Questions and Answers
What constitutes unusual activity for virtual currency?
Which of the following is unusual activity in an insurance setting?
What is an indicator of unusual activity in a broker-dealer setting?
Which of the following defines unusual activity indicative of trade-based money laundering?
Signup and view all the answers
Unusual activity indicative of human trafficking can involve cash deposits that are inconsistent with _____ .
Signup and view all the answers
What are terrorist financing behavior indicators?
Signup and view all the answers
Which category of risk in AML/CFT represents significant risks but not necessarily prohibited activities?
Signup and view all the answers
What actions indicate unusual real estate activity?
Signup and view all the answers
What is AML/CTF Risk Scoring?
Signup and view all the answers
Which of the following are pros of a Risk Based Approach?
Signup and view all the answers
What categories does FATF focus on when assessing risk?
Signup and view all the answers
What are the AML/CTF Risk Categories?
Signup and view all the answers
Which of the following are considered High Risk Customer Types?
Signup and view all the answers
Products/Services Risks deal with how transactions are monitored.
Signup and view all the answers
What are some examples of High Risk Products/Functions?
Signup and view all the answers
What are the Basic Elements of an AML/CFT program?
Signup and view all the answers
Who should be trained in AML/CFT regulations?
Signup and view all the answers
What is involved in Customer Identification (CDD)?
Signup and view all the answers
Which types of sanctions are designed to target specific individuals?
Signup and view all the answers
Comprehensive Sanctions generally prohibit most goods, technology, and services against most countries.
Signup and view all the answers
What does the Specially Designated Nationals and Blocked Persons list published by OFAC contain?
Signup and view all the answers
What does Know Your Employee (KYE) program entail?
Signup and view all the answers
Which of the following is NOT a feature of Automated AML/CFT solutions?
Signup and view all the answers
What does the capability to assess unusual customer behavior include?
Signup and view all the answers
Which of the following is a red flag for unusual customer behavior?
Signup and view all the answers
What indicates unusual cash transactions?
Signup and view all the answers
What is a characteristic of unusual wire transfer transactions?
Signup and view all the answers
Which behavior may be a sign of unusual commercial account activity?
Signup and view all the answers
What could be a sign of unusual investment activity?
Signup and view all the answers
Define unusual employee activity in a banking context.
Signup and view all the answers
Which of the following is a red flag for unusual activity in a money remitter/currency exchange setting?
Signup and view all the answers
Study Notes
AML/CTF Fundamentals
- AML/CTF Risk Scoring: Uses numeric values to categorize risk by geography, customer type, and products/services. Risk ratings must be reevaluated periodically.
- Pros of Risk-Based Approach: Provides flexibility, effectiveness, and proportionality in compliance strategies.
FATF Guidelines
- FATF Recommendations: Focus on assessing risk through customer factors, geographic risks, and product/service transaction risks.
Risk Categories
- AML/CTF Risk Categories: Include prohibited, high, medium, and low risk.
High-Risk Customers and Products
- High-Risk Customer Types: Entities like banks, casinos, offshore corporations, embassies, money services businesses (MSBs), virtual currency exchanges, and cash-intensive businesses.
- High-Risk Products/Functions: Involve private banking, international transactions, money transfer services, and accounts with unusual transaction characteristics.
AML/CFT Program Essentials
- Basic Elements: Internal policies and controls, designated compliance officer, employee training, and independent audits form the backbone of an effective AML/CFT program.
Customer Due Diligence (CDD)
- Risk-Based Procedures for CDD: Understanding customer relationships, ongoing monitoring for suspicious activities, and updating customer information.
- Key Components: Include identifying and verifying customers, understanding business relationship purposes, and conducting ongoing due diligence.
Compliance Features
- AML Policies, Procedures, Controls: Must track key metrics, ensure dual controls, and comply with recordkeeping regulations.
- Elements of Policies and Procedures: Should be clear, approved by management, regularly updated, and establish stakeholder responsibilities.
Monitoring and Investigations
- Transaction Monitoring: Involves the management of software applications and analysis of transaction data in accordance with risk profiles.
- Financial Investigations: Include monitoring alerts from transactions and filing suspicious transaction reports (STRs) as necessary.
Training and Evaluation
- Training Program Components: Must cover AML/CFT laws, internal policies, suspicious activity reporting, and maintaining confidentiality.
- Who to Train: Includes customer-facing staff, operations personnel, compliance staff, and senior management.
Independent Audit Process
- Audit Objectives: Assess integrity of AML/CFT programs, evaluate compliance with laws, and test the effectiveness of monitoring systems.
Compliance Culture
- FinCEN Guidelines: Encourage leadership support, adequate resource allocation, and a comprehensive understanding of AML/CFT impact and compliance within organizations.
Customer Identification Requirements
- Natural Clients: Require full identification including legal name, addresses, and official ID numbers.
- Foreign Entities: Must provide proof of incorporation, beneficial ownership, and expected account usage.
Sanctions
- Types of Sanctions: Targeted (against named individuals), sectoral (specific economic sectors), and comprehensive (broad prohibitions).
- US Sanctions Lists: The Specially Designated Nationals and Blocked Persons list identifies entities involved in terrorism and narcotics trafficking.
Know Your Employee (KYE)
- KYE Program: Aims to understand employee backgrounds to mitigate conflicts of interest and susceptibility to money laundering.### Automated AML/CFT Solutions
- Features include automated customer verification, watch list filtering, transaction monitoring, regulatory reporting automation, case management, and maintaining an audit trail.
Capabilities of Automated Systems
- Monitors transactions to identify anomalies, gathers Customer Due Diligence (CDD) information, and scores customer responses.
- Conducts evaluations of suspicious transactions based on each client's risk profile.
- Provides workflow features for investigation assignments and monitoring, storing at least one year of data.
- Automates filing of Suspicious Transaction Reports (STRs) and standard reporting on investigation nature and productivity.
Unusual Customer Behavior Red Flags
- Signs such as excessive nervousness, discussing recordkeeping to avoid reporting, and reluctance to proceed after being informed of reporting rules.
- High velocity of funds movements with low account balances, large deposits from PEPs or students, and unusual currency transaction patterns.
Unusual Customer ID Circumstances
- Presentation of suspicious or unusual identification, reluctance to provide background info, or attempts to open accounts without ID.
- Permanent addresses outside service area, disconnected contact details, and requests to avoid account statements or mail.
Unusual Cash Transactions
- Large cash deposits made without prior counting, frequent exchanges of small bills for larger ones, and deposits often containing counterfeit bills.
- Conducting transactions below reporting thresholds and transferring cash between accounts in a disjointed manner.
Unusual Non-Cash Deposits
- Depositing large volumes of traveler's checks, consecutively numbered money orders, or checks inconsistent with account purpose.
Unusual Wire Transfer Transactions
- Wire transfers sent or received from various accounts, with persons sending small instruments below reporting thresholds or funds transferred inexplicably across borders.
Unusual Safe Deposit Box Activity
- Excessive time spent near safe deposit boxes, visits prior to cash deposits under reporting thresholds, and renting multiple boxes.
Unusual Activity in Credit Transactions
- Misrepresentation on financial statements, using complex transactions for loans, sudden repayments of large loans without clear funding sources.
Unusual Commercial Account Activity
- Inconsistent financial statements, lack of regular activity on corporate accounts, and high-value transactions among shell companies with no apparent reason.
Unusual Trade Financing Transactions
- Requests for trade financing on commodities with inconsistent market prices, amendments to letters of credit without justification, and unusual payment locations linked to trades.
Unusual Investment Activity
- Using investment accounts to wire funds offshore and cashing out annuities prematurely.
Other Unusual Customer Activity
- High transaction levels via internet or telephone, purchasing numerous prepaid cards, and transactions involving personal accounts for business purposes.
Unusual Employee Activity
- Discrepancy in employee credentials, excessive unresolved exceptions, and lifestyles inconsistent with their salaries.
Unusual Activity in Money Remitter/Currency Exchange Settings
- Alterations in transaction details to avoid CTR filing, frequent purchases below thresholds, and customers using multiple IDs simultaneously.
Unusual Activity for Virtual Currency
- Inconsistent fund transfers related to VC exchanges, multiple accounts funneling to few VC accounts, and significant purchases below reporting thresholds.
Unusual Activity in an Insurance Setting
- Cash payments on policies, use of diverse currencies to pay premiums, and redemption requests during "legal cancellation" periods.
Unusual Activity in a Broker-Dealer Setting
- Customer reluctance to provide information on undisclosed principals, multiple accounts with high wire activity, and transactions designed to evade documentation requirements.
Unusual Real Estate Activity
- Invalid documents submitted for loan cancellations, falsified checks, and misrepresentation of primary residency status on loans.
Unusual Activity for Dealers of Precious Metals and High-Value Items
- Diamonds sourced from countries lacking production, raising concerns about legitimacy in transactions.### Unusual Activity Indicative of Trade Based Money Laundering
- Trade conducted via large volumes with countries outside the recognized "diamond pipeline".
- Purchases or imports drastically exceeding anticipated sales figures.
- Sales of gold bars, coins, or loose diamonds from retail jewelry stores.
- Increased activity in a diamond dealer's account despite a sector-wide decline.
- Transactions between local firms facilitated by an overseas intermediary.
- Payments related to rare or unique diamonds appear outside standard trading practices.
- Use of a single bank account by various businesses leading to potential misuse.
- A sole bank account having multiple handlers for deposits, both retail and wholesale.
- Third parties utilized for fund deposits into a diamond dealer's account.
- Financial activities showing clear inconsistencies with standard diamond trade practices.
- Deposits from foreign companies followed by immediate fund transfers to alternative jurisdictions.
- Exports settled through offsetting and payments received from third parties.
- Transfers where the ordering customer is a Money Service Business (MSB).
- Receivership names on payments from diamond dealers do not correspond to exporters or suppliers.
Unusual Activity Indicative of Human Smuggling
- Numerous wire transfers, often under $3,000, sent from various US locations to a common beneficiary near the US-Mexico border.
- Multiple transfers conducted at different branches directed at border cities on same or consecutive days.
- Money flows deviating from established remittance patterns involving high migrant populations.
- Significant currency deposits in US banks followed by transfers to migrant-heavy countries.
- Unrelated customers sending wires to the same beneficiary near the border, often using similar details.
- Accounts functioning as funnel accounts exhibiting quick withdrawals and cash deposits in disconnected locations.
- Frequent exchanges of small currency for larger denominations by non-cash-intensive customers.
- New customers may unintentionally replace previous clients whose accounts were closed due to suspicious activities.
- Inconsistent lifestyles of customers suggest funding sources unrelated to their proclaimed employment.
- Inflated cash inflows inconsistent with the expected business activities.
Unusual Activity Indicative of Human Trafficking
- Business clients show abnormal payroll expenditures, often low relative to their workforce and operations.
- Significant payroll deductions raise red flags about employee compensation.
- Cashing payroll checks where most funds are retained by employers or returned to their accounts.
- Outbound wire transfers with no legitimate purpose directed towards high-risk trafficking origins.
- Accounts acting as funnel accounts, marked by irregular cash deposits and swift fund withdrawals.
- Multiple unrelated customers sending funds to a common beneficiary.
- Transactions involving individuals escorted by third parties to send money abroad.
- Regular payments to unregistered recruitment agencies linked to labor violations.
- Accounts are created or used by customers accompanied by third parties indicating possible trafficking.
- Foreign workers’ accounts custodians can be their employers or employment agencies.
Terrorist Financing Behavior Indicators
- Transaction parties from nations known for supporting terrorism pose a significant risk.
- Employment of false corporations, including shell entities, to obscure true ownership.
- Inclusion of individuals in the UN 1267 Sanctions List heightens alert.
- Media disclosures linking account holders to terrorist organizations.
- Lack of proper identification for the beneficial owner of accounts.
- Use of nominees, trusts, or family accounts raises suspicion.
- False identification usage for account setups can indicate illicit intent.
- Misappropriation of non-profit organizations for funding terrorism.
Terrorist Financing Indicators Linked to Financial Transactions
- Nonprofits engaged in fund usage inconsistent with their organizational purpose.
- Transactions lacking economic justification; often convoluted to disguise fund sources.
- Inconsistent transaction patterns compared to the normal activity of the account.
- Structured deposits created to bypass detection systems.
- Suspicious references accompanying many cash deposits and withdrawals.
- Frequent ATM activities without clear business rationale pointing to money movement.
- Abnormal cash activities in international accounts signal potential issues.
- Multiple small cash deposits followed by significant wires to other countries raise concerns.
- Reliance on various foreign bank accounts to potentially obscure transaction origins.
High Risk (AML/CFT Risk Categories)
- High risks present that aren’t outright prohibitions; necessitate stringent controls and enhanced due diligence.
Medium Risk (AML/CFT Risk Categories)
- Medium risk requires extra scrutiny; typical for retail businesses engaging some cash transactions, yet not entirely cash-intensive.
Low Risk (AML/CFT Risk Categories)
- Low risk indicates baseline money laundering risk, typically reflecting expected and normal business activity.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on Anti-Money Laundering and Counter Terrorist Financing compliance programs with these flashcards from ACAMS Chapter 3. Explore key concepts like AML/CTF risk scoring and the benefits of a risk-based approach. Perfect for professionals looking to enhance their understanding and application of compliance strategies.
