ACAMS Certified Anti-Money Laundering Specialist Flashcards PDF

Certified Anti-Money Laundering Specialist FLASHCARDS Version 1.16 acams.org Instructions acams.org 1-1 Money laundering involves taking 1-1...

Certified Anti-Money Laundering Specialist FLASHCARDS Version 1.16 acams.org Instructions acams.org 1-1 Money laundering involves taking 1-1 criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities. Money laundering is the process of making dirty money What is money laundering? look clean. 1-2 Electronically moving funds from 1-2 one country to another and dividing them into advanced financial options and/or markets; moving funds from one financial institution to another or within accounts at the Give an example of the second stage of money same institution; converting the cash placed into laundering. the system into monetary instruments; reselling high-value goods and prepaid access or stored value products; investing in real estate and other legitimate businesses; placing money in stocks, bonds, or life insurance products; and using shell companies to obscure the ultimate beneficial owner and assets. 1-3 Purchasing luxury assets such as 1-3 property, artwork, jewelry, or high- end automobiles; and entering into financial arrangements and other ventures in which investments can be made in business Give an example of the third stage of money enterprises. laundering. Version 1.16 © ACAMS. All rights reserved. 1-4 Blending of funds, purchasing 1-4 significant stored value cards with currency, foreign exchange, breaking up amounts, currency smuggling, and loans. Give an example of the first stage of money laundering. 1-5 The Yates memo reminds 1-5 prosecutors that criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing. It notes that the resolution of a What does the Yates Memo say? corporate case does not provide protection to individuals from criminal or civil liability. 1-6 Funds transfers to or from a 1-6 financial secrecy haven or high-risk geographic location without an apparent business reason or when the activity is inconsistent with the customer’s business or What are some indicators of money laundering history; large, incoming funds transfers on behalf using electronic transfers of funds? of a foreign client with little or no explanation or apparent reason; checks and money orders used to receive many small, incoming transfers of funds or to make deposits; funds activity that is unexplained, repetitive, or reveals unusual patterns; payments or receipts that have no apparent link to legitimate contracts, goods, or services; and funds transfers sent or received from the same person to or from different accounts. Version 1.16 © ACAMS. All rights reserved. 1-7 Remote deposit capture (RDC) is a 1-7 bank product that allows customers to scan a check and transmit an electronic image to the bank for deposit. Because RDC minimizes human intervention, it What is remote deposit capture and what risk is decreases the ability to identify potential fraud associated with it? indicators, such as an altered check and multiple deposits of the same item. 1-8 PTAs with foreign institutions 1-8 licensed in offshore centers with weak bank supervision and licensing laws; PTAs arrangements in which the correspondent bank fails to apply CDD to the respondent's customers; What are some of the money laundering risks PTA arrangements in which subaccount holders pertaining to the use of payable through have currency deposit and withdrawal privileges; accounts (PTAs)? and PTAs used in conjunction with a subsidiary, representative, or other office of the respondent bank. 1-9 Money laundering risks can arise in 1-9 concentration accounts when the customer-identifying information is separated from the financial transaction. When separation occurs, the audit trail is lost, and accounts can be What is a money laundering risk pertaining to misused or administered improperly. the use of concentration accounts? Version 1.16 © ACAMS. All rights reserved. 1-10 A PEP is a person who is or has 1-10 been entrusted with a prominent public function domestically or by a foreign country or international organization. Relatives and close associates of PEPs are also considered Define a politically exposed person (PEP). to be PEPs. 1-11 Structuring is designing a 1-11 transaction to evade triggering a reporting or recordkeeping requirement, e.g., breaking a large cash deposit into smaller amounts to be deposited into separate banks, What is structuring? separate accounts, or on separate days to avoid currency transaction reports. 1-12 Credit cards are more likely to be 1-12 used in the second (layering) and third (integration) stages of money laundering. Examples include overpaying a credit card balance and then asking for a refund and placing Which money laundering stage(s) are credit illegal funds in accounts at offshore banks and cards most likely to be used, and what is an then accessing the funds using credit and debit example of money laundering through the use cards associated with the offshore account. of credit cards? Version 1.16 © ACAMS. All rights reserved. 1-13 Multiple financial organization 1-13 relationships, whereby the TPPP’s suspicious activity cannot be seen in its entirety; money laundering by sending funds directly to a financial organization from a foreign jurisdiction What are some of the risks posed by third-party through an international ACH payment; and high payment processors (TPPPs)? return rates from unauthorized transactions. 1-14 Money launderers can use money 1-14 remitters and currency exchanges to make funds available to criminal organizations at a destination country in the local currency. The launderer or broker then sells the criminal dollars What are some ways money services to foreign businesspeople wishing to make businesses (MSBs) can be used for money legitimate purchases of goods for export. The laundering? cash-intensive and transactional nature of MSBs can facilitate money laundering. 1-15 Its international nature; speed of 1-15 transactions; ability to conduct free-of-payment transfers; ease of converting holdings to cash without significant loss of principal; routine use of wire transfers to, from, What are some of the aspects associated with and through multiple jurisdictions; competitive, the securities industry that increase its commission-driven environment; practice of exposure to money laundering? maintaining securities accounts as nominees or trustees; and weak AML programs. Version 1.16 © ACAMS. All rights reserved. 1-16 Converting the funds to be 1-16 laundered from cash to checks and using casino credit to layer transactions before transferring out the funds; buying chips with illicit funds and requesting repayment via a check What are some red flags of money laundering drawn on the casino’s account; using illegal funds associated with casinos and gambling? to repay casino lines of credit; junket operators moving funds across borders and through multiple casinos; paying gambling debts in cash just under the reporting requirements; engaging in minimal gambling without a reasonable explanation; using casinos for banking-like financial services; and unusual gaming and transaction patterns. 1-17 Gold has high intrinsic value in a 1-17 compact and easy-to-transport form. It can be bought and sold simply and often anonymously for currency in most areas of the world, allowing criminals to convert their illicit Why is gold vulnerable to money laundering cash into anonymous, transferable assets. The and terrorist financing risks? gold market is a target for criminal activity because it is lucrative and holds its value regardless of the form it takes. 1-18 Purchasing an expensive airline 1-18 ticket for another person, who then asks for a refund; structuring wire transfers in small amounts to avoid recordkeeping requirements; and establishing tour operator List ways in which travel agencies can be used networks with false bookings and documentation to launder money. to justify significant payments from foreign travel groups. Version 1.16 © ACAMS. All rights reserved. 1-19 Creating and managing corporate 1-19 vehicles and other complex legal arrangements; buying or selling property as a cover for illegal fund transfers; performing financial transactions; providing financial and tax List various functions of gatekeepers—attorneys, advice; providing introductions to financial notaries, accountants, and auditors—that can be organizations; undertaking certain litigation; and useful to money launderers. setting up and managing charities. 1-20 Attorneys have confidential 1-20 relationships with their clients. Why is the issue of requiring attorneys to be gatekeepers in the AML/CFT area controversial? 1-21 It can be purchased with cash; the 1-21 ultimate beneficial owner can be disguised; it is a relatively stable and reliable investment; and the value can be increased through renovations and improvements. What makes real estate an attractive channel for laundering illicit funds? Version 1.16 © ACAMS. All rights reserved. 1-22 Overinvoicing and underinvoicing; 1-22 overshipping and short-shipping; ghost-shipping; shell companies; multiple invoicing; and black market trades. What are some common money laundering techniques involved with trade-based money laundering? 1-23 A form of trade-based money 1-23 laundering, the BMPE is a process by which money in the United States derived from illegal activity is purchased by peso brokers and deposited in US bank accounts established What is the Black Market Peso Exchange by the brokers. The brokers sell checks and wire (BMPE)? transfers drawn on those accounts to legitimate businesses, which use them to purchase goods and services in the US. (Although the US is prominently figured in BMPE, the process is not limited exclusively to that country.) 1-24 Anonymous cardholders, 1-24 anonymous funding, anonymous access to funds, high value limits and no limits on the number of cards individuals can acquire; global access to cash through ATMs; offshore What are the potential risk factors commonly card issuers that might not observe laws in all associated with prepaid bank cards? jurisdictions; and use as a substitute for bulk-cash smuggling. Version 1.16 © ACAMS. All rights reserved. 1-25 Robust oversight of outsourced 1-25 functions; limits on storage values, transactions, and turnover; transaction monitoring systems capable of detecting money laundering patterns and deviations; systems for What are some specific controls that e-money identifying customers with multiple purses, institutions can implement to mitigate the accounts, and cards; geolocation, device-related money launderings risks of prepaid cards, information, and IP addresses to identify mobile payments, and internet-based payment discrepancies in customer activity from the services? information provided at onboarding; cooperation with merchants that accept e-money; geographic restrictions on the use and function of e-money products. 1-26 A User is a person who obtains VC 1-26 to purchase goods or services. An Exchanger is a person engaged as a business in the exchange of VC for real currency, funds, or other virtual currency. An Administrator is a Explain the roles of the following participants in person engaged as a business in issuing VC and the virtual currency (VC) ecosystem: User, who has the authority to redeem the virtual Exchanger, and Administrator. currency. 1-27 Self-funding by foreign terrorist 1-27 fighters; raising funds through social media; new payment products and services; and exploitation of natural resources. What are some emerging risks for terrorist financing? Version 1.16 © ACAMS. All rights reserved. 1-28 Willful blindness is the “deliberate 1-28 avoidance of knowledge of the facts” or “purposeful indifference.” Courts have held that willful blindness is the equivalent of actual knowledge of the illegal source of funds or Explain the legal concept of willful blindness in of the intentions of a customer in a money the context of money laundering. laundering transaction. 1-29 Correspondent banks do not know 1-29 the customers of the respondent directly and rely on the respondent bank’s internal controls; less information is available to help the correspondent bank recognize unusual In what ways is correspondent banking activity; the correspondent does not know the vulnerable to financial crime? degree of supervision to which the respondent is subject, and might have limited information on the respondent’s AML/CFT controls; and some respondents are correspondents to third banks, which further shields the parties involved. 1-30 Concentration accounts are 1-30 internal accounts established to facilitate the processing and settlement of multiple or individual customer transactions within the bank, usually on the same day. They What is a concentration account? are frequently used to facilitate transactions for private banking, trust and custody accounts, funds transfers, and international affiliates. Version 1.16 © ACAMS. All rights reserved. 1-31 Microstructuring is a method of 1-31 placing large amounts of illicit cash into the financial system. It is essentially the same as structuring (i.e., designing a transaction to evade reporting requirements), but at a smaller Describe microstructuring. level. A microstructurer might take an $18,000 deposit and break it into 20 deposits of approximately $900 each. 1-32 High-risk insurance products 1-32 typically offer the ability to fold funds and assets into the policy; full or partial underlying investments under the control of the customer; the option of asset transfers; and a What are the typical features of high-risk high upper limit for the amount of funds held. insurance products? 1-33 Require all art vendors to provide 1-33 identifying information and confirm that they are authorized to sell the item; verify the identities and addresses of new vendors and customers; report suspicious items to the Art How can art and antiques dealers and Loss Register; avoid cash payments; be aware of auctioneers mitigate their money laundering money laundering regulations; and appoint a risks? senior staff member to whom employees can report suspicious activities. Version 1.16 © ACAMS. All rights reserved. 1-34 Withdrawal of assets through 1-34 transfers to unrelated accounts or high-risk jurisdictions; frequent additions to or withdrawals from accounts; checks drawn on, or wire transfers from, accounts of third parties with Describe several ways in which the investment no relation to the client; clients who request and commodity advising industry is susceptible custodial arrangements that allow for anonymity; to money laundering. transfers of funds to the adviser for management followed by transfers to accounts at other institutions in a layering scheme; investing illegal proceeds for a client; and movement of funds to disguise their origin. 1-35 TCPSs can act as a formation 1-35 agent of legal persons; act as (or arrange for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to Describe the types of services that trust and other legal persons; provide a registered office, company service providers (TCSPs) offer to business address, or correspondence for a third parties. company, partnership, or another legal person or arrangement; act as (or arrange for another person to act as) a trustee of an express trust; and act as (or arrange for another person to act as) a nominee shareholder for another person. 1-36 Shell companies convert the cash 1-36 proceeds of crime into alternative assets; create the perception that illicit funds were generated from a legitimate source; facilitate a wide range of legitimate and/or fake What are four related purposes for establishing business transactions that can be used to further or controlling a shell company for money the laundering process; and conceal criminal laundering? ownership. Version 1.16 © ACAMS. All rights reserved. 1-37 A trust can be used to convert illicit 1-37 cash into less suspicious assets; help disguise criminal ownership of funds and other assets; form an essential link between different money laundering vehicles and How can trust accounts be used to launder techniques, such as real estate, nominees, and money, whether offshore or onshore, in the the deposit and transfer of criminal proceeds; context of money laundering? and hide assets from legitimate creditors and protect property from seizure. Payments to the trust beneficiaries can be used to launder money. 1-38 Bearer bonds, bearer stock 1-38 certificates, and bearer shares belong, on the surface, to the “bearer.” When bearer securities are transferred, because there is no registry of owners, the transfer takes place What makes bearer bonds, bearer stock by physically handing over the bonds or share certificates, and bearer shares prime vehicles certificates. Bearer shares offer many for money laundering? opportunities to disguise their legitimate ownership. 1-39 Terrorist financing uses funds for 1-39 an illegal political purpose, but the money is not necessarily derived from illicit proceeds. On the other hand, money laundering always involves the proceeds of illegal activity. What is the basic difference between the The purpose of laundering is to enable the crimes of terrorist financing and money money to be used legally. laundering? Version 1.16 © ACAMS. All rights reserved. 1-40 Use of an account as a front for a 1-40 person with suspected terrorist links; appearance of an account holder’s name on a list of suspected terrorists; frequent, large cash deposits in accounts of nonprofit Describe factors that indicate a financial organizations; high volumes of transactions in organization is at risk for being used as a conduit accounts; and lack of a clear relationship for terrorist financing? between the banking activity and the nature of the account holder's business. 1-41 Unlike formal financial institutions, 1-41 hawalas are not subject to formal government oversight and are not required to keep detailed records in a standard form. Although some hawaladars do keep ledgers, their What makes hawalas attractive to terrorist records are often written in idiosyncratic financiers? shorthand and are maintained only briefly. 1-42 Enjoying the public trust; having 1-42 access to considerable sources of funds; being cash-intensive; frequently having a global presence, often in or near areas exposed to terrorist activity; and often being subject to What characteristics of charities and nonprofit little or no regulation and/or having few obstacles organizations make them particularly vulnerable to their creation. to misuse for terrorist financing? Version 1.16 © ACAMS. All rights reserved. 1-43 Reputational risk (the potential that 1-43 adverse publicity regarding an organization’s business practices and associations will cause a loss of public confidence in the integrity of the organization), operational Describe the four types of risk associated with risk (the potential for loss resulting from money laundering that are faced by financial inadequate internal processes, personnel, or organizations. systems), legal risk (the potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties), and concentration risk (the potential for loss resulting from too much credit or loan exposure to one borrower or group of borrowers). 1-44 Stage one: placement is the 1-44 physical disposal of cash or other assets derived from criminal activity. Stage two: layering is the separation of illicit proceeds from their source by layers of financial transactions Describe the three stages of money laundering. intended to conceal the origin of the proceeds. Stage three: integration is supplying apparent legitimacy to illicit wealth through the reentry of the funds into the economy in what appears to be normal business or personal transactions. 1-45 The USA PATRIOT Act was 1-45 motivated by the terrorist attacks of September 11, 2001, and the urgent need to decipher and disable mechanisms that finance terrorism, including strengthening money What motivated passage of the USA PATRIOT laundering laws and the Bank Secrecy Act. The Act, and to whom does it apply? USA PATRIOT Act has implications for US organizations and non-US organizations that do business in the US. Version 1.16 © ACAMS. All rights reserved. 1-46 Perceived high profitability; intense 1-46 competition; powerful clientele; high level of confidentiality; close trust developed between relationship managers and their clients; commission-based compensation for What factors contribute to the vulnerabilities of relationship managers; culture of secrecy and private banking to money laundering? discretion; and role of relationship managers as client advocates to protect their clients. 1-47 Confirm that the MSB has 1-47 implemented a sufficient AML/CFT program (e.g., procedures, training, and suspicious activity monitoring) and is properly licensed and/or registered in the jurisdictions in What is one of the most important aspects of which it operates. due diligence for a bank when establishing a relationship with a money services business (MSB)? 1-48 A free-look period is a feature that 1-48 allows investors, for a short period of time after the policy is signed and the premium paid, to back out of a policy without penalty. This process allows the money launderer How can the free-look period in the insurance to get an insurance check, which represents industry be used to launder money? cleaned funds. Version 1.16 © ACAMS. All rights reserved. 1-49 When lawyers serve as trustees by 1-49 holding money or assets “in trust” for clients, it enables the lawyers to conduct transactions and administer the client's affairs. Sometimes, illicit money is placed in a law firm’s How can having a lawyer as a trustee on a general trust account in a file set up in the name client's account create vulnerabilities to money of the client, nominee, or a company controlled laundering at a financial organization? by the client. 1-50 Structuring cash deposits below 1-50 the reporting threshold; purchasing vehicles with sequentially numbered checks or money orders; trading in vehicles and conducting successive transactions of buying and selling new What are some money laundering risks, and used vehicles to produce complex layers of methods, and red flags in the vehicle sales transactions; and accepting third-party industry? payments, particularly from jurisdictions with ineffective money laundering controls. 1-51 Increased exposure to organized 1-51 crime and corruption; undermining the legitimate private sector; weakening financial organizations; dampening effect on foreign investments; loss of control of, or mistakes in, What are some of the potential decisions regarding economic policy; economic macroeconomic consequences of unchecked distortion and instability; loss of tax revenue; risks money laundering? to privatization efforts; reputation risk for the country; risk of international sanctions; social costs; reputational risk; operational risk; legal risk; and concentration risk. Version 1.16 © ACAMS. All rights reserved. 1-52 Bearer checks are unconditional 1-52 orders (i.e., negotiable instruments) that, when presented to a financial organization, must be paid to the holder of the instrument rather than to a payee specified on What are bearer checks? the order itself. The financial organization is usually not obligated to verify the identity of the presenter of a bearer check unless the transaction exceeds a specific threshold. 1-53 FIUs are mandatory national 1-53 agencies that handle financial intelligence. They receive reports of suspicious transactions from financial organizations, other people, and entities, analyze them, and What are financial intelligence units (FIUs)? disseminate the resulting intelligence to local law enforcement agencies and foreign FIUs to combat money laundering. 2-1 Spreading the anti-money 2-1 laundering message worldwide; monitoring implementation of the FATF Recommendations among FATF members; and reviewing money laundering trends and Identify the three important tasks that FATF countermeasures. focuses on to fulfill its objectives. Version 1.16 © ACAMS. All rights reserved. 2-2 The identification of risks; 2-2 development of appropriate policies; criminal justice system and law enforcement; financial system and its regulation; transparency of legal persons and arrangements; According to the FATF 40 Recommendations, and international cooperation. the complete set of countermeasures against money laundering and terrorist financing cover what six elements? 2-3 Countries and financial 2-3 organizations should assess the risks associated with the development of new products, business practices, delivery mechanisms, and technology. They should Describe FATF’s Recommendation 15 (2012) assess these risks prior to launching new concerning new products, delivery products and take appropriate measures to mechanisms, and technologies. mitigate the identified risks. 2-4 Customer identification; 2-4 compliance with laws; conformity with high ethical standards and local laws and regulations; full cooperation with national law enforcement to the extent permitted without What are the topics of the six principles set breaching customer confidentiality; staff training; forth in the Basel Committee’s Statement of and recordkeeping and audits. Principles, called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering”? Version 1.16 © ACAMS. All rights reserved. 2-5 Risk analysis and governance; three 2-5 lines of defense; customer due diligence and acceptance; transaction monitoring systems and ongoing monitoring; management of information; and reporting of According to the Basel Committee’s January suspicious transactions and asset freezing 2014 guidelines, "Sound Management of Risks Related to Money Laundering and Financing of Terrorism," what controls should banks implement? 2-6 The four key elements of a KYC 2-6 program are customer identification, risk management, customer acceptance policy, and ongoing monitoring. According to the Basel Committee's KYC guidance, what are the four key elements of a KYC program? 2-7 Risk management; customer 2-7 acceptance and identification policies; and ongoing monitoring of higher-risk accounts. Describe the elements that should be addressed in a global approach to KYC, as identified in the Basel Committee’s October 2004 paper, “Consolidated KYC Risk Management.” Version 1.16 © ACAMS. All rights reserved. 2-8 It specifically includes the category 2-8 of trust and company service providers; it covers all dealers trading in goods who trade in cash over 15,000 euros; and it expands the definition of financial institution to How does the scope of the European Union’s include certain insurance intermediaries. Third Money Laundering Directive differ from the Second Money Laundering Directive? 2-9 A private banking account is 2-9 defined as an account with a minimum aggregate deposit of US$1 million; an account for one or more non-US people; and an account that is assigned to a bank employee How is a private banking account defined under acting as a liaison with the non-US person. Section 312 of the USA PATRIOT Act? 2-10 The EU’s Second Directive 2-10 extended the scope of the First Directive beyond drug-related crimes; expanded the definition of “criminal activity” to cover not just drug trafficking, but all serious crimes; What are the primary ways in which the EU’s brought currency exchanges and money Second Money Laundering Directive expanded remittance offices under AML coverage; clarified the scope of the First Directive? that knowledge of criminal conduct can be inferred from objective factual circumstances; provided a more precise definition of money laundering; and widened the businesses and professions that are subject to the obligations of the Directive. Version 1.16 © ACAMS. All rights reserved. 2-11 Determining whether enhanced 2-11 due diligence is necessary; assessing the money laundering risk presented by the correspondent account; and applying risk-based procedures and controls reasonably According to Section 312 of the USA PATRIOT designed to detect and report suspected money Act, the due diligence program for laundering. correspondent banks must address what three measures? 2-12 The threshold that financial 2-12 organizations should monitor for occasional customers is US$15,000 [Recommendation 10]; for casinos, including Internet casinos, it is US$3,000 What are the FATF-designated thresholds that [Recommendation 22]; and for dealers in should trigger AML scrutiny? precious metals, when engaged in any cash transaction, it is $US15,000 [Recommendations 22-23]. 2-13 Financial organizations must report 2-13 to the appropriate FIU when they suspect or have reasonable grounds to suspect that funds are the proceeds of a criminal activity or are related to terrorist financing. The financial Describe FATF’s Recommendations regarding organizations and employees reporting such suspicious activity reporting. suspicions should be protected from liability for reporting and prohibited from disclosing that they have reported such activity. Confidentiality concerning suspicious activity reports (SARs) is critical to the effective functioning of the reporting regime. Version 1.16 © ACAMS. All rights reserved. 2-14 For high-risk customers, both the 2-14 Wolfsberg Group’s Correspondent Banking Principles and the FATF recommend obtaining the approval of senior management to commence or continue the business relationship, The Wolfsberg Group and the FATF as well as requiring the first payment to be recommend what enhanced due diligence carried out through an account in the customer’s before commencing or continuing a business name with a bank subject to similar CDD relationship with high-risk customers? standards. 2-15 AML/CFT policies and coordination 2-15 [Recommendations 1-2]; money laundering and confiscation [Recommendations 3-4]; terrorist financing and financing of proliferation [Recommendations 5-8]; financial Identify the seven topics of international and nonfinancial institution preventative standards incorporated into the FATF 40 measures [Recommendations 9-23]; Recommendations. transparency and beneficial ownership of legal persons and arrangements [Recommendations 24-25]; powers and responsibilities of competent authorities and other institutional measures [Recommendations 26-35]; and international cooperation [Recommendations 36-40]. 2-16 Countries should start by 2-16 identifying, assessing, and understanding the money laundering and terrorist financing risks they face. Then they should take appropriate measures to mitigate Describe FATF’s Recommendation concerning the identified risks. The risk-based approach the risk-based approach. allows countries to allocate their limited resources in a targeted manner in line with their own specific circumstances to increase the efficiency of the preventative measures. Financial organizations should also use a risk- based approach to identify and mitigate their risks. Version 1.16 © ACAMS. All rights reserved. 2-17 Countries and jurisdictions on the 2-17 "black list" have strategic deficiencies that are so serious that FATF calls on its members and nonmembers to apply EDD and, in the most serious cases, countermeasures. Differentiate between what are referred to as Countries and jurisdictions on the "grey list" are FATF's "black list" and “grey list.” already actively engaging with FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. Once a jurisdiction is under increased monitoring, it means it has committed to swiftly resolve the identified strategic deficiencies within an agreed-upon time frame, while the FATF keeps it under close scrutiny. 2-18 The jurisdiction should be 2-18 strategically important based on quantitative (e.g., size of GDP, population) and qualitative indicators (e.g., impact on global financial system, level of AML/CFT risks faced) At a high level, what are the criteria for and additional considerations (e.g., level of becoming a FATF Member? adherence to financial sector standards), and FATF’s geographic balance should be enhanced by the jurisdiction becoming a member. 2-19 No, numbered accounts should not 2-19 be prohibited, but they should be subjected to exactly the same KYC procedures as other customer accounts. KYC tests may be carried out by select staff, but the identity of Does the Basel Committee prohibit the use of customers must be known to an adequate numbered accounts? number of staff if the bank is to be sufficiently diligent. “Such accounts should in no circumstances be used to hide the customer identity from a bank’s compliance function or from the supervisors.” Version 1.16 © ACAMS. All rights reserved. 2-20 EU members must transpose the 2-20 Directives into law. What must EU member countries do with the EU Directives? 2-21 The First Directive of 1991 confined 2-21 predicate offenses of money laundering to drug trafficking, as defined in the 1988 Vienna Convention. However, member states were encouraged to extend the predicate What was considered a predicate offense for offenses to other crimes. money laundering under the First EU Money Laundering Directive? 2-22 Natural and legal persons trading in 2-22 goods are covered to the extent that they make or receive cash payments of €10,000 or more (decreased from €15,000). What is the revised threshold for reporting suspicious transactions under the Fourth EU Money Laundering Directive? Version 1.16 © ACAMS. All rights reserved. 2-23 Asia/Pacific Group on Money 2-23 Laundering (APG); Caribbean Financial Action Task Force (CFATF); Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the What are the nine FATF-Style Regional Bodies? Financing of Terrorism (MONEYVAL); Eurasian Group (EAG); Eastern and Southern Africa Anti- Money Laundering Group (ESAAMLG); Financial Action Task Force of Latin America (GAFILAT); Inter-Governmental Action Group against Money Laundering in West Africa (GIABA); Middle East and North Africa Financial Action Task Force (MENAFATF); Task Force on Money Laundering in Central Africa (GABAC). 2-24 The Caribbean Financial Action 2-24 Task Force (CFATF) Which of the FATF-Style Regional Bodies issued its own set of 19 recommendations, which were specific to the region? 2-25 The Organization of American 2-25 States (OAS), via the Inter- American Drug Abuse Control Commission What permanent international organization was the first reach an agreement on model legislation aimed specifically at dealing with money laundering? Version 1.16 © ACAMS. All rights reserved. 2-26 The Egmont Group of Financial 2-26 Intelligence Units What organization provides a forum for financial intelligence units around the world to improve cooperation and foster trust among countries to securely share sensitive information in the fight against money laundering and the financing of terrorism. 2-27 Section 319(a) of the USA PATRIOT 2-27 Act greatly strengthened the forfeiture powers over the funds of foreign persons and organizations. If the funds the United States pursues are deposited in a foreign How does Section 319(a) of the USA PATRIOT bank that keeps an interbank account at a US Act affect non-US banks that have an account bank, the United States may bring a case to with a US financial organization? forfeit the crime-tainted funds in the US account. 2-28 OFAC, the Office of Foreign Assets 2-28 Control, is the division of the U.S. Department of Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals What is the role of OFAC? against targeted foreign countries, terrorists, international narcotics traffickers, and criminals engaged in activities related to the proliferation of weapons of mass destruction. OFAC imposes controls on transactions and freezes foreign assets under US jurisdiction. Version 1.16 © ACAMS. All rights reserved. 2-29 According to the Wolfsberg Group, 2-29 a bank’s due diligence on a respondent bank should be based on the respondent’s risk profile and the nature of the business relationship. Due diligence should Describe the Wolfsberg Group's address specific risk indicators, such as the recommendation concerning a correspondent respondent bank’s geographic risk, ownership bank's due diligence on a respondent bank. and management structures, customer base, and products and services offered. Furthermore, the determination of the level and scope of due diligence that is required on a respondent bank should be made after considering the relationship between the respondent bank and its ultimate parent (if any). 2-30 The board of directors plays a 2-30 critical oversight role. The board should approve and oversee policies for risk, risk management, and compliance. The board also should have a clear understanding of the money According to the Basel Committee, what are laundering risks, including timely, complete, and the responsibilities of the board of directors accurate information related to the risk related to AML/CFT compliance? assessment. Along with senior management, the board should appoint a qualified chief AML officer with overall responsibility for the AML function and provide this officer with sufficient resources to execute his responsibilities to oversee compliance with the bank’s AML program. 2-31 The Basel Committee’s KYC 2-31 guidance centers on the use of due diligence requirements to mitigate the dangers of corrupt customers. Without due diligence, banks can be subject to reputational, According to the Basel Committee, how are operational, legal, and concentration risks, which sound KYC policies and procedures critical to can result in significant financial cost. Sound KYC protecting the safety and soundness of banks? policies and procedures are critical to protecting the safety and soundness of banks, as well as the integrity of banking systems. Version 1.16 © ACAMS. All rights reserved. 2-32 FIUs are tasked with receiving and 2-32 analyzing SARs and maintaining close links with police and customs authorities. They share information among themselves informally in the context of investigations, usually What is the purpose of a memorandum of on the basis of memoranda of understanding. understanding in the context of financial The Egmont Group of FIUs has established a intelligence units (FIUs) conducting model for MOUs. They are not typically used for investigations? obtaining evidence, but for obtaining intelligence that might lead to evidence. 3-1 Risk is dynamic and needs to be 3-1 continuously managed, and the environment in which each organization operates is subject to continual change. Externally, the political changes of a jurisdiction and whether Why is it important for organizations to continue economic sanctions are imposed or removed can to update and revisit their AML/CFT risk affect a country's risk rating. Internally, assessments? organizations respond to market and customer demands by merging or acquiring other companies, introducing new products and services, and implementing new delivery systems. The combination of these changes makes it critical that the ML/TF risk model is subject to regular review. In some countries, there is a legislative obligation for such reviews to be undertaken on a regular basis. 3-2 Customer risk factors (e.g., 3-2 nonresident customers, cash- intensive businesses, complex ownership structure); country or geographic risks (e.g., countries with inadequate AML/CFT systems, According to FATF, what categories of risk countries subject to sanctions, countries involved factors warrant enhanced due diligence with funding or supporting of terrorist activities); measures? and product, service, transaction or delivery channel risk factors (e.g., private banking, anonymous transactions, payments received from unknown third parties). Version 1.16 © ACAMS. All rights reserved. 3-3 Unusual activity, such as alerts, 3-3 cases, and suspicious activity (SAR) filings; receipt of law enforcement inquiries, such as subpoenas; transactions that violate economic sanctions programs; and significant volumes of As a financial organization develops transaction activity where it would not be expected. history with its customers, what factors should lead it to consider modifying the risk rating of a customer? 3-4 The US State Department's annual 3-4 “International Narcotics Control Strategy Report,” rating more than 100 countries on their money laundering controls; Transparency International's yearly “Corruption Perceptions Index,” What are some sources for identifying high-risk which rates more than 100 countries on perceived countries? corruption; FATF identifies jurisdictions with weak AML/CFT regimes and issues country-specific mutual evaluation reports; and in the US, certain domestic jurisdictions are evaluated based on whether they fall within government-identified higher-risk geographic locations, such as high- intensity drug trafficking areas (HIDTAs) and high-intensity financial crime areas (HIFCAs). 3-5 AML/CFT programs rely on a 3-5 variety of internal controls, including management reports, automated review systems, and utilization of multiple reviewers; the internal technology or tools the In addition to policies and procedures, what are financial organization uses to ensure the examples of internal controls with AML/CFT AML/CFT program is functioning as intended and programs? within predefined parameters; the alert compliance department to identify potential outliers and deviations from normal policy that may need to be reviewed. Version 1.16 © ACAMS. All rights reserved. 3-6 The sophistication of the 3-6 compliance function should be based upon the organization's nature, size, complexity, regulatory environment, and the specific risks associated with its products, What factors should be considered when services, and customers. No two organizations determining the level of sophistication of an will have exactly the same compliance structure, organization's compliance function? because the risks facing each organization are different, as identified in their respective risk assessments. 3-7 The ability of the compliance 3-7 officer to communicate effectively, both in writing and verbally, is vital to the success of an organization’s AML/CFT program. The compliance officer must be able to Why is it important for an organization's communicate at all levels of the organization— AML/CFT compliance officer to have good from front-line associates to the CEO and board communication skills? of directors. The compliance officer needs to be capable of articulating matters of importance to senior and executive management. A compliance officer must be able to analyze and interpret changes, determine what effect they could have on the organization, and suggest an action plan, when appropriate. 3-8 Regardless of the way an 3-8 organization delegates its various AML/CFT tasks, its designated compliance officer is responsible for executing the AML/CFT program. More and more often, various Describe an AML/CFT compliance officer's regulators are seeking enforcement actions accountability. against not only the organization, its executive management team, and board of directors for AML/CFT violations, but the compliance officer as well. Version 1.16 © ACAMS. All rights reserved. 3-9 Most areas of the financial 3-9 organization should receive AML/CFT training, including customer-facing staff; operations personnel; AML/CFT compliance staff; senior management and board of directors; What are some of the target audiences for and independent testing staff. In some countries, training? training programs must extend beyond full- and part-time employees to include contractors, consultants, students, apprentice placements, and secondees from other branches or subsidiaries. 3-10 Tests evaluate how well the training 3-10 is understood, with a mandatory passing score. Why are tests important in AML/CFT training? 3-11 Training should be ongoing and on 3-11 a regular schedule. Existing employees should at least attend an annual training session. New employees should receive appropriate training with respect to their job When should a financial organization conduct function and within a reasonable period after training? joining or transferring to a new job. Situations may arise that demand an immediate session or enhanced training. Changes in software, systems, procedures, or regulations are additional triggers for training sessions, as well as specific illicit financial activity that affects a specific business line or department. Version 1.16 © ACAMS. All rights reserved. 3-12 When establishing business 3-12 relationships; carrying out occasional transactions under certain circumstances; when there is a suspicion of money laundering or terrorist financing; and According to FATF Recommendation 10, when when the financial organization has doubts about should financial organizations undertake the veracity or adequacy of previously obtained customer due diligence measures? customer identification data. 3-13 When there are circumstances in 3-13 which the risk of money laundering or terrorist financing is higher, EDD measures should be taken. These include customer risk factors; country or geographic risk factors; and According to FATF's Recommendation 10, when product, service, transaction, and delivery should a financial organization conduct channel risk factors. enhanced due diligence (EDD) on a customer? 3-14 Source of funds and wealth; 3-14 identifying information on individuals with control over the account, such as signatories or guarantors; occupation or type of business; financial statements; banking What are examples of information obtained references; domicile; proximity of the customer’s when a financial organization conducts residence, place of employment, and place of enhanced due diligence on high-risk business to the bank; description of the customers? customer’s primary trade area and whether international transactions are expected; description of the business operations, the anticipated volume of currency and total sales; a list of major customers and suppliers; explanations for changes in account activity. Version 1.16 © ACAMS. All rights reserved. 3-15 A bank should not establish a 3-15 banking relationship or carry out any transactions until the identity of the customer has been satisfactorily established and verified in accordance with FATF Recommendation 10. According to FATF Recommendation 10, when should the identity of a customer be established and verified? 3-16 Financial organizations should aim 3-16 to apply their customer acceptance policy, procedures for customer identification, process for monitoring high-risk accounts and risk-management framework on a How should a global financial organization global basis to all of their offices, branches and address the performance of customer due subsidiaries. The organization should clearly diligence across its various operations? communicate these policies and procedures through ongoing training and regular communications, and conduct monitoring and testing to ensure compliance with the policies and procedures. 3-17 The Specially Designated Nationals 3-17 and Blocked Persons (SDN) list What is the name of the Office of Foreign Assets Control’s (OFAC) sanctions list? Version 1.16 © ACAMS. All rights reserved. 3-18 Before a financial organization 3-18 starts doing business with a new customer or engaging in certain transactions, it should review the various country sanctions program requirements and published lists of When should a financial organization conduct known or suspected terrorists, narcotics sanctions screening? traffickers, and other criminals, for potential matches. 3-19 These lists do not provide all 3-19 relevant information related to PEPs that would assist in identifying them. For example, they do not include unique identifiers, such as date of birth or address, which poses What is a limitation of using publicly available significant operational constraints, particularly at sources of information to identify politically large retail financial organizations. exposed persons (PEPs) and their associations? 3-20 A system of internal policies, 3-20 procedures and controls (first line of defense); a designated compliance function with a compliance officer (second line of