Practice Question Session

18-07-2021
Q- No 1
What are two legal risks of having inadequate privacy policies and
procedures? (Choose two.)
• A. Diminished reputation
• B. Industry of regulatory sanctions
• C. Charges of deceptive business practices
• D. Higher marketing and public relations costs
Q No 2
The vice president of the foreign correspondent banking department at
a large United States bank has been notified that a foreign bank with an
offshore license wants to open a correspondent account.
Which two things must the vice president acquire under the USA
PATRIOT Act? (Choose two.)
A. list of all the customers of the correspondent bank
B. list of the types of businesses served by the correspondent bank
C. Information relating to the foreign bank’s anti-money laundering program
D. The identity of 10% owners of the correspondent bank, unless it is publicly
traded
Q No 3
What is an example of the integration stage of money laundering
involving a bank or another deposit-taking institution?
• A. Depositing illicit funds into an account set up for a front company
• B. Directing third parties to exchange illicit cash for negotiable
instruments
• C. Wiring illicit funds from an account at one bank to an account at
another bank
• D. Using illicit funds that had previously been deposited to purchase a
luxury vehicle
Q No 3
What is an example of the integration stage of money laundering
involving a bank or another deposit-taking institution?
• A. Depositing illicit funds into an account set up for a front company
• B. Directing third parties to exchange illicit cash for negotiable
instruments
• C. Wiring illicit funds from an account at one bank to an account at
another bank
• D. Using illicit funds that had previously been deposited to purchase a
luxury vehicle
Q No 4
Which aspect of the USA PATRIOT Act impacts foreign financial
institutions?
A. Requiring enhanced due diligence for foreign shell banks
B. Expanding sanctions requirements to a U.S. financial institution’s
foreign branches
C. Expanding the anti-money laundering program requirements to all
foreign financial institutions
D. Providing authority to impose special measures on institutions that
are of primary money-laundering concern
Q No 5
The compliance officer at a crowd funding website is in charge of
monitoring new crowd funding projects. Recently, the number of crowd
funding projects has significantly increased.
Which red flag indicates the highest anti-money laundering risk?
A. Those with the largest number of donors
B. Projects that get funding within days of their start
C. Projects with the highest monetary success threshold
D. Projects that start and close and are fully funded within a very short
period
Q No 5
What is the appropriate compliance control for identifying politically
exposed persons (PEPs) according to the Basel Committee’s paper on
Customer Due Diligence for Banks?
A. Determining that a local figure is a PEP
B. Reviewing when a relationship is established
C. Reviewing relationships at account opening and on a periodic basis
D. Requiring that the customer discloses that they are a PEP or an
associate of a PEP
Q No 6
What is the appropriate compliance control for identifying politically
exposed persons (PEPs) according to the Basel Committee’s paper on
Customer Due Diligence for Banks?
A. Determining that a local figure is a PEP
B. Reviewing when a relationship is established
C. Reviewing relationships at account opening and on a periodic basis
D. Requiring that the customer discloses that they are a PEP or an
associate of a PEP
Q No 7
What are two sources for maintaining up-to-date sanctions
information? (Choose two.)
A. U.S. Federal Bureau of Investigation’s National Security Letters
B. U.S. Department of the Treasury Office of Foreign Assets Control
C. U.S. Department of the Treasury – Section 311 – Special Measures
D. Financial Action Task Force’s list of High Risk and Non-Cooperative
Jurisdictions
Q No 8
A politically exposed person (PEP) maintains an account at a bank. Last
month a money laundering analyst filed a suspicious transaction report
about unusual wire deposits originated by unknown individuals in the
home country of the official.
To whom should this situation be escalated?
A. The board of directors
B. The line of business executive
C. The bank’s anti-money laundering officer
D. The Financial Action Task Force’s PEP Hotline
Q No 9
Which two individuals are ordinarily beneficial owners of a private
banking account according to the Wolfsberg Anti-Money Laundering
Principles for Private Banking? (Choose two.)
A. Those two are authorized signers on the account
B. Those who have legal title to a controlling share interest in the
customer
C. Those who generally have ultimate control through ownership or
other means over the funds in the account
D. Those who are the ultimate source of funds for the account and
whose source of wealth should be subject to due diligence
Q No 10
When should the anti-money laundering risk assessment be updated?
A. Every two years
B. After a merger or acquisition
C. When the board of directors changes
D. When instructed to by the Financial Action Task Force
Q No 11
A customer brings $15,000 worth of chips into a casino and plays
various games. The customer redeems all the remaining chips and
requests a wire transfer of the proceeds to an unrelated third party.
What are two red flags that indicate money laundering? (Choose two.)
A. Customer redeeming all remaining chips
B. Playing various games before cashing out
C. Bringing $15,000 worth of chips into the casino
D. Requesting a wire transfer to an unrelated third party
Q No 12
Upon a routine account review a money laundering investigator identified a
number of large round dollar wire transfer deposits into a business account
owned by a local auto repair shop. The wire transfers all originated from a
country that is a known financial secrecy haven with poor anti-money
laundering controls. The investigator concludes there appears to be no
legitimate business purpose for the wire transfers and files a suspicious
transaction report. The owner of the auto repair shop is popular in the
community and is a well-known philanthropist. To whom should the
investigator escalate these concerns?
A. Audit committee
B. Chairman of the Board
C. The owner of the auto repair shop
D. The bank anti-money laundering officer
Q No 13
A compliance officer learns from an Information Technology (IT) source of a
potential new financial service being discussed by the new product approval
committee. What is the correct next course of action?
A. Request that the new product approval committee include the compliance
officer.
B. Go to the board of directors and try to shut the new service down
immediately because the committee did not communicate with the
compliance officer.
C. Get as much information as possible from the source so that potential
risks can be researched and a report prepared and presented to the head of
marketing.
D. Start initial research into potential risks but wait until notified that the
service has been approved by the committee before initiating extensive
research
Q No 14
What is the goal of the Egmont Group in providing a forum for Financial
Intelligence Units (FIUs) around the world?
A. A. To improve international laws to combat money laundering and the
financing of terrorism and foster the implementation of domestic programs.
B. To provide a forum for FIUs to improve cooperation in the fight against
money laundering and the financing of terrorism and to foster the
implementation of domestic programs in this field.
C. To improve communication with law enforcement in the fight against
money laundering and the financing of terrorism and to foster the
implementation of domestic programs in this field.
D. To improve cooperation with state and federal governments in the fight
against money laundering and the financing of terrorism and to foster the
implementation of domestic programs in this field.
Q No 15
A compliance officer at an insurance company has been reviewing the
transaction activity of several clients. Which transaction is considered a
red flag for potential money laundering?
A. A client paid the quarterly life insurance premium using money
orders from two different banks.
B. A client from a high-risk jurisdiction recently purchased property
insurance for a real-estate development.
C. A corporation owns several affiliates and recently opened separate
group life insurance policies for each of the affiliates.
D. A client established a $100,000 charitable annuity with a non-profit
organization that provides health and safety assistance internationally.
Q No 16
The branch manager notices that a number of customers come in weekly
and always use the same teller to process their deposits. The manager
notices that the customers and the teller, who are from the same ethnic
group, are speaking in a foreign language and every once in a while the
customers from local ethnic restaurants will bring the teller lunch. The
commercial customers that visit the teller generally deposit the same
amount of cash each time they come in. How should the branch manager
respond to this activity?
A. Transfer the teller to another branch
B. Conduct further investigation before taking any other action
C. Encourage the teller to bring in more business from the ethnic community
D. Suggest to the teller to send the customers to other tellers to avoid the
opportunity for collusion
Q No 17
Which insurance product is particularly vulnerable to money
laundering?
A. Annuity
B. Casualty
C. Collateral
D. Regulated pension
Q No 18
What is an essential element of Know Your Customer (KYC) standards
according to the Basel Committee’s Customer Due Diligence for Banks
paper?
A. Annual staff training
B. A customer acceptance policy
C. The same KYC requirements must be applied in all cases
D. All completed KYC documents must be reviewed by a senior
manager not involved in the account opening process
Q No 19
A customer living in a high-risk jurisdiction makes frequent, large cash
deposits at a bank. The same customer sends small wire transfers to
unrelated parties in other high-risk jurisdictions.
What are two red flags that may indicate money laundering? (Choose
two.)
A. The bank allows cash deposits
B. The client resides in a high-risk jurisdiction
C. Wire transfers are to high-risk jurisdiction
D. Large cash deposits are from a high-risk jurisdiction
Q No 20
Which action should countries take related to the financing of terrorist
acts in accordance with the Financial Action Task Force 40
Recommendations?
A. Oppose
B. Sanction
C. Prosecute
D. Criminalize
Q No 21
A new compliance officer is reviewing the bank’s anti-money
laundering program and notices that the risk assessment was
completed six months ago. Since that time, the bank acquired another
financial institution, re-named the internal records group, and
streamlined cash handling procedures.
Which factor causes the compliance officer to update the bank’s risk
assessment?
A. The bank acquired another institution
B. The internal records group has been re-named
C. The cash handling procedures were streamlined
D. The risk assessment was completed six months ago
Q No 22
The Wolfsberg Anti-Money Laundering Principles for Private Banking
require new clients to be approved by whom?
A. The board of directors
B. Only the private banker
C. The private banker’s supervisor
D. At least one person other than the private banker
Q No 23
A bank employee recently opened an account for a new restaurant.
Daily cash deposits over a three-month period are close to $9,500.
What are two red flags that indicate possible money laundering or
terrorist financing? (Choose two.)
A. The restaurant is located in a different city
B. The daily cash deposits are so close in amount
C. It is a new account that has daily cash deposits
D. The new account demonstrates a steady flow of income
Q No 24
In which two ways does a government Financial Intelligence Unit
interact with public and private sectors? (Choose two.)
A. It governs the methods of investigation used by competent
authorities
B. It mediates disputes between financial institutions and investigative
authorities
C. It receives and analyzes disclosures filed by financial and non-bank
institutions
D. It disseminates information and the results of its analysis to
competent authorities
Q No 25
What do Financial Action Task Force (FATF)-style regional bodies do for
their members to help combat money laundering and terrorist
financing?
A. They provide technical assistance to members in implementing FATF
recommendations
B. They assist member countries in penalizing entities that violate FATF
standards and recommendations
C. They work with members on areas of concern outside of anti-money
laundering and terrorist financing
D. They supervise member country financial institutions relating to
anti-money laundering and terrorist financing
Q No 26
What are the regulatory risks to a bank employee who willfully violates
anti-money laundering laws?
A. Investigation and reputational damage
B. Fines and suspension from the industry
C. Criminal investigation and imprisonment
D. Enforcement actions including fines against the financial institution
Q No 27
What are two requirements with respect to supporting documentation
that is used to identify potentially suspicious activity, according to
Financial Action Task Force? (Choose two.)
A. It must be retained for at least five years
B. It must be retained for at least seven years
C. It must be kept in a manner so that it can be provided promptly
D. It must only be released to the government through a subpoena
process
Q No 28
What is a major economic consequence of money laundering through
the use of front companies?
A. Placing more emphasis on manufacturing
B. Weakening of the legitimate private sector
C. Creating a more competitive pricing environment
D. Aligning management principles between criminal enterprises and
legitimate businesses
Q No 29
As a result of an audit, a policy exception was identified that had been
approved by the compliance officer. The auditor determined that the policy
exception is a violation of a regulatory requirement.
What should the auditor do?
A. Advise the compliance officer on how to appropriately respond to policy
exceptions.
B. Include the regulatory violation in the audit report and report it to the
board of directors.
C. Consult with legal counsel to determine if the approval of the policy
exception was acceptable.
D. Include the regulatory violation in the audit report and recommend the
compliance officer be subject to disciplinary action by the board of directors
Q No 30
Financial Action Task Force (FATF)-style regional bodies are created and
obliged to understand the inherent money laundering and terrorist
financing risks in the region of the world they serve. What is one of the
methods they use to understand these risks?
A. They require member countries to develop statistical metrics over
money laundering and terrorist financing crimes
B. They require participating financial institutions of their members to
file suspicious transaction reports to the regional body
C. They conduct global research on money laundering and terrorist
financing trends and report their findings in their own typologies report
D. They conduct regional-level research and analysis of the money
laundering and terrorist financing methods and trends using standards
and templates used for FATF typologies reports
Q No 31
A bank’s anti-money laundering section receives an anonymous tip that
a customer might be engaging in possible money laundering.
Which two facts should be considered during the course of an
investigation into this matter? (Choose two.)
A. The customer has had a long-standing account at the bank
B. The customer in on the exempt list for currency transaction
reporting requirements
C. The customer is issuing a number of wires to several relatively high-
risk jurisdictions
D. The customer’s account has had a large volume of activity, but the
month-end balance is usually low
Q No 32
Who has the ultimate responsibility within a bank for ensuring that the
bank has a comprehensive and effective Bank Secrecy Act / anti-money
laundering (BSA/ AML) program and oversight framework that is
reasonably designed to ensure compliance with applicable regulations?
A. Senior management
B. Board of directors
C. Business line managers
D. BSA/AML compliance officer
Q No 33
A compliance officer provides an overview of the bank’s anti-money
laundering program to a group of new tellers during employee
orientation. Which training element should be delivered to this
audience?
A. Results of recent risk assessments
B. Large cash transaction reporting procedures
C. The financial institution’s surprise cash audit policy
D. Past check fraud losses incurred by the financial institution
Q No 34
A compliance officer at a small community bank has been asked to
review existing customer onboarding policies and procedures to ensure
they adequately address anti-money laundering risks. How should
customer due diligence be implemented?
A. With an annual compliance review and approval of customers
B. With a one-time event conducted at initial customer onboarding
C. As an ongoing activity that may vary commensurate with the risk
profile of the customer
D. As applicable to customers that pose higher money laundering or
terrorist financing risk
Q No 35
Under which two circumstances may law enforcement be given access
to a financial institution customer’s financial records? (Choose two.)
A. If the person is named in a suspicious transaction report
B. If law enforcement serves a legal summons or subpoena
C. If the investigation of a customer is made public in the media
D. If law enforcement has circumstantial evidence to suspect money
laundering
Q No 36
How does the Financial Acton Task Force (FATF) communicate its
findings regarding jurisdictions with strategic anti-money laundering /
Counter Financing of Terrorism deficiencies?
A. By issuing documentation to the private sector
B. By issuing two formal documents three times per year
C. By issuing informal communication to FATF members
D. By issuing four formal documents to the deficient jurisdictions
Q No 37
A recent anti-money laundering audit revealed several regulatory
reporting violations and lapses with the organization’s anti-money
laundering policy. As a result, the compliance officer has created a
follow-up matrix to document progress in correcting the identified
deficiencies.
To whom should the compliance officer provide regular updates of
corrective action to help ensure the appropriate oversight?
A. Audit management
B. Human Resources
C. Business line managers
D. Designated board committee
Q No 38
Which two methods have terrorist groups used to diversify their
revenue stream and to fund their operations? (Choose two.)
A. Human trafficking
B. Engaging in civil conflict
C. Smuggling cultural artifacts
D. Engaging in wire transfer activity
Q No 39
Which two statements are true regarding the European Union Money
Laundering Directives? (Choose two.)
A. They apply to member states of the European Union
B. They require member states to enact laws and/or regulations to
comply with the directives
C. They set forth non-binding best practices for financial institutions
within the member states
D. They have extraterritorial impact and apply to states that have
diplomatic relations with member states
Q No 40
Which action does the Financial Action Task Force (FATF) recommend
be taken against jurisdictions that have strategic deficiencies?
A. Conduct due diligence
B. Apply counter-measures
C. Add the jurisdiction to the United Nations’ list of sanctioned
jurisdictions
D. Create an action plan to address the deficiencies without the
support of the FATF
Q No 41
A compliance officer was recently reviewing transactional data for an
international charity and found transactions that present a higher risk.
Which reason is cause for terminating the banking relationship?
A. The charity has had a high a high turnover rate of official positions
B. The charity has several incoming international funds transfers
C. The flow of funds both in and out are complex and hard to trace
D. The charity is headquartered in a country on the Office of Foreign
Assets Control list
Q No 42
Historically, a tour guide has made monthly cash deposits averaging
$10,000. Over the past three months, the monthly deposits have
averaged $100,000. When the financial institution questions the
increased deposits, the tour guide explains that there have been
numerous conventions in town so business has increased substantially.
Which further action(s) should the financial institution take?
A. Immediately terminate the relationship
B. Schedule a periodic review of activity
C. Perform further investigation, it appropriate report the activity to the
authorities and consider terminating the relationship
D. Perform further investigation, if appropriate report the activity to
the authorities and place a limit on future transactions
Answer Sheet
1A&B 8C 15 D 22 D 29 B 36
2C&C 9C&D 16 B 23 B & D 30 C 37 D
3C 10 B 17 A 24 C & D 31 C & D 38 A & B
4D 11 A & D 18 B 25 A 32 B 39 A & B
5D 12 D 19 C & D 26 D 33 B 40 B
6C 13 A 20 D 27 A & C 34 C 41 C
7B&D 14 B 21 A 28 B 35 B & D 42 C