AML/CFT Regulations Overview

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Questions and Answers

Within what timeframe should a Suspicious Transaction Report (STR) be submitted after determining a transaction is suspicious?

Within 15 days of the succeeding month.

Within 10 days

Within 30 days

Within 7 days (correct)

For how long should account opening records, including identification documents, be retained from the date of account closure?

5 years

10 years (correct)

7 years

3 years

Which of the following is NOT a key element of the Reserve Bank of India's (RBI) Master Direction on Know Your Customer (KYC)?

Loan Disbursement Process (correct)

Monitoring of Transactions

Customer Acceptance Policy

Customer Identification Procedure

What is the prescribed timeframe for periodic KYC updation for medium-risk customers?

8 years Signup and view all the answers

Which of the following does the Negotiable Instruments Act primarily deal with?

Promissory Notes, Bills of Exchange, and Cheques Signup and view all the answers

What does ‘SAFE’ stand for in the context of identifying suspicious transactions?

Screen, Ask, ফাইন্ড, Evaluate Signup and view all the answers

What is the significance of the threshold of ₹10,00,000 in the context of cash transactions?

It's the threshold above which a cash transaction triggers the filing of a Cash Transaction Report (CTR) Signup and view all the answers

Mr. Mishra deposits ₹5 Lakh, ₹5 Lakh, and ₹4 Lakh in three different banks. What is this practice known as?

Structuring Signup and view all the answers

What does STR stand for in the context of the Prevention of Money Laundering Act (PMLA)?

Suspicious Transaction Reports Signup and view all the answers

If a bank concludes that a transaction is suspicious, who is authorized to file a report onward to FIU-IND?

The Principal Officer Signup and view all the answers

According to KYC/AML regulations, what does CFT stand for?

Combating the financing of terrorism Signup and view all the answers

Which of the following is NOT a typical red flag that indicates a suspicious transaction?

Transactions that involve small amounts of cash. Signup and view all the answers

Which of these countries is on the FATF blacklist?

Myanmar Signup and view all the answers

In the context of managing AML/CTF in business, which of these factors should be considered?

Methods of delivery such as cash, internet and telephone banking Signup and view all the answers

According to the provided text, what should branches AVOID doing with regards to banned/terrorist organizations?

Opening deposit or advance accounts. Signup and view all the answers

What does FCRA stand for?

Foreign contribution Regulation Act Signup and view all the answers

For how long should newly opened accounts be closely monitored, according to the text?

6 months Signup and view all the answers

Which agency functions as the Central Counter Terrorism Law Enforcement Agency in India?

National Investigation Agency Signup and view all the answers

If a customer is conducting business transactions through their savings account, what should the bank do?

Educate the customer and suggest opening a current account. Signup and view all the answers

What are shell companies primarily characterized by?

Existing only on paper without substantial physical operations Signup and view all the answers

In what situations should a bank apply customer due diligence?

When establishing a business relationship, carrying out occasional transactions, suspecting money laundering or terrorist financing, and doubting the veracity of previously obtained documents Signup and view all the answers

What activity is described in the following scenario: A customer conducts three wire transfers of $400,000 each on the same day instead of one transfer of $1,200,000.

Structuring/Layering Signup and view all the answers

Which of the following best describes a 'Money Mule'?

A person who transfers money, received from a third party, to another party and obtains a commission or a victim of fraud who unwittingly launders money. Signup and view all the answers

What action should a bank take if it learns a customer was arrested for drug trafficking shortly after a large cash purchase?

Make an STR to the FIU about the transaction. Signup and view all the answers

What are the individuals who facilitate the informal transfer of funds across borders, as described in the content, called?

Hawaladars Signup and view all the answers

Besides actual money laundering transactions, what else are banks required to report?

Attempted money laundering transactions Signup and view all the answers

Study Notes

AML/CFT Quiz Discussion

The National Investigation Agency functions as the Central Counter Terrorism Law Enforcement Agency in India.
Shell companies are fake companies that may not exist physically.
Banks should apply customer due diligence when establishing business relationships, handling occasional transactions, or suspecting money laundering or terrorism financing.
Examples of layering include customers making 3 separate transfers of 4 lakhs each, instead of a single 12 lakh transfer, and refusing to provide required information.
Money mules transfer money, often digitally or in cash, from one party to another for a commission. They are sometimes unaware victims in crimes.
A month ago, Mr. Sam purchased investment property, in the name of a Jennifer Corps ltd; paid Rs. 45 lakhs in cash; and was subsequently arrested for drug trafficking. A STR (Suspicious Transaction Report) should be filed to the FIU regarding the transaction.
Money is transferred from country A to country B through an agent using a Hawala system; the receiver is identified in country B.
Banks must report attempted money laundering transactions. Hawala is an Arabic word.
India observes Anti-terrorism day on May 21st.
Bombing, hijacking, and hostage taking are examples of terrorism.
Suspicious transaction reports (STRs) need to be filed within seven days of suspecting a suspicious transaction (cash or non-cash).
Terrorism requires financing for weapons, bombs, recruitment, training, and living expenses.
Account opening records, including identification documents, must be kept for ten years after cessation of transactions.
The Financial Action Task Force (FATF) is an intergovernmental organization founded in 1989 to combat money laundering and terrorism financing, originating from the G7 forum.
The key elements of the RBI’s Master Direction on KYC include Customer Acceptance Policy, Customer Identification Procedure, monitoring transactions, and risk management.
The Negotiable Instruments Act governs promissory notes, bills of exchange, and cheques.
Medium-risk customers require KYC updates every 8 years.
The deadline for submitting cash transaction reports is the 15th of the following month.
Internet banking transactions, that do not involve cash withdrawals, are excluded from the cash transaction reporting requirements.
State and private financing are sources of terrorist financing.
Terrorism can be domestic or international.
Combating the Financing of Terrorism (CFT) falls under KYC/AML regulations.
A suspicious transaction raises reasonable suspicion and may involve criminal activity, lack economic or bonafide purpose, and may involve terrorism financing.
Countries like North Korea, Iran, and Myanmar are on the FATF blacklist.
Banks should consider KYC practices, including customer identification, fund destination, and delivery methods such as cash, phone, and online banking.
The Financial Action Task Force plays a crucial role in combating terrorist financing globally.

Additional Points

Branches should not open accounts for banned terrorist organizations.
FCRA refers to the Foreign Contribution Regulation Act.
Newly opened accounts should be closely monitored for the first 6 months.
The IBA produced the first edition of KYC and AML guidelines for banks in 2003.
Customers without PANs may need further documentation to initiate accounts.
High-risk accounts require fresh KYC documents within 2 years.
"Red flags" in money laundering denote suspicious activities or transactions.
India is a member of the FATF. A Joint Financial Intelligence Unit uses a SAFE approach (Screen, Ask, Find, Evaluate) to identify suspicious activities.

Additional Policies

KYC compliance is mandatory under the Prevention of Money Laundering Act 2002.
Structuring involves breaking down a large cash transaction into smaller ones to avoid reporting thresholds.
Politically exposed persons (PEPs) or suspicious transaction reports (STRs) are reported.
Banks should report suspicious transactions to relevant authorities.
Money laundering involves placement and layering.
Accounts cannot be categorized as “very high” under KYC.
Bank principal officers can report suspicious transactions to FIU-IND.

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Description

Test your knowledge on Anti-Money Laundering and Counter Financing of Terrorism concepts. This quiz covers topics such as shell companies, customer due diligence, and the roles of law enforcement in India. Learn about the implications of suspicious transactions and money mule activities.