Certified Anti-Money LaunderingSpecialist CAMS exam, Exams of Cybercrime, Cybersecurity and Data Privacy

Download Certified Anti-Money LaunderingSpecialist CAMS exam and more Exams Cybercrime, Cybersecurity and Data Privacy in PDF only on Docsity! Certified Anti-Money Laundering Specialist CAMS exam What is money laundering? correct answertaking CRIMINAL proceeds and disguising their illegal sources to USE the funds for LEGAL or ILLEGAL acts. Give an example of the SECOND stage of money laundering. correct answerLayering - Electronically moving funds between countries; moving funds between financial institutions; and converting cash placed into the system into monetary instruments. Give an example of the THIRD stage of money laundering. correct answerIntegration - Purchasing luxury assets; and investing in business enterprises. Give an example of the FIRST stage of money laundering. correct answerPlacement - Co-mingling ILLEGITIMATE and LEGITIMATE funds; foreign exchange transactions with illegal funds; and depositing small amounts of cash into multiple accounts. What does the (Sally Yates - Then-Deputy Attorney General of the Department of Justice) Yates memo say? correct answerIt reminds prosecutors that criminal and civil corporate misconduct investigations should also focus on the individuals who perpetrated the wrongdoing. What are some indicators of money laundering using electronic funds transfers? correct answerFunds transfers to or from a financial secrecy haven; large, incoming fund transfers from a foreign client with little or no explanation or apparent reason; and fund transfers that have no apparent link to legitimate business. What is REMOTE DEPOSIT CAPTURE and what risk is associated with it? correct answerA product offered by banks that allows customers to SCAN A CHECK AND TRANSMIT an electronic image to the bank FOR DEPOSIT. Associated risks include ENABLING a money launderer to deposit checks without visiting the bank thus avoiding detection. What are some of the money laundering RISKS pertaining to the use of Payable Through Accounts (PTAs)? correct answerWhere foreign institutions licensed in offshore centers, each bank having its own supervision; where the respondent bank (the foreign bank) fails to conduct adequate customer due diligence; and where the sub-account holders have currency deposit and withdrawal privileges. What is a money laundering RISK pertaining to the use of CONCENTRATION ACCOUNTS? correct answerThe fact that CUSTOMER IDENTIFYING INFORMATION MAY NOT BE INCLUDED, making the audit trail difficult or impossible to follow. What is a PEP or Politically Exposed Person, and what is the PRIMARY RISK in dealing with a PEP? correct answerA person who has or has had a prominent government or quasi-public position in a country. The PRIMARY RISK is that THEIR SOURCE OF FUNDS MAY BE FROM CORRUPTION. What is structuring? correct answerTaking a large cash deposit and breaking it into smaller amounts deposited into separate banks, accounts or on separate days to avoid currency transaction reports. When are CREDIT CARDS most likely used for money laundering and give an example of money laundering using credit cards? correct answerNOT likely INITIAL PLACEMENT. More LIKELY in LAYERING or INTEGRATION. For EXAMPLE, OVERPAYING on the BALANCE and THEN ASKING FOR A REFUND. Receiving a check from a reputable company makes the funds appear legitimate. What are some of the risks posed by Third-Party Payment Processors (TPPPs)? correct answerMultiple financial institution relationships whereby their suspicious ACTIVITY CANNOT BE Entirely SEEN by one institution; engaging in ACH transactions from overseas whereby the suspicious TRANSACTIONS GET HIDDEN by the large number of other transactions they engage in; and the possibility of higher than average return rates stemming from unauthorized transactions. What are some ways MONEY SERVICES BUSINESSES can be used for money laundering? correct answerCashing checks without obtaining adequate proof of identity; failing to file Currency Transaction Reports when required; and transmitting funds overseas without sufficient due diligence. What are some of the money laundering risks associated with securities broker-dealers? correct answerIts international nature, speed of transactions, ease of converting holdings into cash without significant loss of principal; large volume of wires; competitive, commission-driven environment; practice of maintaining securities accounts in the name of nominees or trusts; and weak AML programs. Describe microstructuring. correct answerDONE AT A SMALL LEVEL. Instead of taking $18,000 and breaking it into two deposits, the microstructurer might break it into 20 deposits of approximately $900 each. This level of structuring makes it extremely difficult to detect. How can the EARLY REDEMPTION METHOD on insurance policies be used to launder money? correct answerThe launderer buys a policy with illicit money and then tells the insurance company he has changed his mind and does not need the policy now. After paying a PENALTY, he REDEEMS the policy receiving a clean check from a respected insurer. How can art and antiques dealers and auctioneers MITIGATE their money laundering risks? correct answer• REQUIRE all art vendors to provide names and addresses; to SIGN and date a form that states the item was not stolen and they are authorized to sell it. • VERIFY identities and addresses of new vendors and customers. • If an item might be stolen, immediately CONACT the Art Loss Register (www. artloss.com), the world's largest private stolen art database. • Be CRITICAL when a customer asks to pay in CASH. • Be AWARE of money laundering regulations. • Appoint a senior staff member who employees can REPORT suspicious activities to. Describe several ways COMMODITY FUTURES AND OPTIONS accounts may be susceptible to money laundering. correct answerAsset withdrawal or TRANSFER to unrelated accounts or high-risk countries; Frequent ADDITION to or withdrawal from accounts; Checks drawn on, or wire transfers from, third parties accounts with NO RELATION to the client; Clients who request CUSTODIAL arrangements allowing them to remain ANONYMOUS; Layering by TRANSFER of funds to the adviser for management followed by transfers to accounts at other institutions; Investing illegal proceeds FOR a client; MOVEMENT of funds to disguise their origin Describe Trust and Company Service Providers (TCSP) correct answer• Persons and entities participating in the creation, administration or management of corporate vehicles. • Acting as a formation agent of LEGAL persons • Acting as (or arranging 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 other legal persons • Providing a REGISTERED OFFICE, business address or correspondence for a company, a partnership or any other legal person or arrangement • Acting as (or arranging for another person to act as) a TRUSTEE of an express trust • Acting as (or arranging for another person to act as) a NOMINEE shareholder for another person According to a 2001 report, "Money Laundering in Canada: An Analysis of Royal Canadian Mounted Police (RCMP) Cases," what are the related reasons to establish or control a shell company for money laundering purposes? correct answerThey accomplish the objective of CONVERTING criminal cash proceeds into alternative assets; Through it, the launderer can create a PERCEPTION of legitimacy; Conduct a WIDE RANGE OF LEGITIMATE and/or bogus business transactions can be used to further the laundering process; CONCEAL CRIMINAL ownership; Nominees can be used as owners, directors, officers or shareholders What is the significance of either an offshore or onshore trust account in the context of money laundering? correct answerIt can be used as part of the FIRST STEP in CONVERTING illicit cash into less suspicious assets; it can help HIDE criminal ownership; it is often an essential link between different money laundering vehicles and techniques, such as real estate, shell and active companies, nominees, and the deposit and transfer of criminal proceeds. Why are bearer bonds and bearer stock certificates prime vehicles for money laundering? correct answerThey BELONG, on the surface, to the holder. When these securities are transferred, because there is no registry of owners, the transfer takes place by physically handing over the bonds or share certificates. These type of shares offer lots of opportunities to DISGUISE their OWNERSHIP. What is the most basic difference between terrorist financing and money laundering? correct answerThe first uses funds for an illegal political purpose, but the money is NOT NECESSARILY DERIVED from illicit proceeds. On the other hand, the second type ALWAYS INVOLVES THE PROCEEDS OF ILLEGAL ACTIVITY. The purpose of laundering is to enable legal use of illegal money. What general financial characteristics described in FATF's report "Guidance for Financial Institutions in Detecting Terrorist Financing" published April 24, 2002 to help institutions AVOID becoming conduits for terrorist financing? correct answerUse of an account as a FRONT for suspected terrorist links; Accountholder's name appears on a SUSPECTED terrorist list; FREQUENT LARGE cash deposits in accounts of non-profit organizations; HIGH VOLUME of account transactions; LACK OF A CLEAR relationship between the banking activity and the nature of the accountholder's business Why are hawalas attractive to terrorist financiers? correct answerUnlike formal financial institutions, they are NOT SUBJECT TO FORMAL GOVERNMENT OVERSIGHT AND DO NOT KEEP DETAILED RECORDS IN A STANDARD FORM. Although some hawaladars do keep ledgers, their records are often written in idiosyncratic shorthand and are maintained only briefly. What characteristics of CHARITIES or non-profit organizations make them particularly vulnerable to terrorist financing? correct answer• PUBLIC TRUST • ACCESS to considerable sources of FUNDS • CASH-intensive • GLOBAL presence, often in or near areas exposed to terrorist activity • LITTLE or no REGULATION and/or few obstacles to formation Describe types of risk financial institutions face associated with money laundering. correct answerREPUTATIONAL - adverse publicity causes a loss of public confidence; OPERATIONAL - losses resulting from inadequate internal processes, personnel or systems, or from external events; LEGAL - lawsuits, adverse judgments, unenforceable contracts, fines and penalties generating losses, increased expenses, or even closure; CONCENTRATION - losses from too much credit or loan exposure to one borrower or group of borrowers. Describe the phases of money laundering. correct answerPLACEMENT - physically disposing of cash or other assets derived from criminal activity; LAYERING - concealing the origin of illicit proceeds by separating them through layers of financial transactions; INTEGRATION - re-entry of criminally derived funds into the economy through seemingly normal business or personal transactions. Identify and describe the sections of the USA PATRIOT act concerning due diligence U.S. financial institutions NEED to perform for relationships with FOREIGN CORRESPONDENT BANKING customers. correct answer312 REQUIRES institutions to set up RISK-BASED DUE DILIGENCE to mitigate money laundering risks posed by foreign financial institutions; 313 - PROHIBITS U.S. financial institutions from opening or maintaining correspondent accounts FOR FOREIGN SHELL banks and requires taking "REASONABLE STEPS" to ensure that a foreign bank correspondent account is not used to indirectly provide banking services to a shell bank; 319(b) - REQUIRES U.S. financial institutions to MAINTAIN identity RECORDS of foreign bank owners, for which they maintain correspondent accounts. What factors may contribute to private banking being susceptible to money laundering? correct answer• Perceived high profitability • Intense competition • Powerful clientele • High level of confidentiality • Close relationships of trust between relationship managers and their clients How does the scope of the European Union's THIRD Money Laundering Directive differ from the SECOND Money Laundering Directive? correct answerIt specifically INCLUDES THE CATEGORY OF TRUST AND COMPANY SERVICE PROVIDERS; It covers ALL DEALERS trading in goods who trade in CASH over 15,000 Euros; The DEFINITION of financial institution includes certain INSURANCE INTERMEDIARIES How is a private banking account DEFINED under Section 312 of the USA PATRIOT ACT? correct answerAn account with a MINIMUM AGGREGATE DEPOSIT OF $1 MILLION for one or more non-U.S. persons, and is ASSIGNED to a bank EMPLOYEE acting as a LIAISON with the non-U.S. person. What was the primary way the European Union's SECOND Directive on Prevention of the Use of the Financial System for the Purpose of Money Laundering (2001) EXPANDED the scope of the FIRST Directive? correct answerThe definition of "criminal activity" was EXPANDED to include not just drug trafficking, but ALL SERIOUS CRIMES, including CORRUPTION and FRAUD against the financial interests of the European Community. According to Section 312 of the USA PATRIOT act, the foreign correspondent accounts due diligence program for non US persons must address what measures? correct answer"Appropriate, specific and risk-based," and, where necessary, enhanced policies, procedures and controls reasonably designed to identify and report suspected money laundering in a correspondent account maintained in the US. The program must also be included in the institution's anti-money laundering program, such as: 1) DETERMINING the necessity for enhanced due diligence 2) ASSESSING money laundering RISK presented by the correspondent account 3) APPLYING risk-based PROCEDURES and CONTROLS reasonably designed to detect and report suspected money laundering According to FATF's 2012 Recommendations, what are the DESIGNATED THRESHOLDS for transactions under Recommendations 10, 22, and 23? correct answerOCCASIONAL customers is €15,000; CASINOS, including Internet casinos is €3,000; PRECIOUS METALS dealers, when engaged in any cash transaction is €15,000 Describe FATF's 2012 recommendations 20-21 on SUSPICIOUS TRANSACTION reporting and liability. correct answerInstitutions MUST report to the FIU where they SUSPECT or REASONABLY suspect funds are from criminal activity, or related to terrorist financing. Those reporting SHOULD BE PROTECTED from liability for reporting and SHOULD BE PROHIBITED from disclosing that they have reported such activity. According to the Wolfsberg 2000 Anti-Money Laundering Principles for Private Banking, what are SITUATIONS that require further or enhanced due diligence? correct answer• PUBLIC OFFICIALS - individuals holding, or having held, positions of public trust, and their families and close associates • HIGH-RISK COUNTRIES - "identified by credible sources as having inadequate anti-money laundering standards or high-risk for crime and corruption" • HIGH-RISK ACTIVITIES - clients and beneficial owners whose source of wealth "emanates from activities known to be susceptible to money laundering" Identify the topics of INTERNATIONAL STANDARDS incorporated into the 2012 FATF 40 Recommendations. correct answer1) [Recommendations 1-2] AML/CFT policies and procedures 2) [Recommendations 3-4] Money laundering and CONFISCATION 3) [Recommendations 5-8] TERRORIST financing and proliferation 4) [Recommendations 9-23] Financial and non-financial INSTITUTION PREVENTIVE measures 5) [Recommendations 24-25] Transparency and beneficial ownership of legal persons and arrangements 6) [Recommendations 26-35] Powers and responsibilities of competent authorities and other institutional measures 7) [Recommendations 36-40] International cooperation Describe FATF's 2012 Recommendation 1 on the RISK-BASED APPROACH. correct answerCOUNTRIES SHOULD IDENTIFY, ASSESS and UNDERSTAND the money laundering and terrorist financing RISKS they face. Then they should take appropriate measures to MITIGATE identified risks. The risk-based approach allows countries to allocate limited resources in a targeted manner to their particular circumstances, thereby increasing efficiency of preventative measures. FINANCIAL INSTITUTIONS should use the risk- based approach to IDENTIFY and MITIGATE risks. In 2009, FATF began to publicly identify HIGH RISK jurisdictions. What made the named jurisdictions HIGH RISK? correct answerSTRATEGIC AML/CFT REGIME DEFICIENCIES. What are the basic CRITERIA for becoming a FATF MEMBER? correct answer• Proposed jurisdiction should be STRATEGICALLY IMPORTANT based on quantitative and qualitative indicators • FATF's GEOGRAPHIC balance ENHANCED by proposed jurisdiction membership • Provide WRITTEN COMMITMENT at political/ministerial level • Start mutual evaluation process within a MAX OF THREE YEARS after invitation as observer • Membership granted upon SATISFACTORY mutual EVALUATION Does the Basel Committee prohibit the use of numbered accounts? correct answerNO, SUBJECT TO THE SAME KYC PROCEDURES AS OTHER CUSTOMER ACCOUNTS. Select staff may carry out KYC tests, but the customer's IDENTITY MUST be known by an adequate number of staff to be considered sufficiently diligent. "Such accounts should never be used to hide the customer's identity from a bank's compliance or supervisors." What must EU member countries do with the EU Directives? correct answerEU members must TRANSPOSE THE DIRECTIVES INTO LAW Under the 1991 FIRST EU Money Laundering Directive, what was considered a PREDICATE OFFENSE? correct answerIt confined them to DRUG TRAFFICKING as defined in the 1988 Vienna Convention. However, member states were encouraged to EXTEND THE PREDICATE OFFENSES TO OTHER CRIMES. What is the REVISED THRESHOLD for reporting SUSPICIOUS transactions under the FOURTH EU Money Laundering Directive? correct answerIt DECREASED from EUR 15,000 to EUR 10,000. What are HIGH-LEVEL PRINCIPLES that apply to both FATF and FATF-Style Regional Bodies (FSRB's)? correct answer1) ROLE: Play an essential role in IDENTIFYING AND ASSESSING AML/CFT technical assistance needs for their individual members. In those FSRBs that carry out this co-ordination work, technical assistance necessarily complements mutual evaluation and follow-up processes by helping jurisdictions to implement FATF standards 2) AUTONOMY: FREE-STANDING ORGANIZATIONS that share the goals of combating money laundering, and financing of terrorism and proliferation, and fostering effective AML/CFT systems 3) RECIPROCITY: Operate on the basis of MUTUAL OR JOINT COMMON recognition of their work, which implies that both share similar mechanisms for effective participation and involvement in each other's activities What are the FATF-Style REGIONAL Bodies - FSRB's? correct answer1) ASIA/PACIFIC Group on Money Laundering (APG) 2) CARIBBEAN Financial Action Task Force (CFATF) 3) Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL, formerly PC-R-EV) What are some factors an institution should consider when assessing or modifying its customers' dynamic risk ratings? correct answer• UNUSUAL activity, such as alerts, cases, and STR filings • Receipt of law enforcement INQUIRIES, such as subpoenas • Transactions that VIOLATE economic sanctions programs • Other considerations, such as significant unexpected activity, domestic charity engaging in large international transactions, or businesses engaged in unusually large VOLUMES of cash. What are some sources of heightened GEOGRAPHIC RISK? correct answer• The US State Department ISSUES an annual "International Narcotics Control Strategy REPORT" rating more than 100 countries on their money laundering controls • Transparency International PUBLISHES a yearly "Corruption Perceptions Index," which RATES more than 100 countries on perceived corruption • FATF IDENTIFIES jurisdictions with weak AML/CFT regimes and ISSUES country-specific Mutual Evaluation Reports • In the United States certain domestic jurisdictions are EVALUATED based on whether they fall within higher-risk geographic locations such as High Intensity Drug Trafficking Areas (HIDTA) or High Intensity Financial Crime Areas (HIFCA) What are some examples of INTERNAL AML/CFT CONTROLS, outside of policies and procedures? correct answerMANAGEMENT REPORTS and other built-in safeguards. SHOULD enable compliance to recognize deviations from standard procedures and protocols. For example, requiring a corporate officer's APPROVAL, or two SIGNATURES for transactions that exceed a prescribed amount. What should be considered when determining the SOPHISTICATION of an individual institution's compliance function? correct answerNATURE, SIZE, COMPLEXITY, REGULATORY ENVIRONMENT, AND THE SPECIFIC RISK ASSOCIATED WITH THE PRODUCTS, SERVICES, AND CLIENTELE. Why is it critical that the Compliance Officer have good communications skills? correct answerTo articulate important matters to senior and executive management, particularly significant changes that may present risk, such as a sudden or substantial increase in STRs or currency transaction reports (CTRs). Other items of concern may include changes to laws or regulations that may require immediate action. A compliance officer must be able to analyze and interpret ongoing changes, determine what effect they may have on the institution, and suggest an action plan when appropriate. What controls over a delegated AML duty should a Compliance Officer consider? correct answerRISK- BASED QUALITY ASSURANCE REVIEWS, MONITORING, AND TESTING, to ensure functions are performed appropriately. This may include REVIEW of Customer Due Diligence (CDD) to ensure completeness, MONITORING CDD reports for completeness or defects, and TESTING to assess satisfactory compliance. What are some of the target audiences for training? correct answer• Customer-facing staff • Operations personnel • AML/CFT compliance staff • Senior management and board of directors • Independent testing staff Why is it important to test at the end of training? correct answerEVALUATE how well the training is UNDERSTOOD. WHEN should an institution conduct training? correct answerOn an ONGOING and regular schedule. Existing employees should at LEAST attend an ANNUAL session. New employees should receive appropriate training within a REASONABLE PERIOD after joining or transferring to a NEW job. Situations may require IMMEDIATE sessions. For example, an emergency session MAY be necessary right after an examination or audit that UNCOVERS serious money laundering control DEFICIENCIES. A NEWS story naming the institution, or recent regulatory action, such as a Consent Order. CHANGES in software, systems, procedures or regulations are additional triggers. According to FATF, when should an institution conduct CUSTOMER DUE DILIGENCE (CDD)? correct answer• Establishing business relationships • OCCASIONAL transactions under certain circumstances • SUSPICION of money laundering or terrorist financing • DOUBTS about VERACITY or adequacy of customer identification data According to FATF, when should an institution conduct ENHANCED DUE DILIGENCE on a customer? correct answerENHANCED CDD measures should be taken when the RISK of money laundering or terrorist financing is HIGHER What are some EXAMPLES of ENHANCED due diligence (EDD) for higher risk customers? correct answer• SOURCE of funds and wealth • Identifying information on SIGNATORIES OR GUARANTORS with account control • OCCUPATION or type of business • FINANCIAL statements • BANKING references • DOMICILE • PROXIMITY of the customer's residence or place of employment, TO THE BANK • DESCRIPTION of the customer's PRIMARY TRADE AREA and whether international transactions are routine • DESCRIPTION of the business operations, anticipated volume of currency and total sales, and a list of major customers and suppliers • Explanations for CHANGES in account activity According to FATF, when should the identity of a customer be verified? correct answerA bank should not establish a 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 How should a global financial institution address the performance of CDD across its various operations? correct answerThey should apply their customer acceptance policy, procedures for customer identification, process for monitoring higher risk accounts and risk management framework on a global basis to all of their offices, branches and subsidiaries. They should CLEARLY COMMUNICATE these through ONGOING training and REGULAR communications, as well as MONITORING and TESTING to ensure compliance. What are the THREE PRIMARY categories of economic sanctions? correct answer• TARGETED - aimed at specifically NAMED INDIVIDUALS, often including freezing assets and implementing travel bans where possible • SECTORAL - aimed at KEY SECTORS of an economy to prohibit a very specific subset of financial dealings to impede future growth • COMPREHENSIVE - generally PROHIBIT ALL DIRECT OR INDIRECT import/export, trade brokering, financing, or facilitating against most goods, technology, and services. These are often aimed at REGIMES responsible for gross human rights violations, and nuclear proliferation. • Official bank checks • Money orders • Foreign exchange transactions • Trade-financing transactions with unusual pricing features • Payable Through Accounts (PTAs) What are the GENERAL categories of risk? correct answer• PROHIBITED - The company will not tolerate any dealings. Countries subject to economic sanctions or designated as state sponsors of terrorism, such as Sudan or Iran, are prime candidates. Prohibited customers include shell banks. • HIGH-RISK - Significant, but not necessarily prohibited. To mitigate, the firm should apply more stringent controls such as enhanced due diligence and more rigorous transaction monitoring. Countries noted for corruption or drug trafficking are generally high risk. High-risk customers may include PEPs; high-risk products and services may include correspondent and private banking • MEDIUM-RISK - Merit additional scrutiny, but not the level of high-risk • LOW OR STANDARD-RISK - Baseline risk of money laundering; normal business rules apply. What TYPES of customers MIGHT be considered HIGH-RISK for money laundering? correct answer• Casinos • Offshore corporations and banks in tax/ banking havens • Money Services Businesses (MSBs), including currency exchange houses, money remitters, check cashers • Car, boat and plane dealerships • Used-car and truck-dealers and machine parts manufacturers • Travel agencies • Securities Broker/dealers • Jewel, gem and precious metals dealers • Import/ export companies • Cash-intensive businesses (restaurants, retail stores, parking). Where does the ultimate responsibility for the AML compliance program lie? correct answerBOARD OF DIRECTORS members must set the tone from the top by openly voicing their commitment to the program, ensuring that their commitment flows through all service areas and lines of business, and holding responsible parties accountable for compliance. What are elements of a sound Customer Due Diligence (CDD) program? correct answer1) Full IDENTIFICATION of customer and business entities, including source of funds and wealth when appropriate 2) DEVELOPMENT of transaction and activity PROFILES of each customer's anticipated activity 3) DEFINITION and ACCEPTANCE of the customer in the context of specific products and services 4) ASSESS and GRADE customer or account risks 5) ACCOUNT and transaction MONITORING based on risk 6) INVESTIGATE and EXAMINE unusual customer or account activity 7) DOCUMENTATION of findings Describe a sound Know Your EMPLOYEE (KYE) program. correct answerAllows institution to understand BACKGROUND, CONFLICTS of INTEREST and SUSCEPTIBILITY to money laundering. Policies, procedures, internal controls, job descriptions, code of conduct/ethics, levels of authority, compliance with personnel laws and regulations, accountability, monitoring, dual control, and other deterrents should be firmly in place. Identify several types of INTERNAL REPORTS financial institutions may use to DISCOVER money laundering and terrorist financing. correct answer• Cash activity in EXCESS or JUST BELOW the country's reporting threshold (to identify possible structuring) • AGGREGATED Cash activity (e.g., individual transactions over a certain amount, or totaling more than a certain amount over a 30-day period) to identify possible structuring • Wire TRANSFER REPORTS/ logs with filters using amount and geographical factors • Monetary INSTRUMENT logs/reports • Check KITING/ drawing on uncollected funds (significant debit/credit flows) • Significant CHANGE reports • New account ACTIVITY reports Describe a TYPICAL suspicious or unusual transaction reporting process within a financial institution. correct answer• Formally EVALUATE each instance • DOCUMENT the reporting decision, whether or not filed with the authorities • Periodically NOTIFY senior management or board of directors of filings • Detection TRAINING According to the 1999 U.S. Customs "trade advisory" titled "The Black Market Peso Exchange (BMPE)," what are some red flags as indicators of BMPE? correct answer1) Payment made in CASH by a THIRD PARTY with no connection to the underlying transaction 2) Payment made by WIRE TRANSFERS from THIRD PARTIES un-connected to the underlying transaction 3) Payment made with CHECKS, BANK DRAFTS or MONEY ORDERS not drawn on the purchaser's account Identify ways that good technology can equip organizations with improved defenses against financial crime. correct answer1) Transaction MONITORING 2) Watch list FILTERING 3) AUTOMATION of regulatory REPORTING 4) A detailed AUDIT TRAIL Define a search warrant and describe how it is issued. correct answerA court's PERMISSION for law enforcement to SEARCH designated premises AND SEIZE specific items. Generally, the requesting agency is required to establish probable cause. Is AUTHORIZED based on information contained in an AFFIDAVIT submitted by a law enforcement officer. Identify the factors a prosecutor may consider when determining whether or not to BRING A CASE against an institution involving money laundering-related charges. correct answer• CRIMINAL HISTORY • COOPERATIVE • DISCOVERED and SELF-REPORTED issues • HAS HAD a comprehensive and effective AML program • HAS TAKEN timely and effective remedial action • CIVIL REMEDIES available that can serve as punishment • DETERRING WRONGDOING by others is needed and served by prosecution Describe the steps ABC Bank should consider taking upon receipt of a subpoena compelling production of certain documents on a PERSONAL CHECKING ACCOUNT. correct answerSENIOR management and/or What are the STEPS commonly taken to obtain MUTUAL LEGAL assistance? correct answer1. The requesting CENTRAL AUTHORITY sends a "COMMISSION ROGATOIRE" (letter rogatory, or letter of request) to the receiving CENTRAL AUTHORITY. The letter includes the information sought, nature of the request, criminal charges in the requesting country, and the legal provision for the request. 2. The receiving central authority SENDS the request to a LOCAL INVESTIGATOR to find out if the information is available. 3. The requesting country's INVESTIGATOR then VISITS and ACCOMPANIES the receiving country's investigator during visits or when taking statements. 4. The requesting country's INVESTIGATOR ASKS for PERMISSION to remove evidence. 5. The receiving CENTRAL AUTHORITY SENDS the evidence to the requesting central authority, thereby SATISFYING the request for MUTUAL LEGAL ASSISTANCE. 6. Local WITNESSES MAY need to attend court hearings in the requesting country Identify the gateways that ASSIST with AML COOPERATION between countries. correct answer1) Mutual Legal Assistance Treaties 2) Financial Intelligence Units 3) The Supervisory Channel What are Recommendations 36-40? correct answerDeal with mutual legal assistance treaties, extradition, confiscation of assets, and mechanisms to exchange information internationally. Recommendations 36-40 from FATF's 40 pertain specifically to INTERNATIONAL ASPECTS of money laundering and TERRORIST FINANCING INVESTIGATIONS. What are bearer negotiable instruments? correct answerInclude checks, promissory notes and money orders that are EITHER in bearer form, are ENDORSED without restriction, are MADE OUT to a fictitious payee, or are otherwise in such form that TITLE thereto PASSES upon delivery. What is a Memorandum of Understanding (MOU)? correct answerOften used by countries to govern sharing of assets in international asset-forfeiture cases or to set out their respective duties in anti-money laundering initiatives. FIUs frequently receive and analyze suspicious transaction reports and maintain close links with police and customs authorities, informally share information among themselves in investigations, usually on the basis of an MOU. The Egmont Group of FIUs has established a MODEL for such MOUs. UNLIKE the Mutual Legal Assistance Treaty, this gateway is NOT ORDINARILY USED FOR OBTAINING EVIDENCE, BUT OBTAINING INTELLIGENCE THAT MIGHT LEAD TO EVIDENCE. What is a commission rogatoire? correct answerWRITTEN REQUEST FOR LEGAL OR JUDICIAL ASSISTANCE SENT BY ONE Country's CENTRAL AUTHORITY TO ANOTHER, when seeking evidence from the foreign jurisdiction. Typically specifies the nature, relevant criminal charges in the requesting country, legal provision, and information sought. What is a country's EXTRATERRITORIAL REACH? correct answerThe EXTENSION of one country's policies and laws to the citizens and institutions of another. For example, the "extraterritorial jurisdiction" of the principal U.S. anti-money laundering law can apply to a non-U.S. citizen if the "CONDUCT" occurs "IN PART" in the U.S. (Title 18, USC Sec. 1956(f)). Describe a Financial Intelligence Unit (FIU). correct answerA central GOVERNMENTAL OFFICE that obtains information from financial reports, processes it and then discloses it to an appropriate government authority in support of a national anti money laundering effort. ACTIVITIES INCLUDE ‐ receiving, analyzing, and disseminating information and, sometimes, investigating and prosecuting individuals indicated in the disclosures. Front Company correct answerA BUSINESS THAT COMMINGLES ILLICIT FUNDS WITH funds FROM THE SALE OF LEGITIMATE PRODUCTS OR SERVICES. They may subsidize front company products and services at levels well below market. They have a competitive advantage over legitimate firms forced to borrow from more costly, legitimate financial markets. What is an International Business Company (IBC)? correct answerA variety of OFFSHORE CORPORATE STRUCTURES, alternately called "exempt companies," which are dedicated to business use outside the incorporating jurisdiction and enjoy rapid formation, secrecy, broad powers, low cost, low to zero taxation, and minimal filing and reporting requirements. Describe Know Your Customer (KYC). correct answerPOLICIES and PROCEDURES used to determine the TRUE IDENTITY of a customer and their "normal and expected" activity, which helps DETECT "UNUSUAL" activity. Many experts believe that a sound program is one of the best anti-money laundering tools. What is a Mutual Legal Assistance Treaty (MLAT)? correct answerAn AGREEMENT AMONG COUNTRIES ALLOWING FOR legal proceedings, access to documents and witnesses, and other legal and judicial resources in the respective countries, in private and public sectors, for use in official investigations and prosecutions. Define physical cross-border transportation of currency or bearer negotiable instruments. correct answer(1) By a natural person, or in their luggage or vehicle (2) Through cargo containers (3) Through mail Define a red flag. correct answerA warning signal that should bring attention to a potentially suspicious situation, transaction or activity What are remittance services? correct answerReferred to as giro houses or casas de cambio. They are BUSINESSES THAT RECEIVE CASH OR OTHER FUNDS THAT THEY TRANSFER THROUGH THE BANKING SYSTEM TO ANOTHER ACCOUNT. The account is held by an associated company in a foreign jurisdiction where the money is made available to the recipient. Describe a Ponzi Scheme. correct answerA money laundering system named after Charles Ponzi, an Italian immigrant who spent 10 years in jail in the U.S. for a scheme that defrauded 40,000 people out of $15,000,000. Ponzi's name became synonymous with the use of new investors' money to pay off prior investors. Ponzi schemes involve fake, non existent investment schemes in which the investors are ‐ tricked into investing on the promise of unusually attractive returns. The operator of the scheme can keep the operation going by paying off early investors with the money from new investors until the scheme collapses under its own weight and/or the promoter vanishes with the remaining money. The Bernie Madoff scheme is a recent example of a Ponzi scheme. The prime bank guaranty, roll program, bank debenture program and high yield promises are frequently used to entice investors into participating in Ponzi schemes. What is a safe harbor for reporting suspicious activity? correct answerLegal protection for financial institutions, their directors, officers and employees from criminal and civil liability for breach of any restriction on disclosing information imposed by contract, or by any legislative, regulatory or administrative prohibition, for reporting suspicions in good faith to the Financial Investigation Unit (FIU), even without knowing precisely the underlying criminal activity, and regardless of whether illegal activity actually occurred. Define smurfing correct answerA commonly used money laundering method involving the use of multiple individuals and/or transactions for making cash deposits, buying monetary instruments, or bank drafts under the reporting threshold. Describe a tax haven. correct answerCountries that offer special tax incentives or tax avoidance to foreign investors and depositors.