Anti-Money Laundering Practices Quiz

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Questions and Answers

What action should be taken if there are doubts about the adequacy of previously obtained Customer Identification Data?

Continue with existing customer data without changes

Review due diligence measures and verify the client’s identity again (correct)

Terminate the business relationship immediately

Request additional funds from the client for verification

Which risk category customer requires their information to be updated at least once every two years?

Low-Risk Category

Medium-Risk Category

High-Risk Category (correct)

No specific risk category applies

What is essential for the Bank to obtain regarding the customer's business relationship?

The customer's personal history and background information

A detailed plan for the customer's future investments

Only the financial gains expected from the relationship

Information on the purpose and intended nature of the business relationship (correct)

What should be the approach of the Bank regarding customer information?

Adopt a risk-based approach to the extent of additional information required (D) Signup and view all the answers

When must reasonable steps be taken by the Bank to keep customer information up to date?

When an existing customer opens a new account and during specified intervals (C) Signup and view all the answers

Which of the following indicates a potential requirement for additional verification measures?

Suspicion of money laundering or terrorism financing (A) Signup and view all the answers

What is the primary purpose of customer due diligence in relation to knowing your customer?

To confirm that prospective customers are who they claim to be. (A) Signup and view all the answers

Which of the following is NOT a condition under which banks may rely on third-party customer due diligence?

The third party is located in a high-risk jurisdiction. (A) Signup and view all the answers

What must a bank satisfy to ensure the credibility of a third party in customer due diligence?

The third party must be regulated and monitored for compliance. (C) Signup and view all the answers

What role does the bank retain concerning customer due diligence when using a third party?

The bank is ultimately responsible for due diligence. (C) Signup and view all the answers

When does the identification requirement become particularly important for a bank?

Both B and C. (B) Signup and view all the answers

Which factor does NOT influence the customer identification process?

The personal history of the customer. (C) Signup and view all the answers

What must be assessed about a third party when used for customer due diligence?

Their regulation and compliance with diligence requirements. (A) Signup and view all the answers

What is required from the documentation when conducting customer due diligence?

Copies of identification data must be readily available. (B) Signup and view all the answers

Which of the following scenarios requires customer identification?

A walk-in customer conducting transactions over rupees fifty thousand (C), A customer wishing to open a savings account (D) Signup and view all the answers

What should be done if there is doubt about customer identification data?

Reassess the customer identification data (A) Signup and view all the answers

In what situation could a bank suspect money laundering activities?

If a customer refuses to provide satisfactory identification evidence (C) Signup and view all the answers

What is the threshold amount for requiring customer identification for non-account holders conducting transactions?

Rupees fifty thousand (D) Signup and view all the answers

Why should banks take special care when an applicant refuses to provide identification?

It may suggest engagement in money laundering (C) Signup and view all the answers

What action should a bank take if it suspects intentional structuring of transactions?

Make a suspicious activity report for further investigation (B) Signup and view all the answers

Which of the following activities does not require customer identification?

Opening a basic savings account (A) Signup and view all the answers

What is the primary purpose of customer identification procedures?

To prevent fraudulent activities, including money laundering (D) Signup and view all the answers

Study Notes

Duty to Obtain Identification

Essential for Anti-Money Laundering (AML) to ensure customers are who they claim to be.
Distinction between one-off transactions and ongoing business relationships affects identification requirements.

Verification via Third Parties

Banks may rely on customer due diligence from third parties if specific conditions are met:
- Immediate access to records or information from third party or Central KYC Records Registry.
- Availability of identification data and relevant documentation upon request.
- Third party must be regulated and compliant with client due diligence and record-keeping standards under the PML Act.
- Third party should not be located in high-risk jurisdictions.
- Ultimate responsibility for client due diligence lies with the bank, including enhanced due diligence measures as needed.

Customer Identification Process

In cases of suspicion related to money laundering or terrorism financing, banks must:
- Review due diligence measures.
- Re-verify client identity and gather details on the business purpose and intended relationship.

Customer Identification Procedures

Sufficient information must be collected on the nature of the customer's expected business and transaction patterns.
A risk-based approach determines necessary additional information while respecting applicant privacy.
Information must be kept updated regularly:
- Low-Risk: Update at least once every 10 years.
- High-Risk: Update at least once every 2 years.
- Medium Risk: Update at least once every 8 years.

Circumstances for Customer Identification

Identification required when:
- Starting an account-based relationship.
- Performing international money transfers for non-account holders.
- Authenticity of previously obtained identification data is in doubt.
- Selling products for transactions above ₹50,000.
- Conducting transactions for non-account-based customers totaling ₹50,000 or more.
- Suspected intentional structuring of transactions below ₹50,000.
Introduction should not be sought during account openings.
Lack of satisfactory identification evidence may lead to suspicion of money laundering and necessitate a suspicious activity report to the principal officer.

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Description

Test your knowledge on the essential practices of Anti-Money Laundering (AML), focusing on customer identification and due diligence. Learn about the requirements for verifying customer identities and the reliance on third parties within the AML framework.