Question & Answer

1. Which of the following is not an example of layering

a) Using cash deposited in a bank account to purchase an asset
b) Exchanging cash for a monetary instrument
c) Using an inbound wire transfer to purchase an asset
d) Using an inbound wire transfer to purchase a monetary instrument
You answered D
The correct answer is B

This answer uses physical cash to purchase an asset, and is a feature of placement. All other
answers use money that is already in the financial system and are thus examples of layering
2. What are key effects of money laundering on countries? Choose three.
i) Reputation risk
ii) Losing control of regulatory policy
iii) Being forced into adverse fiscal policies
iv) Losing control of monetary policy

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is A

Counties can suffer reputational risk if they are known as a haven for money laundering, they
may be forced to make adverse fiscal (tax and budget) policy to compensate for the tax
revenue lost to criminal laundering, and they may lose control of monetary policy as
currency flows are directed by launderers out of the country. The country should use
regulatory policy to enforce anti-money laundering.
3. Risks of correspondent banking include the following. Choose three.
i) The effectiveness of the regulatory regime may be unknown
ii) The ultimate customers are at arms length
iii) The USA Patriot Act did not address correspondent banking risks
iv) The volumes of transactions are high

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is C

While the regulatory regime may be known, the effectiveness of that regime on any one
institution may be difficult to assess beyond standard checklists. The arms-length nature of
correspondent banking means that customer due diligence of the ultimate customer is difficult
or impossible, and the transaction volumes are high, so suspicious transactions are hidden in
the noise. The USA Patriot act contained specific provisions concerning correspondent
banking in sections 312, 313, 319a & b
4. Which of the following are most vulnerable to the placement stage of money laundering?
Choose
two.
i) Purchasing diamonds
ii) Overpaying a credit card balance
iii) Obtaining cashiers cheques
iv) Internet casinos

A) i, ii
B) i, iii
C) i, iv
D) ii, iii

You answered D
The correct answer is B

Gem stones and cashiers cheques can be purchased using cash, making them vulnerable to
placement. Credit cards and internet casinos do not usually allow cash payments, and so are
less likely to be used as part of the placement phase.
5. Which of the following describes a payable through account.
a) A numbered account where the customer is unknown
b) A correspondent account that can be used directly by the respondent’s customers without
the respondent’s oversight
c) Internal bank accounts used to assist in the settlement and processing of customer
transactions. Also known as omnibus, settlement, or collection account.
d) A system where a bank offers accounts to another bank to enable it to perform transactions
in a location where it does not have a physical presence

You answered D
The correct answer is B

C describes a concentration account, D is a correspondent account, A is numbered account

6. What is a risk of concentration accounts?
a) the underlying customer identification can be lost
b) co-mingling of clean and dirty funds can occur
c) customers may be unaware they are using them
d) confidentiality and secrecy between client and banker

You answered D
The correct answer is A

The internal accounts used by the bank may be set up so that the audit trail is lost when they
are used. The other answers are not relevant risks to the use of concentration accounts
7. What are two risks associated with private banking?
i) The area was not covered by the Wolfsburg group
ii) politically exposed persons
iii) Private investment companies
iv) Lack of competition

A) i, ii
B) i, iv
C) ii, iii
D) ii, iv

You answered D
The correct answer is C

Politically exposed persons (PEPs) use private banking, and may have access to funds
derived from embezzlement or bribes. Wealthy users of private banking often use private
investment companies (PICs) to manage their wealth which may hide the beneficial owners.
The Wolfsburg group did cover private banking, and there is intense competition in private
banking, making those answers incorrect.
8. Which of the following is a correct statement?
a) smurfs travel from bank to bank withdrawing cash from ATMs
b) smurfing is a way to avoid triggering a currency reporting threshold
c) smurfs are dead people who's accounts have been taken over by money launderers
d) smurfing requires an insider at a financial institution

You answered D
The correct answer is B

Smurfing is used to deposit cash at a financial institution below the reporting threshold. A is
incorrect because smurfs deposit cash, rather than withdrawing it. C is incorrect, smurfs
often use accounts set up using dead peoples identities, but the term does not refer to them. D
is incorrect because this is relates to cuckoo smurfing
9. Which one of the following might indicate microstructuring?
a) converting $800 of travellers cheques to a wire transfer
b) using counter deposit slips
c) large cash deposits
d) using cash to purchase a gold ingot

You answered D
The correct answer is B

Microstructuers often use counter deposit slips as they make many small cash deposits and
will have insufficient pre-printed paying in slips. A is incorrect as there is no cash involved,
C&D both mention either large cash amounts, or expensive items which would not indicate
microstructuring, which uses small amounts of cash, typically under $1000.
10. Cuckoo smurfing features which three of the following?
i. An unwitting bank account owner
ii. An insider in a financial institution
iii. An accomplice in a foreign country who deposits cash
iv. Concentration of funds
A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is D

Although the remitter is expecting funds to be sent via an international wire transfer, in a
cuckoo smurfing situation, an accompanied in a financial institution diverts it elsewhere. The
funds are instead deposited as dirty cash by an accomplice in a foreign country into the
unwitting recipient’s bank account. There is no concentration of funds as this would cause a
discrepancy between the remittance and receipt which would raise the alarm.
11. What is the best way to guard against the risk of money laundering by bank staff?
a. Ensure that key staff are registered with the regulator
b. Ensure segregation of duties for all tasks
c. Conduct initial and ongoing criminal background checks
d. Ensure managers review staff work periodically

You answered D
The correct answer is C

All of these are methods to guard against money laundering risks, however not all of them
are effective. Registering staff with the regulator is not possible in all jurisdictions, and may
only cover senior roles not all roles that might be at risk of money laundering, segregation of
12. Why are credit unions (building societies) vulnerable to money laundering?
a) They are small in size
b) They have high levels of cash transactions
c) They offer complex products
d) They are not regulated

You answered D
The correct answer is B

These financial institutions are low risk because they are small, but they are vulnerable
because of the level of cash transactions. They do not usually offer complex products, and
they are regulated.
13. At which stages of money laundering are credit cards used? Choose two.
i) Layering
ii) Structuring
iii) Integration
iv) Placement

A) i, ii
B) i, iii
C) i, iv
D) ii, iii

You answered D
The correct answer is B

Structuring and placement are methods of disposing of cash, which many credit cards
do not permit. They are used for structuring and integration.
14. Which of the following are money laundering risks at insurance companies?
Choose two:
i) Early cancellation capabilities of car insurance
ii) Salesmen are incentivised
iii) Underpaying insurance and requesting refunds
iv) Cancelling life policies during the 'free look' period

A) i, ii
B) i, iii
C) i, iv
D) ii, iv

You answered D
The correct answer is D

Salesmen that are incentivised may overlook their suspicions, and cancelling life
insurance during the free look period enables the launderer to obtain a refund of
clean money. Underpaying insurance does not lead to an excess cash balance and
cancelling car insurance early would not lead to a large refund so is nota significant
risk of money laundering.
15. What is wash trading?
a. The ability to launder funds using nominee accounts
b. The inherent anonymity granted by many broker-dealers
c. The use of offsetting trades to launder funds
d. The trading of commodities

You answered D
The correct answer is C

The use of two offsetting trades means that the market can move in either direction
and the principle is safe. The loss of dirty money in one account is compensated by the
creation of legitimate gains in another trading account. None of the other descriptions
matches that of a wash trade.
16. Securities dealers are attractive to money launderers for the following reasons.
Choose three:
i. They have information that can be used for insider trading
ii. They use high speed wire transfers
iii. They have a competitive, commission-driven culture
iv. They use cash accounts that are not subject to banking AML controls
A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is B

Broker dealers are not party to insider information. They do use wire transfers, which
are useful to money launderers, the commission driven culture could cause sales staff
to overlook the source of funds, and their cash accounts are not subject to the same
level of AML oversight at banking accounts.
17. Casinos and other gaming venues are attractive to money launderers for the
following reasons.
Choose three:
i. They offer a plausible source of recently acquired wealth
ii. Gambles can be placed so that there is very little risk to capital
iii. The variety of gambling opportunities are useful at the integration stage
iv. Funds can be made available in different jurisdictions

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is C

Broker dealers are not party to insider information. They do use wire transfers, which
are useful to money launderers, the commission driven culture could cause sales staff
to overlook the source of funds, and their cash accounts are not subject to the same
level of AML oversight at banking accounts.
18. Which two of the following makes gold the most attractive to money launderers?
i. It has high demand due to religious or cultural reasons
ii. It can be used in the placement phase
iii. It can be easily melted down
iv. It can be used in the layering phase

A) i, ii
B) i, iii
C) i, iv
D) ii, iv

You answered D
The correct answer is D
Gold can be purchased for dirty cash, meaning it is useful in the placement phase. It
can also be exchanged for cash or other items or physically handed to another person
with little or no audit trail, making it useful in the integration phase. Although gold is
in high demand and can be easily melted down, these are not the most useful features
of gold to money launderers.
19. Why are travel agents vulnerable to money launderers? Choose one.
a. They sell hotel rooms in high risk destinations
b. Hotels are frequented by politically exposed persons
c. Refunds can be made to third parties
d. They are listed in the FATF 40 recommendations

You answered D
The correct answer is C

Expensive flights and hotels can be purchased for a third party, who can then request
a refund of the cost.
20. Vehicle sellers are susceptible to money laundering because of the following
reasons. Choose three:
i. They allow third party payments
ii. They sell high value items
iii. They allow down trading
iv. They allow partial down payments

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is A

They allow third party payments which can obscure the link between the asset and the
source of the funds. They do sell high value items, but this in and of itself does not
make the vehicle seller susceptible, so this is not a correct answer. They do allow
down trading, with the difference available as a cheque made out from the dealer.
They allow partial down payments which could be used for structuring.
21. Lawyers are more useful in money laundering than company formation agents
because of the
following reason:
a. They have a client-attorney privilege
b. They can represent the launderer in court
c. They can create complex vehicles such as private investment companies
d. They can act as nominee shareholders, directors and secretaries

You answered D
The correct answer is A
The attorney-client privilege means that some information cannot be released to law
enforcement. While a lawyer does represent a client in court, this is not part of the
money laundering process. Both lawyers and company formation agents can create
complex vehicles and act as nominee, so these factors do not make lawyers more
useful.
22. Real estate is most often associated with which two of the following:
i. Layering
ii. Placement
iii. Integration
iv. Structuring

A) i, ii
B) i, iii
C) i, iv
D) ii, iii

You answered D
The correct answer is B

Property is often used to disguise the source of funds, making it useful in the layering
phase. It can also be used in the integration phase where an asset such as a holiday
complex can be purchased, adding to the air of legitimacy. Because real estate is
costly, it is not usually a good candidate for placement, which would require very
large sums of cash, or structuring, which requires multiple small sums of cash to
avoid reporting thresholds.
23. Under valuing exports are used to:
a. Move money using nominee accounts
b. Enable the black market peso exchange
c. Create fraudulent transfer pricing schemes
d. Add an air of legitimacy to letters of credit
You answered D
The correct answer is C

Fraudulent transfer pricing schemes are most often associated with the undervaluing
of exports. They can be used in conjunction with the black market peso exchange;
however they are not necessary for the BMPE to work. They are not used to move
money using nominee accounts. Letters of credit can be used to add an air of
legitimacy to undervalued exports, but not the other way around.
24. What three features of prepaid cards make them most attractive to money
launderers:
i. Anonymity
ii. Widely accepted at merchants
iii. High value limits
iv. ATM access

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is A

The ability to use the cards at a wide range of merchants is a benefit to a normal
retail customer more than it is a benefit to a money launderer. The global ATM access
allows the transfer of money out of the country, the high value limits make them useful
as an alternative to smuggling cash, and the anonymity reduced the audit trail that
can be linked to the launderer.
25. Front companies are useful to the launderer for the following three reasons:
i. They generate legitimate cash which can be comingled with dirty money
ii. They provide a source of employment
iii. They have low overheads
iv. They can be sold for high profits

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered D
The correct answer is C

III is incorrect because although criminally controlled front companies do have lower
overheads (as they are not subject to commercial pressures such as bank financing
costs) these commercial considerations are not the primary reason the enterprise is
used by the launderer. The generation of cash with which to comingle funds is a key
driver, as is the need to have legitimate employment to avoid suspicion. The high
profits that they generate when sold, due to their artificially high turn over is another
attraction.
26. Why would a money launderer purchase a company that he already owned?
a. To avoid tax
b. To hide money
c. To repatriate wealth
d. To appear successful

You answered D
The correct answer is C

The money launderer uses offshore wealth to purchase the company that he already
owns, thus repatriating the cash and maintaining his ownership of the company.
27. What is double invoicing?
a. The raising of two invoices payable by the same party against the same goods
b. The raising of two invoices payable by different parties against the same goods
c. A subsidiary purchasing goods from a parent at too high a price
d. The creation of an invoice where the goods are non-existent

You answered D
The correct answer is C

Double invoicing is where a subsidiary purchases goods from a parent at too high a
price, or a parent purchases from a subsidiary at too low a price.
28. What is a settlor?
a. A beneficiary of a trust
b. A lawyer
c. A third party
d. A person who sets up a trust

You answered D
The correct answer is D

A settlor is the person who creates the trust which defines how the assets of the trust
are to be distributed to the beneficiaries. The settlor may be a lawyer, or other legal
professional a third party, or even the beneficiary of a trust, however this is not
required.
29. What should banks do in order to mitigate the risk of companies with bearer
shares? Choose one.
a. Refuse to do business with such firms
b. Insist that the shares are handed over to the bank for safe keeping
c. Inspect the register of owners
d. Enquire as to the beneficial owners of the company

You answered D
The correct answer is D

There is no requirement to refuse to do business with such entitles, however there is

no register of owners to check. The bank cannot insist that the shares be handed over,
as possession equates to ownership. The bank should satisfy itself as to the beneficial
owners of the entity.
30. What are the main differences between terrorist financing and money
laundering?
a. Only one of these is covered by the Wolfsburg group
b. Terrorist financing can involve the use of legitimate funds
c. Layering is used in money laundering, not terrorist financing
d. All of the above

You answered D
The correct answer is B
Terrorist financing can involve the use of legitimate funds for illegitimate purposes.
The Wolfsburg group included terrorist financing in the 2002 revisions. Layering is
used by both money launderers and terrorist financers to disguise the source of funds.
31. Which of the following statements is true?
a. An alternative remittance system is usually more expensive than a bank transfer
b. Informal value transfer systems settle balances through the normal process of
trade
c. Hawala is illegal
d. Informal remittance systems are only used in the placement phase of money
laundering
You answered D
The correct answer is B

alternative remittance systems usually settle their balances in the normal process of
international trade. Hawala is illegal in most, but not all, countries, alternative
remittance systems are usually less expensive than bank transfers, and these systems
can be used in any phase of money laundering, not just the placement phase.
32. How can charities ensure they are less attractive to money launderers? Choose
three.
i. Ensure strict oversight and regulation
ii. Use standard bank accounts
iii. Use full accounting for all expenditure
iv. Conduct field audits

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is B

Charities are not subject to strict oversight or regulation, so this would not be
possible. The charity can ensure that normal bank accounts are used, so that bank
AML controls are in place. Accounting for all expenditure ensures a clear audit trail,
and field audits can ensure that expenditure is appropriate.
33. Which of the following compliance criteria is not a requirement for membership of
FATF?
a. Freezing and confiscation of funds
b. Payment of FATF penalties
c. Customer due diligence
d. International cooperation
You answered D
The correct answer is B

FATF cannot impose fines or apply other direct sanctions.

34. What are the three objectives of FATF?
i. Monitoring implementation of recommendations by members
ii. Promoting AML messages worldwide
iii. Encouraging the use of risk based methods
iv. Monitoring money laundering trends and countermeasures

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is C

Although FATF does recommend risk based measures in its guidance, it’s not a
specific stated objective.
35. What three of the following items did the 2003 revision to the FATF
recommendations include:
i. Transparency of legal persons
ii. Terrorist financing
iii. Predicate offences for money laundering
iv. Prohibition of shell banks

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is B

The transparency of legal persons was already in the original FATF

recommendations
36. What three of the following items did the 2012 revision to the FATF
recommendations include:
i. Merging the 9 terrorist financing recommendations
ii. Domestic politically exposed persons
iii. Setting up financial intelligence units
iv. Tax crimes

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is C

Setting up an FIU was a function of the IMF and World Bank, further codified by the
Egmont Group.
37. Why does FATF recommend a risk-based approach
a. More effective use of resources
b. More cost effective approach
c. Because FATF better understands risk
d. All of the above
You answered D
The correct answer is A

It is recognised that a budget will always be limited, and the risk based approached
allows the best use of this budget. The motivation is not to save costs, or for the FATF
to specify the risks faced by a specific institution or jurisdiction.
38. In what situations does FATF recommend heighted customer due diligence?
Choose three:
i. Wire transfers
ii. Politically exposed persons
iii. New technologies
iv. Counter transactions

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is D

Counter transactions should be subject to currency reporting thresholds and

suspicious transaction reporting, but not enhanced customer due diligence.
39. FATF recommendations specify which of the following would encounter a FATF
designated threshold
of €15,000:
a. Bank customers carrying out regular cash transactions
b. Internet casinos
c. Cash dealers of precious stones
d. Car dealers
You answered D
The correct answer is C

Dealers of precious metals and stones are subject to a $/€15,000 threshold for
reporting when dealing in cash. The same threshold also applies to financial
institutions, but only for occasional customer transactions. Internet casinos are
subject to a $/€3,000 limit. Car dealers are not covered by the reporting thresholds.
40. Non-Cooperative Countries are measured by the FATF using which criteria?
Choose three:
i. Loopholes in financial regulations
ii. Obstacles raised by regulatory requirements
iii. Inadequate AML resources
iv. Geographic location

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered D
The correct answer is D

The geographic location is not a measure of cooperation.

41. Which of the following industries does the FATF guidelines not cover:
a. Notaries
b. Legal professionals
c. Trust and company service providers
d. High value vehicle sales
You answered D
The correct answer is D

The FATF recommendations cover the others in some circumstances (such as when
managing client money, or acting as a nominee shareholder)
42. According to the Basel paper published in 2001 covering Customer Due
Diligence For Banks, what are
the four key elements of KYC?
a. Identification, transaction profile, monitoring, reporting
b. Risk management, identification, monitoring, acceptance
c. Risk-based controls, identification, monitoring, acceptance
d. Identification, transaction profile, source of funds, monitoring
You answered D
The correct answer is B

Although the order has been re-arranged, these are the four key elements of KYC
according to the paper.
43. What did the Basel paper published in 1997 covering Core Principles for
Effective Banking
Supervision, recommend?
a. Strong KYC, high ethical standards, adoption of the FATF recommendations
b. Capital requirements, liquidity measures, monitoring and reporting requirements
c. Controls over private banking, correspondent banking, payable through accounts,
and shell
banks
d. None of the above
You answered A
The correct answer is B

The paper covered KYC, the use of high ethical standards in the fight against
criminals using the banking system, and urged the adoption of the FATF 40
recommendations.
44. What did the EU First Directive on Money Laundering (91/308/EEC) cover?
a. Terrorist financing
b. Drug Trafficking
c. International financial services
d. All of the above
You answered A
The correct answer is B

The directive only covered drug trafficking and domestic financial services, however,
the scope could be broadened by member states to cover other predicate crimes.
45. What was not introduced into the scope of the EU Second Directive on Money
Laundering
(2001/97/EEC)?
a. Politically exposed persons (PEPs)
b. Wilful blindness
c. Precise definition of laundering
d. Bureaux de change and money transmitters
You answered A
The correct answer is A

PEPS were introduced in the Third Directive.

46. What was introduced into the scope of the EU Third Directive on Money
Laundering (2001/97/EEC)?
Choose three.
i. Protection for employees reporting suspicious transactions
ii. Collection of statistics on suspicious transactions
iii. Life insurance intermediaries
iv. Fraud and other serious predicate crimes

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is D

Fraud and other serious predicate crimes were introduced in the Second Directive.
47. Which regional FATF body was created by a inter-governmental treaty?
a. MONEYVAL (Council of Europe Select Committee of Experts on the Evaluation of
Anti-Money
Laundering Measures
b. Eurasian Group (EAG)
c. Financial Action Task Force of South America against Money Laundering
(GAFISUD �" Grupo
de Accion Financiera de Sudamerica)
d. Middle East and North African Financial Action Task Force (MENAFATF)
You answered A
The correct answer is C

The Financial Action Task Force of South America against Money Laundering
(GAFISUD �" Grupo de Accion Financiera de Sudamerica) was set up by an inter-
governmental treaty.
48. Which countries are co-operating nations of the Caribbean Financial Action Task
Force (CFATF)?
a. Nauru, Aruba, Bahamas
b. UK, USA, Canada, Mexico, France, Spain, the Netherlands
c. Cayman Islands, Guernsey, Seychelles
d. Monaco, Luxembourg, Cyprus
You answered A
The correct answer is B

Nauru, Guernsey, Seychelles, Monaco, Luxembourg and Cyprus are known as tax
havens, they are not CFATF co-operating nations.
49. Which of the following activities is carried out by the Egmont group:
a. Drafting model anti-money laundering laws
b. Promoting the establishment of financial intelligence units
c. Recommends controls within private banking
d. Partnership with Transparency International
You answered A
The correct answer is B

The Egmont group is a body of financial intelligence units (FIUs)

50. Which three of the following did the Wolfsburg group cover:
i. Standards and policies for KYC, AML and terrorist financing
ii. Prohibition of concentration accounts
iii. Enhanced customer due diligence for money services businesses
iv. Supporting regulators, judges, prosecutors, financial intelligence units and law
enforcement

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is D

The Wolfsburg group is an association of banks and is concerned with managing

banking policy, not the link to other enforcement bodies.
51. What does section 311 of the USA Patriot Act cover:
a. The ability to designate a foreign jurisdiction, a foreign financial institution, a type
of
international transaction, or a type of account as a specific concern to be addressed
by US
banks.
b. Prohibiting correspondent accounts for shell banks
c. Making correspondent account records available within 120 hours
d. Due diligence for non-US private bank customers

You answered A
The correct answer is A
The text is in the content of section 311
52. What does section 312 of the USA Patriot Act cover:
a. The ability to designate a foreign jurisdiction, a foreign financial institution, a type
of
international transaction, or a type of account as a specific concern to be addressed
by US
banks.
b. Prohibiting correspondent accounts for shell banks
c. Making correspondent account records available within 120 hours
d. Due diligence for non-US private bank customers

You answered A
The correct answer is D

The text is in the content of section 312

53. What does section 313 of the USA Patriot Act cover:
a. The ability to designate a foreign jurisdiction, a foreign financial institution, a type
of
international transaction, or a type of account as a specific concern to be addressed
by US
banks.
b. Prohibiting correspondent accounts for shell banks
c. Making correspondent account records available within 120 hours
d. Due diligence for non-US private bank customers
You answered A
The correct answer is B

The text is in the content of section 313

54. What does section 319b of the USA Patriot Act cover:
a. The ability to designate a foreign jurisdiction, a foreign financial institution, a type
of
international transaction, or a type of account as a specific concern to be addressed
by US
banks.
b. Prohibiting correspondent accounts for shell banks
c. Making correspondent account records available within 120 hours
d. Due diligence for non-US private bank customers
You answered A
The correct answer is C

The text is in the content of section 319b

55. Which three sentences describe the Office of Foreign Assets Control (OFAC):
i. Enforces economic and trade sanctions
ii. Enforces fiscal policy
iii. Applies to all US citizens, regardless of location
iv. Applies to all US-incorporated entities, including foreign branches
A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is A

OFAC is not involved in fiscal (tax and expenditure) matters.

56. Which of the following statements is correct?
a. AML functions should be centralised to ensure efficiency
b. AML functions should be decentralised to ensure product knowledge
c. AML functions should have a centralised aspect to ensure consistency
d. AML functions should be external to the firm to provide objectivity

You answered A
The correct answer is C

AML functions can be either centralised or decentralised, however they should ensure
that they have a centralised aspect to ensure consistency.
57. Which three statements describe the motivations behind risk-based approaches
to AML?
i. They are flexible to meet the risks of different geographical areas, products, and
customers
ii. They are effective, as companies know better than regulators how to mitigate risk
iii. They are cost-effective, because organisations only need to look at the highest
risks
iv. They are proportionate, and allow an intelligent, rather than a checkbox, approach

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is C

Although focussing on only high risks could be a cost saving measure, cost
effectiveness should not be a primary motivation for the approach

58. Which of the following types of companies pose a high risk of money laundering?
Choose three:
i. Art dealers, and dealers in precious stones and metals
ii. Restaurants, parking, car washes
iii. Travel Agencies, machine parts
iv. Electronics merchants, supermarkets.

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is D

Electronics merchants and supermarkets are not generally considered to represent a

high risk of money laundering
59. Which group of banking products is the highest risk:
a. Deposit taking, retail brokerage, cash advances on a credit card
b. Wire transfers, travellers cheques, bankers cheques
c. Foreign exchange, savings accounts, checking accounts
d. Private banking, fixed income bonds, domestic accounts

You answered A
The correct answer is B

All three of these are high risk as they allow cash management and are negotiable
instruments. All of the other answers start with a high risk activity, followed by two
activities that are not considered high risk.
60. What are the four key elements of an AML program? Choose one answer:
a. AML certifications; regulator liaison; law enforcement liaison; and documentation
standards
b. Policies & procedures; senior management sponsorship; on-going compliance
testing;
and third party oversight
c. On-going employee training; designated compliance office ,internal audit testing;
and
policies, procedures and controls
d. Board approval; approved procedures; supervisor testing; and agreed reporting
arrangements

You answered A
The correct answer is C

The four key elements of an AML program are internal policies, procedures and
controls, with a designated compliance officer with day-to-day oversight of the
program. This should be combined with ongoing training and an independent audit
function to test the program.
61. What should be addressed within the AML policies and procedures?
a. Risk based due diligence
b. Segregation of duties
c. Record keeping requirements
d. All of the above
You answered A
The correct answer is D

They should all be addressed within the policies and procedures

62. Which two are important functions of the designated compliance officer?
i. Creating training
ii. Delivering training
iii. Staying current with regulatory and legal changes
iv. Conducting reviews of AML compliance

A) i, ii
B) i, iii
C) i, iv
D) ii, iii
You answered A
The correct answer is B

The training could be delivered by another competent individual once it has been
created by the compliance officer in line with the organisation’s needs. Reviews of
AML compliance should be carried out by an independent function separate from the
compliance officer.
63. Which of the following is not a requirement for customer due diligence:
a. Profiles of expected account activity
b. Documenting findings
c. Conducting investigations into the source of a client’s wealth
d. Investigating unusual activity

You answered A
The correct answer is C

Although understanding the client’s source of wealth should be validated as part of

CDD, conducting an investigation without any suspicion is not a requirement.
64. Basel 2003 account opening guidelines included which three of the following
items:
i. Government issued unique identification
ii. Date and place of birth
iii. Occupation, position, employer
iv. Countries visited and visas recorded in passport

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is D
There is no requirement to review the passport for visas and visits.
65. Why are politically exposed persons (PEPs) difficult to identify for a retail bank?
a. The large volume of transactions makes screening impractical
b. The lack of identifying information (e.g. date of birth) makes false hits common
c. The lack of PEP name lists make automation impossible
d. The secrecy laws of some jurisdictions means identifying PEPs is impractical

You answered A
The correct answer is B

The name lists of PEPs do not include date of birth, which means that larger banks
are likely to have many matches based on the name alone.
66. FDIC guidance issued in 2005 recommended which of the following for ‘know
your employee’
programmes
a. Re-screen when a person is promoted
b. Subject contractors to the same controls
c. Background screen on employment for criminal history
d. All of the above

You answered A
The correct answer is D

All of these were recommended by the FDIC

67. Which three of the following would be a red flag in a customer situation:
i. Customers who move frequently
ii. International use of ATMs
iii. Customers who send wire transfers
iv. Turning down high interest rates

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is C

Sending wire transfers, by itself, is not a red flag.

68. Which three of the following would be a red flag when dealing with cash
transactions?
i. Changing large bills for smaller bills frequently
ii. Deposits contains lots of fake bills, or very dirty or musty bills
iii.
Making large deposits without counting the cash
iv. Making deposits of currency wrapped in currency straps

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is B

Exchanging large bills for smaller bills is common for retail shops that provide
change. The others are all red flags.
69. Which three of the following would be a red flag regarding non-cash deposits?
i. Depositing consecutively numbered travellers cheques
ii. Depositing bearer bonds
iii. Depositing third party cheques
iv. Frequent purchase of monetary instruments

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is A

Bearer bonds cannot be deposited.

70. Which three of the following would be a red flag regarding trade finance?
i. Changes to the beneficiary of a letter of credit just before a payment is made
ii. Letter of credit is for goods not in demand in the exporting country
iii. Goods for import or export are at prices above or below normal market rates
iv. Commodities shipped through locations without apparent economic or logistical
reason

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is A

II would be a red flag if the goods were not in demand in the importing country, but
the lack of domestic demand could be a good reason to export.
71. Which three of the following would be a red flag regarding employees?
i. Employees carry over vacation days from one year to the next
ii. Employee is involved in an large number of unresolved exceptions
iii. Employee leads a lavish lifestyle, not in line with the salary
iv. Employee circumvents policies

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is B

Carrying over vacation would only be a red flag if it amounted to not taking periodic
vacations at all in order to prevent someone else taking on their responsibilities while
they are out of the office, and potentially revealing wrongdoing.
72. Which three of the following would be a red flag in an insurance situation?
i. Changes to the beneficiary of car insurance
ii. Early redemption of life policy
iii. Unconcerned with early redemption charges
iv. Cash payments

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is B

It is not normally possible to use car insurance as a money laundering vehicle, and
changing the beneficiary on a policy is not usually permitted.
73. Electronic AML solutions offer which three of the following benefits:
i. Monitoring of transactions for signs of laundering
ii. Screening of data against known watch lists
iii. Efficiencies permitting the outsourcing of compliance functions
iv. Automated regulatory reporting

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is C

Outsourcing of compliance is not a stated benefit of electronic AML solutions.

74. What does a subpoena allow?
a. Entry of a specific location to seize specific categories of documents or items
b. Law enforcement to obtain documents and testimony
c. Law enforcement to commence proceedings
d. Law enforcement to evaluate documents under client-attorney privilege

You answered A
The correct answer is B

A subpoena allows law enforcement to obtain documents and testimony. The entry of a
specific location requires a search warrant, law enforcement can commence
proceedings without a subpoena, and law enforcement cannot generally evaluate
documents under privilege.
75. What does a search warrant allow?
a. The interview of subjects
b. Entry of a specific location to seize specific categories of documents or items
c. The arrest of a suspect
d. A court case to proceed

You answered A
The correct answer is B

Interviewing subjects can only happen after arrest, and arrest can only occur with an
arrest warrant. A court case may come after the search warrant after evidence of
criminal wrong-doing is discovered.
76. Which three of the following are steps that law enforcement should take when
performing an
investigation? Choose three.
i. Documenting activity and transactions; reviewing databases; and reviewing
licensing
and registration files
ii. Analysing financial transactions; Reviewing STRs; and conducting computer
based
searches
iii. Decide whether to prosecute; obtain evidence; cross-examine witnesses
iv. Follow the money; identify the unlawful activity; and obtain international co-
operation

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is C

The points within III would be carried out after the investigation, if criminal wrong-
doing was identified
77. What three steps should an institution take to respond to all law enforcement
investigations?
i. Respond quickly and completely to all requests
ii. Narrow overly broad requests
iii. Establish a single point of contact
iv. Notify the customer

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is D

The institution should not notify the customer, which would constitute ‘tipping off’ in
many jurisdictions.
78. When law-enforcement exercise search warrants, what three things should the
organisation do?
i. Ask for the affidavit
ii. Ask for the subpoena
iii. Ask for the inventory
iv. Ask for the warrant

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is A

The affidavit accompanies the warrant, and contains additional information. It may
not be possible to obtain, but should always be asked for. The inventory of items
removed should also be requested. There would not be a subpoena issued at the same
time as the search warrant.
79. When should you freeze accounts or assets?
a. When asked to do so by law enforcement
b. Upon receipt of the warrant issued by the court ordering the freeze
c. Upon request of legal counsel
d. All of the above

You answered A
The correct answer is B

Assets may only be frozen on court order.

80. Why should ‘no comment’ be provided to the press when the facts are against an
organisation under
investigation?
a. To prevent appearing foolish should subsequent leaks occur
b. Because any admission of wrong doing would cause the share price to drop
c. Because any inaccuracies could lead to an investigation by the SEC
d. All of the above

You answered A
The correct answer is C

Although the share price may drop, admitting wrong doing during an investigation
would be premature, appearing foolish in the light of later leaks is less important than
ensuring that true and accurate representations are made to the market.
81. When should you conduct an internal investigation?
a. When you receive an adverse regulatory opinion
b. When you receive an adverse internal audit report
c. When you receive an employee hotline tip off
d. All of the above

You answered A
The correct answer is C

The other situations would warrant remediation of the identified issue, but it should
not be necessary to conduct an investigation in order to do this.
82. Which one of the following statement is correct:
a. Documents can be destroyed in line with the document destruction policy even
though
they may be of use in an on-going government investigation
b. Documents cannot be destroyed in line with the document retention policy
c. Documents can be destroyed in line with the document destruction policy,
provided no
government investigation is on-going
d. Documents should be retained for a minimum of 6 years

You answered A
The correct answer is C

Once notified of an investigation, documents should no longer be destroyed, as they

may need to be provided as evidence. Documents are normally permitted to be
destroyed in line with the destruction policy. Retaining documents for a minimum of 6
years, would depend on the specific documentation and the legal requirements of the
jurisdiction. It is not a blanket approach to all documents.
83. Which three of the following are useful techniques to use when interviewing
employees:
i. Carry out the interview as soon as possible to ensure memories are fresh
ii. Interrogation rooms should be set up with bright lights facing the interviewee
iii. General background questions should be asked at the start, with contentious
questions
left to the end
iv. Counsel should prepare staff before the interview, and debrief them afterwards to
identify the line of questioning.

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii

You answered A
The correct answer is A

There is no need to set up bright lights facing interviewees in a interview situation.

84. What is the main purpose of IMoLIN, International Money Laundering Information
Network
a. It created and disseminated model laws
b. It was created by the UN (United Nations)
c. It acts as a clearing house of money laundering information
d. All of the above

You answered A
The correct answer is C

IMoLIN was set up with it’s main purpose as a clearing house of information.
Answers A and B are both correct, but are not the main purpose of the organisation.
85. What is a ‘commission rogatoire’?
a. A letter requesting cooperation from a foreign central authority
b. A gateway for international cooperation
c. Permission from a central authority that allows a foreign investigation to occur
d. A letter of decline, where a central authority refuses a foreign investigation
You answered A
The correct answer is A

It is a letter of request, issued to a foreign authority, seeking their cooperation in an

investigation. It forms part of the gateway for Mutual legal assistance treaties to
operate, however it is not the gateway itself. It is also does not imply permission being
granted or refused.
86. How do FIUs (financial intelligence units) share information internationally?
a. Using a commission rogatoire
b. Using a multilateral legal assistance treaty (MLAT)
c. Using a memorandum of understanding
d. Using the Wolfsburg principles

You answered A
The correct answer is C

A memorandum of understanding MOU) is used by FIUs to share information. A

commission rogatoire is used by law enforcement under a MLAT. The FIUs adhere to
the Egmont principles to share information, not the Wolfsburg principles.
87. What are the principles from the Egmont group related to information sharing?
Choose three.
i. Free exchange of information, on the basis of reciprocity
ii. Grant permission to law enforcement, if appropriate
iii. Respect privacy and confidentiality
iv. Share information with every member as a matter of course

A) i, iii, iv
B) ii, iii, iv
C) i, ii, iv
D) i, ii, iii
You answered A
The correct answer is D

IV is incorrect as the information should be shared with every relevant FIU, but not
every member as a matter of course.
88. According to the 2002 Basel committee “Report on sharing information between
jurisdictions in
connection with the fight against terrorism” which of the following statements is true:
a. Supervisors should disseminate information to government departments
b. Information can be used as evidence
c. General information about financial activity can be shared between regulators
d. Specific information about politically exposed persons can be shared between
regulators
and used as evidence

You answered A
The correct answer is C

Supervisors should not disseminated information to government departments,

information may not be used as evidence, and specific information about PEPs can be
shared, but not used as evidence.