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NEW QUESTION # 15
What are key risks in Financial Crime Prevention Control? (SELECT 3)
- A. Insurance.
- B. Financial.
- C. Reputational.
- D. Regulatory.
Answer: B
NEW QUESTION # 16
Which customer type represents the highest risk of money laundering to a financial institution?
- A. Accounting firm
- B. Construction company
- C. Wholesale food distributor
- D. Payment service provider
Answer: D
Explanation:
Payment service providers pose higher money laundering risk because they handle high volumes of transactions, often across multiple jurisdictions, and may process funds on behalf of third parties, increasing the potential for illicit activity.
NEW QUESTION # 17
Jurisdictions with high risk usually have (SELECT 4)
- A. Host shell and shelf companies.
- B. Inadequate regulatory and judicial frameworks to prevent terror financing
- C. Poverty
- D. High levels of corruption
- E. Poor anti-money laundering regulations.
Answer: A,B,D,E
NEW QUESTION # 18
A KYC analyst suspects a transaction is related to a sanctioned individual. How should the analyst respond?
- A. Discuss the issue with the firm's compliance officer as it is of low priority.
- B. Report the issue immediately according to the defined procedures.
- C. Continue with the due diligence onboarding procedure, focusing on primary and secondary documentation.
- D. Reach out to the customer to confirm their sanctions status during the onboarding process, and after that, once a year.
Answer: B
Explanation:
Any suspicion of a link to a sanctioned individual must be reported immediately through the institution's defined sanctions compliance procedures to ensure legal and regulatory obligations are met without tipping off the customer.
NEW QUESTION # 19
A hospitality worker brings deposits items that appear to be made from a cash intensive business. Is this a red flag?
- A. It depends on the location, business, and feeling of the employee accepting the deposit.
- B. Yes, anyone who brings that type of currency is likely involved to have received it from illegal means.
- C. No, the customer profile for the hospitality worker fits their occupation.
Answer: C
NEW QUESTION # 20
The minimum level of Customer Due Diligence that is required when opening a new account includes the following? (SELECT 4)
What type of locations is the account going to be transacting with. (Correct)
Why this account is being opened? (Correct)
What type of people does the customer associate with?
- A. What sorts of transactions you should anticipate?
- B. The frequency and expected amounts of those transactions?
Answer: A
NEW QUESTION # 21
The overall customer risk rating is usually derived as a composite of the following four categories of risk in money laundering prevention.
What are the those four?
- A. Client, Jurisdiction, Product, and Sub-Channel.
- B. Client, Jurisdiction, Selected Products, and Channel.
- C. Customer, Jurisdiction, Product, and Channel.
- D. Customer, Jurisdiction, Product, and Sub-Channel.
Answer: C
NEW QUESTION # 22
What is the Second Line of Defense? (SLOD)
- A. The _______ line of defense is also known as the front line, these customer-facing employees are best-equipped to get the information you need for your customer due diligence. Can include Operations, risk, and control teams.
- B. The ________ line of defense is internal audit. They perform an independent review of the controls applied by the lines of defense.
- C. The _______ line of defense is the compliance and internal control functions. That includes the chief money laundering reporting officer, or MLRO, in charge of managing and monitoring AML and CFT activities.
Answer: C
NEW QUESTION # 23
An Ultimate Beneficial Owner (UBO) with a control prong is an individual with:
- A. direct and indirect ownership less than a certain percent value who exercises management and operational control.
- B. indirect ownership greater than a certain percent value.
- C. direct ownership greater than a certain percent value.
- D. direct and indirect ownership greater than a certain percent value but who lacks management and operational control.
Answer: A
Explanation:
Under the control prong, a UBO is identified as an individual who may not meet the ownership threshold but still exercises significant management or operational control over the entity, thereby having effective influence over its activities.
NEW QUESTION # 24
Are Immediate family members, relatives, and close associates of PEPS classified as PEPS?
- A. Yes.
- B. No.
- C. Perhaps.
Answer: C
NEW QUESTION # 25
In relation to account activity, which is an example of tipping off?
- A. Disclosure of a suspicious transaction report to the subject of that report
- B. Disclosure of information to a regulatory body
- C. Request of additional information with respect to a client's behavior
- D. Disclosure of inside information based on KYC knowledge of a specific client
Answer: A
Explanation:
Tipping off occurs when a customer is informed that a suspicious transaction report (STR) has been filed about them, which could compromise investigations and is prohibited under AML laws.
NEW QUESTION # 26
What is the Primary European Union Money Laundering regulation?
- A. 5th Anti-Money Laundering Act.
- B. 2nd Anti-Money Laundering Directive.
- C. 4th Anti-Money Laundering Act.
- D. 3rd Anti-Money Laundering Directive
- E. 5th Anti-Money Laundering Directive.
Answer: E
NEW QUESTION # 27
During a routine CDD update in a financial institution, a junior member of the compliance department identifies that the spouse of the reviewed client was elected as a member of government. Which action should the junior member take?
- A. File a suspicious transaction report because the client did not notify the financial institution.
- B. Inform the relationship manager about the election of the client's spouse
- C. Update the client's information to reflect that the client is related to a politically exposed person.
- D. Make a note on the client's account of this fact and continue operations as usual.
Answer: C
Explanation:
FATF guidelines require enhanced due diligence when a client becomes a Politically Exposed Person (PEP) or is related to one. Since the client's spouse is now a government member, the client must be classified as related to a PEP, and the institution's records must be updated accordingly.
NEW QUESTION # 28
Under a risk based approach is a PEP risk manageable If a customer discloses during the KYC, or Know Your Customer process?
- A. No, PEPS are do not fit within the risk tolerance of an organization.
- B. Yes, He or she is the spouse of a government official, closely related to the government official
- C. No, PEPs do not need to disclose their status, it is up to the financial institution to find that information out and determine the risk.
- D. Yes, PEPS need bank accounts and access to financial investment products like everyone else.
Answer: B
NEW QUESTION # 29
Which describes the best method for creating a thorough audit trail to prove compliance?
- A. Incorporating copies of documentation and written communication in the customer profile
- B. Storing transcripts in the customer's profile of dialogues that take place during onboarding
- C. Notations within the customer profile that the identity was checked
- D. Documenting pictures of the customer holding the identification stored in the customer profile
Answer: A
Explanation:
A thorough audit trail requires keeping complete, verifiable records, including copies of identification documents and all written communications, so that compliance checks can be evidenced to regulators or auditors.
NEW QUESTION # 30
What of the following countries are considered Tax Havens? (SELECT 2)
- A. United States Virgin Islands.
- B. British Virgin Islands.
- C. Cayman Islands.
- D. Barbados.
Answer: B,C
NEW QUESTION # 31
A customer of a bank in the EU has been changing the business activities of their company every month since becoming a customer two years ago. The bank should:
- A. keep records of the changing circumstances for as long as the customer holds an account with the bank.
- B. hold the older information for one year and then destroy any records in line with data privacy requirements.
- C. hold the information for a period of time, as specified by the policies of the bank, and in line with the EU AML Directives.
- D. maintain only the current information, because data privacy regulations require old information be destroyed when updated.
Answer: C
Explanation:
Under EU AML Directives, banks must retain customer information and changes for the period specified in their internal policies, ensuring compliance with record-keeping requirements, while also adhering to applicable data privacy laws.
NEW QUESTION # 32
According to the Financial Action Task Force (FATF) Risk-Based Approach Guidance, institutions should
- A. incorporate only higher risk customers into its risk profile.
- B. adjust the extent and depth of EDD monitoring in line with their risk profile.
- C. adjust customers' EDD processes independent from the institution's risk profile.
- D. incorporate customer risks into the business line risk profiles, but not into the institutional risk profile
Answer: B
Explanation:
FATF's Risk-Based Approach Guidance advises that the scope and intensity of Enhanced Due Diligence (EDD) should be proportionate to the institution's overall risk profile, ensuring resources are directed where risks are greatest.
NEW QUESTION # 33
Which client action would justify an internal referral for a potential suspicious activity report?
- A. Opening a cash-intensive restaurant business
- B. Deposit of 35,000 Euro in cash without supporting evidence
- C. Expansion of operations to a Financial Action Task Force (FATF) high-risk country
- D. Election of the client's father to Parliament
Answer: B
Explanation:
A large cash deposit without supporting evidence for its origin is a clear money laundering red flag, warranting an internal referral for potential filing of a suspicious activity report.
NEW QUESTION # 34
What is the Primary Money Laundering Regulation in the United Kingdom?
- A. Proceeds of Terrorism Act
- B. The Money Laundering and Terrorist Financing (Amendment) Regulation 2019
- C. Proceeds of Crime Act
- D. UK AML Sanctions Regime
Answer: B
NEW QUESTION # 35
Which key elements should be included in CDD?
- A. Customer overview, nature of business or occupation, geographic profile, and summary of red flags C Risk assessment statement risk appetite description and the risk presented by the customer
- B. Customer type, related accounts and activity totals, industry information, and a peer business summary
- C. Account type, court records, open source intelligence information, and a list of reasons to maintain the customer
Answer: A
Explanation:
Core elements of Customer Due Diligence include a customer overview, the nature of their business or occupation, their geographic profile, and a summary of any identified red flags, all of which support accurate risk assessment and monitoring.
NEW QUESTION # 36
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