of bank employees

The Correct Answer is AB

Question 34

Which requirement is included in the Fourth European Union Directive on money laundering?

A. It requires obliged entities to consider politically exposed persons as high risk for life B. It requires obliged entities to conduct enhanced due diligence on all prepaid card holders C. It requires member countries to maintain registries of the beneficial owners of legal entities D. It requires member states to enact economic sanctions against countries that do not cooperate with Financial Action Task Force recommendations

The Correct Answer is C

Question 35

What is an essential element of Know Your Customer (KYC) standards according to the Basel Committee's Customer Due Diligence for Banks paper?

A. Annual staff training B. A customer acceptance policy C. The same KYC requirements must be applied in all cases D. All completed KYC documents must be reviewed by a senior manager not involved in the account opening process

The Correct Answer is B

Question 36

Which insurance product is particularly vulnerable to money laundering?

A. Annuity B. Casualty B. Casualty D. Regulated pension

The Correct Answer is A

Question 37

A large international bank has detected potentially suspicious activity in one of its customer accounts. Following an investigation, the bank has determined the activity to be typical of suspected money laundering. To which entity should this activity be reported on a suspicious transaction report according to Financial Action Task Force?

A. National Security Council B. Financial Intelligence Unit C. Local law enforcement agency D. Federal law enforcement agency

The Correct Answer is A

Question 38

What might limit a compliance officer's ability to respond to a foreign law enforcement official's request to provide information with regard to an anti-money laundering investigation?

A. Privacy and data protection laws in the compliance officer's country B. Whether there is a mutual legal assistance treaty between the countries of the compliance office and the law enforcement official C. Whether the request has been processed by the foreign law enforcement official's embassy in the compliance officer's country D. Anti-money laundering laws that require the confidential treatment of Suspicious Transaction Reports in the law enforcement official's country

The Correct Answer is B

Question 39

Since its last regulatory examination, a financial institution has aggressively grown by adding profitable new products and services. The institution has not historically received regulatory criticism regarding its anti-money laundering compliance program. However, a recent regulatory examination cited significant deficiencies in the anti-money laundering program that were attributed primarily to the lack of oversight by the institution's leadership in implementing adequate controls over the new products and services. Which area of international control should leadership first address to correct the weaknesses in the program?

A. Anti-money laundering policy B. Anti-money laundering policy C. Money laundering risk assessment D. Anti-money laundering compliance staff

The Correct Answer is C

Question 40

A United States (U.S.) bank was recently alerted by law enforcement of an increase in sale of large denomination U.S. bank notes to casas de cambio. They suspect that a Mexican syndicate is operating a money laundering scheme in the bank's jurisdiction. Which two steps should be taken to trace funds through the bank to assist law enforcement in their investigation? (Choose two.)

A. Identify the money laundering scheme and submit a suspicious transaction report B. Identify if there is a decrease in the sale of large denomination U.S. bank notes to casas de cambio by the bank C. Identify deposits by casas de cambio that include third-party items including sequentially numbered monetary instruments D. Identify multiple wire transfers initiated by casas de cambio to jurisdictions outside of Mexico that bear no apparent business relationship with that casa de cambio

The Correct Answer is C & D

Question 41

A client i1 a wholesale auto business that operates as a used car lot. The client regularly ships vehicles internationally. In a four-month period, the client received wires totaling $1,250,000 from a dealer in Benin in West Africa. All wires originated from Benin and were in increments of $50,000. Account debits made to the account were payable to various transport companies. All incoming checks reference various vehicles purchased. Dock shipping receipts produced by the client to support account activity identify the vehicles but cannot easily be tied to the wires received. What is the suspicious behavior?

A. The dock shipping receipts match the vehicles A. The dock shipping receipts match the vehicles C. Wires received are in large, even dollar amounts D. Account debits are payable to transport companies

The Correct Answer is C

Question 42

The branch manager calls the compliance officer and informs her that a law enforcement officer has just left the branch and was asking a lot of questions and left a business card. What should the compliance officer do?

A. File a suspicious transaction report B. Follow up to verify that the officer received all necessary information C. Verify that the reported officer was an actual authorized representative D. Require the branch manager to write a detailed memo about the request

The Correct Answer is C

Question 43

How can violations of anti-money laundering laws be a risk to individuals?

A. Violations can result in civil and criminal fines and penalties against the individuals. B. Violations can result in additional legislation that the individuals have to comply with. C. Violations can result in enforcement actions that damage the reputation of the individual's employer. D. Violations can result in additional and more stringent anti-money laundering training for individuals.

The Correct Answer is A

Question 44

The USA PATRIOT Act requires United States (U.S.) financial institutions to collect certain information from non-U.S. banks that hold a correspondent account. Which two pieces of information must a non-U.S. bank provide to its U.S. correspondent to enable them to comply with this requirement? (Choose two.)

A. The name and address of all shell banks the bank maintains accounts for B. The name and address of all beneficial owners who own 25% or more of the bank C. Prompt notice of any suspicious activity it detects on any customer who uses the correspondent account D. The name and address of a U.S. person who is authorized to receive service of legal process for the bank

The Correct Answer is BD

Question 45

A U.K. real estate agent has three foreign clients interested in purchasing an apartment building, valued at £30 million, in the outskirts of London as an investment property. The clients are not willing to have their names provided to the bank. The clients want the purchase to be made in the names of three private companies for privacy reasons. The plan is to wire the funds into an account held in the name of another private company at a bank in London. Which red flag should stop the agent from discussing this potential purchase further?

A. The clients are foreign B. The clients have the funds necessary to fund a £30 million purchase C. The clients are not willing to have their names provided to the bank D. The clients want the purchase to be made in the names of the private companies

The Correct Answer is C

Question 46

What are two requirements for monitoring and reporting suspicious activity for correspondent banking according to the Wolfsberg Principles? (Choose two.)

A. Incorporate suspicious activity monitoring into periodic reviews B. Incorporate due diligence results such as customer risk ratings C. Utilize downstream correspondents to investigate and report suspicious activity D. Investigate and report suspicious activity only for the correspondent bank's clients

The Correct Answer is BA

Question 47

Who has the day-to-day responsibility of communicating and reinforcing the established antimoney laundering compliance culture and program?

A. Business lines B. Senior management C. Board of directors D. Compliance officer

The Correct Answer is D

Question 48

An anti-money laundering audit identifies a significant weakness in how transaction monitoring alerts are cleared. Audit sampling identified potentially suspicious activity that was cleared as not suspicious. Management accepts the audit finding and develops a remediation plan. What is the role of the auditor during the correction phase?

A. Directing the remediation of the deficiency in a timely manner B. Developing procedures to provide sufficient risk-based documentation for clearing alerts C. Providing training to the alert clearing department on the importance of effective alert clearing Validating the successful remediation of the issue once management indicates the issue is resolved

The Correct Answer is D

Question 49

What are two purposes of the USA PATRIOT Act? (Choose two.)

A. To strengthen United States' measures to prevent, detect, and prosecute international money laundering and financing of terrorism B. To subject to special scrutiny foreign jurisdictions, foreign financial institutions, and classes of international transactions or types of accounts that are susceptible to criminal abuse C. To administer and enforce economic and trade sanctions based on United States foreign policy and national security goals against targeted foreign countries and regimes, terrorists, and international narcotics traffickers D. To set standards and promote effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system

The Correct Answer is AB

Question 50

Which two mechanisms should be implemented to assist with cross-border money laundering investigations? (Choose two.)

A. Countries should request Interpol to provide the required information. B. Countries should ensure that information received is protected from unauthorized disclosure. C. Countries should establish mechanisms allowing financial investigators to obtain and share information in respect of specific investigations. D. Countries should conduct separate investigations to ensure information is not unintentionally disclosed without the appropriate legal approval.

The Correct Answer is BD

Question 51

Which statement about a multinational institution's ability to fully investigate unusual activity in all its foreign operations is correct?

A. Local privacy and data protection laws may prevent an affiliate from sharing information. B. Certain account documents may be stored only in local language which will prohibit a global assessment. C. The institution should consult with the customer and request permission to conduct a full investigation into all the accounts. D. Enterprise-wide compliance oversight rules issued in the global institution's headquarters country will override any local limitations in other countries

The Correct Answer is D

Question 52

A bank receives an anonymous tip from an employee about another employee through its confidential hotline. Which activity warrants further review?

A. A mortgage officer works with home loan applicants to resolve adverse credit issues B. An employee in bookkeeping accepts funds transfer requests from customers via telephone C. An employee in accounting works with customers to help understand how to reduce service charges D. A teller distributes bank brochures to customers who regularly conduct cash transactions below reporting limits

The Correct Answer is B

Question 53

A large United States (U.S.) bank is performing due diligence on a non-U.S. bank. The nonU.S. bank has applied for a correspondent account at the U.S. bank. Which two steps should the U.S. bank take under the USA PATRIOT Act? (Choose two.)

A. Verify the identity of the customers of the foreign bank B. Determine whether enhanced due diligence is necessary C. Assess the money laundering risk presented by the correspondent account D. Verify the identity of politically exposed persons in management positions at the non-U.S. bank

The Correct Answer is C & D