ACAMS Practice Questions
C – ANS The USA PATRIOT Act was passed in:
A) 1970
B) 1985
C) 2001
D) 2007
D – ANS The three stages of money laundering are:
A) Layering, Placement, Refining
B) Placement, Refining, Integration
C) Refining. Integration, Layering
D) Integration, Layering, Placement<\/p>\n\n\n\n
D – ANS Which of the following would be satisfactory elements of an
Anti-Money Laundering Program?
I – A CAMS certified employee in the Investigations Unit writes up a few policies
and procedures and posts them on the department bulletin board.
II – Shortly after attaining their CAMS certification, the individual provides AML
training to the Investigations Unit.
III – The CAMS certified individual routinely reviews the work of the Investigations
Unit.
IV – The CAMS certified individual assumes the responsibility of a compliance
watchdog.
A) All of the above would be satisfactory
B) II and IV would be satisfactory
C) I and III would be satisfactory
D) None of the above would be satisfactory<\/p>\n\n\n\n
The correct answer would be “D – None of the above would be satisfactory.”
I – The AML program must be approved by the Board of Directors.<\/p>\n\n\n\n
II – An AML training program is required of all personnel (and contractors).
III – The review of the bank’s Financial Intelligence Department, as part of the
audit of the AML program, must be performed by an independent (and
knowledgeable) party.
IV – The Compliance Officer must be appointed by the Board of Directors (or
upper management with the Board’s approval).
D – ANS In determining what risks a customer poses, which consideration
should NOT be a major factor?
A) Where the customer resides or where the business is headquartered.
B) What is the size of your financial institution.
C) What occupation or type of business does the customer derive their income
from.
D) What are the customer’s ethnic heritage, sexual orientation and political
beliefs.<\/p>\n\n\n\n
ACAMS Certification
Describe the three phases of money laundering. – ANS \u2022 Placement is the
physical disposal of cash or other assets derived
from criminal activity.<\/p>\n\n\n\n
large volumes of transactions for their customers’ customers. This
makes it more difficult to identify the suspect transactions, as the
financial institution generally does not have the information on the
actual parties conducting the transaction to know whether they are
unusual.
Describe four types of risk associated with
money laundering faced by a financial institution. – ANS \u2022 Reputational risk is
described as the potential that adverse publicity
regarding an organization’s business practices and associations, whether
accurate or not, will cause a loss of public confidence in the integrity of the
organization.<\/p>\n\n\n\n
Identify and describe the three sections of the USA Patriot
Act concerning due diligence U.S. financial institutions need
to perform for relationships with foreign correspondent
banking customers. – ANS Section 312 requires institutions must set up risk
based due
diligence to mitigate the money laundering risks posed by foreign
financial institutions.
Section 313, which prohibits U.S. financial institutions from opening
or maintaining correspondent accounts for foreign shell banks and
requires them to take “reasonable steps” to ensure that a
correspondent account of a foreign bank is not being used indirectly
to provide banking services to a shell bank.
Section 319, which requires U.S. financial institutions to maintain
records with the names and address of the owners of foreign banks
for which they maintain correspondent accounts.
What are the economic effects of money laundering? – ANS \u2022 Loss of control of,
or mistakes in, decisions regarding economic
policy,<\/p>\n\n\n\n
ACAMS Study Guide Practice Questions
Which of the following is the most common method of laundering money through
a legal money services business?
A. Exchanging currency and remitting money
B. Smuggling bulk cash
C. Transferring funds through payable through accounts (PTAs)
D. Exchanging Colombian pesos on the black market – ANS a
In general, the three phases of money laundering are said to be: placement and
A. structuring and manipulation.
B. layering and integration.
C. layering and smurfing.
D. integration and infiltration. – ANS b
Which statement is true?
A. Systemic weaknesses in free trade zones include inadequate AML\/CFT
safeguards, minimal
oversight by local authorities and weak procedures to inspect goods.
B. Cuckoo smurfing is a significant money laundering technique identified by the
Financial Action<\/p>\n\n\n\n
Task Force, wherein a form of structuring uses nested accounts with shell banks
in secrecy havens.
C. In its 40 Recommendations, the FATF issued a list of designated categories of
offense that asserts
crimes for a money laundering prosecution.
D. E-cash is not attractive to the money launderer because it cannot be
completely anonymous and
does not allow for large amounts to be transported quickly and easily. – ANS a
Which three of the following is an indication of possible money laundering in an
insurance industry scenario?
A. Insurance products sold through intermediaries, agents or brokers
B. Single-premium insurance bonds, redeemed at a discount
C. Policyholders who are unconcerned about penalties for early cancellation
D. Policyholders who redeem the policy within the free look period – ANS b, c, d
Which two activities are typically associated with the black market peso
exchange (BMPE) money laundering system?
A. Converting illicit drug proceeds from dollars or euros to Colombian pesos
B. Converting illicit drug proceeds from Colombian pesos to dollars or euros
C. Facilitating purchases by Colombian importers of goods manufactured in the
United States or
Europe through peso brokers<\/p>\n\n\n\n
D. Facilitating purchases by European or U.S. importers of goods manufactured
in Colombia through
peso brokers – ANS a & c
What is the right of reciprocity in the field of international cooperation against
money laundering?
A. The legal principle that financial institutions that have referred customers to
other financial institutions can share information about these customers with the
other institutions
B. A rule of the Basel Committee allowing properly regulated financial institutes
of another member state of the Basel Committee to do business without
additional supervision to the degree that the
other state grants the same right
C. The right of each FATF member country to delegate prosecution of a case of
money laundering to another member that is already investigating the same case
D. A rule in the law of a country allowing its authorities to cooperate with
authorities of other countries to the degree that their law allows them to do the
same – ANS d
The greatest risk for money laundering is for casinos that
A. provide their customers with a wide array of gambling services.
B. operate in a non-Egmont member country.<\/p>\n\n\n\n
C. allow customers with credit balances to withdraw funds by check in another
jurisdiction.
D. only send suspicious transaction reports to the financial intelligence unit of
the country it operates in. – ANS c
Which statement is true regarding the risk of politically exposed persons (PEPs)?
A. PEPs provide access to third parties on whom the financial institution has not
conducted sufficient due diligence.
B. PEPs have significantly greater exposure to the politically corrupt funds,
including accepting bribes or misappropriating government funds.
C. PEPs are foreign customers who inherently present additional risk as they are
engaged in crossborder transactions.
D. PEPs generally do not pose enhanced risks to an institution due to their
political standing; rather, PEPs increase the prestige of an institution. – ANS b
In 2014, the Wolfsberg Group published its Anti-Money Laundering Principles for
Correspondent Banking. Which three of the following elements are recommended
to be included in the due diligence of
a correspondent banking client?
A. The geographic risk
B. The ownership and management structure
C. The r\u00e9sum\u00e9 of the compliance officer
D. The customer base – ANS a, b & d<\/p>\n\n\n\n
ACAMS Exam Review What are the three indicators of a black market peso exchange (BMPE)? – ANS 2.) Customer transaction & activity profiles (real & projected) ACAMS Test What is concentration risk an FI faces bc of ML – ANS The potential for loss What are the economic effects of ML? – ANS -Loss of control of\/mistakes in ACAMS-Prep-Mock EXAM implement as part of the plan to target such individuals? – ANS Investigate the In performing a risk analysis, which factor(s) should a financial institution High risk activities ACAMS (Glossary of Terms) secure, multilingual database, AMLID is an important reference tool for law Asia\/Pacific Group on Money Laundering (APG) – ANS A Financial Action Task Automated Teller Machine (ATM) – ANS An electronic banking outlet that allows ACAMS Study Guide 3) Integration is supplying apparent legitimacy to illicit wealth through the What are the economic effects of money laundering? – ANS 1) Loss of control 4) Concentration risk is the potential for loss resulting from too much credit or ACAMS Practice QuestionsC – ANS The USA PATRIOT Act was passed in:A) 1970B) 1985C) 2001D) 2007D – ANS The three stages of money laundering are:A) Layering, Placement, RefiningB) Placement, Refining, IntegrationC) Refining. Integration, LayeringD) Integration, Layering, Placement D – ANS Which of the following would be satisfactory elements of anAnti-Money Laundering Program?I – A CAMS […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-117660","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/117660","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=117660"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/117660\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=117660"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=117660"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=117660"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Define “smurfing.” – ANS The use of multiple individuals and\/or transactions for
making cash deposits, buying monetary transactions or banks drafts in amounts
under the reporting threshold.
(NB: Some equate this term with structuring)
What are the sections of the USA PATRIOT Act pertaining to AML due diligence? –
ANS Section 312<\/em> — Requirement that institutions create risk-based due
diligence programs
Section 313<\/em> — Prohibits US financial institutions from dealing with shell banks
Section 319<\/em> — Requires US financial institutions to maintain records with
names, contact info of the owners of foreign banks for which they maintain
correspondent accounts.
Before establishing correspondent accounts, banks should be able to answer basic questions about the respondent bank, including owners and the nature of its regulatory oversight<\/em><\/p>\n\n\n\n
1.) Payment made in cash by a third party with no connection to the underlying
transaction;
2.) Payment made by wire transfers from third parties unconnected to the
underlying transaction; and
3.) Payment made with checks, bank drafts, or money orders not drawn on the
account of the purchaser.
What are the four basic elements of a financial institution’s AML program? – ANS
1.) Policies<\/em> — a system of internal policies, procedures, and controls;
2.) Oversight<\/em> — a designated compliance officer with day-to-day oversight of the
AML program
3.) Training<\/em> — an ongoing employee training program
4.) Audit<\/em> — An independent audit function to test the AML program
What are the seven elements of a sound customer due diligence (CDD) program?<\/p>\n\n\n\n\n
wealth<\/li>\n<\/ul>\n\n\n\n
3.) Acceptance of customer in context of products & services
4.) Assessment and grading of risks that the customer\/account present
5.) Transaction monitoring based on risks
6.) Investigation of unusual customer activity
7.) Documentation of findings
According to the Wolfsberg Statement on AML Screening, Monitoring, and
Searching (2009), what are the most appropriate and effective overall monitoring
frameworks? – ANS Risk-based monitoring models and frameworks sufficiently
flexible to meet the needs and nature of the individual financial institution. These
may contain one or more of the following:<\/p>\n\n\n\n\n
What is the broad objective of the UNODC model legislation on money laundering
and the financing of terrorism? – ANS 1.) To strengthen the ability of MS to
implement measures against money laundering and the financing of terrorism
2.) To assist them in detecting seizing, and confiscating illicit proceeds as
required pursuant to UN instruments and other globally accepted standards
3.) To provide relevant and appropriate technical assistance upon request
What are the permitted uses of information according to the Egmont Group’s
“Principles for Information Exchange between Financial Intelligence Units for
Money Laundering and Terrorism Financing Cases”? – ANS 1.) Info exchanged
between FIUs may be used only for the specific purpose for which the info was
sought or provided
2.) The requesting FIU may not transfer the shared information to a third party,
nor make use of the information for an administrative, investigative,
prosecutorial, or judicial purpose without the prior consent of the supplying FIU<\/li>\n<\/ul>\n\n\n\n
Three phases of ML – ANS Placement
Layering
Integration
What is placement – ANS First ML phase
The physical disposal of cash or other assets derived from criminal activity.
What is layering – ANS Second ML phase
The separation of illicit proceeds from their source by layers of financial
transactions intended to conceal the origin of the proceeds
What is integration – ANS Third (final) ML phase
Supplying apparent legitimacy to illicit wealth through re-entry of the funds into
the economy in what appears to be normal business or personal transactions.
What are the two main reasons why correspondent banking is vulnerable to ML? –
ANS 1. By its nature, it creates situation where FinInst carries out fin
transactions o\/b\/o customer of another inst. Indirect rel means that corr bank
provides services for indivs\/entities for which is has not done DD or obtained any
first hand knowledge<\/p>\n\n\n\n\n
process many transactions for customer accounts. Makes it more difficult to
identify suspicious transactions (FI generally doesn’t have knowledge on actual
parties conducting trans such that it would know if the trans was unusual).
What are four types of risk associated with ML faced by an FI? – ANS
Reputational risk
Operational risk
Legal risk
Concentration risk
What are the reputational risks an FI faces b\/c of ML? – ANS The potential that
adverse publicity re an org’s business practices and associations, whether
accurate or not, will cause a loss of public confidence in the org’s integrity
What are the operational risks an FI faces because of ML – ANS The potential for
loss resulting from inadequate internal processes, personnel or systems or from
external events
What are legal risks an FI faces bc of ML – ANS Potential for lawsuits, adverse
judgments, unenforceable Ks, fines and penalties generating losses, increased
expenses for an org, or the closure of the org<\/li>\n<\/ol>\n\n\n\n
resulting from too much credit or loan exposure to one borrower or group of
borrowers
What are the sections of the Patriot Act re DD FIs need to perform for rels with
foreign corr banking customers? – ANS Sec 312 – institutions must set up
risk-based DD to mitigate ML risks posed by foreign FIs
Sec 313-prohibits US banks from opening\/maintaining corr accounts for foreign
shell banks’ requires them to take reasonable steps to ensure that corr account of
foreign bank isn’t being used indirectly to provide banking svcs to shell bank
Sec 319 – requires US FIs to maintain records with names\/addresses of owners of
foreign banks for which they maintain corr accounts
What is a concentration account – ANS Internal accounts established to
facilitate processing\/settlement of multiple\/indiv customer transactions within the
bank, usually on the same day. Frequently used to facilitate transactions for
private banking, trust\/custody accounts, fund transfers, and intl affiliates.
Also known as special-use, omnibus, settlement, suspense, intraday, sweep, or
collection accounts.<\/p>\n\n\n\n
decisions re economic policy
-Economic distortion and instability
-Loss of tax revenue
-Risks to privatization efforts
-Reputation risk for the country
-Social costs
What factors might contribute to vulnerabilities of private banking w\/r\/t ML – ANS
-Perceived high profitability
-intense competition
-powerful clientele
-high level of confidentiality associated with private banking
-close rel of trust developed between relationship managers and their clients
-commission-based comp for rel mgrs
-culture of secrecy and discretion developed by the rel mgrs for their clients
-rel mgrs becoming client advocates to protect their clients<\/p>\n\n\n\n
What are three indicators of money laundering associated with using electronic
funds transfers? – ANS Funds transfers to or from financial secrecy haven
without an apparent business reason.
Funds transfers are received or sent from the same person to or from different
accounts.
Payments or receipts with no apparent link to legitimate contract goods or
services
On who does the ultimate responsibility for an institution’s anti-money laundering
program rest? – ANS FI board of directors.
Federal law requires all U.S. financial institutions to secure and maintain all
records and supporting documentation used in suspicious activity reporting for
how many years? – ANS 5 years
The marketing department presents a business plan targeting individuals holding
important public positions. What are some steps the financial institution should<\/p>\n\n\n\n
source of funds.
Determine the purpose of the account.
Take all reasonable steps to check the background of the individual based on
public information.
Which statement is true about banking regulatory agencies having the authority
to obtain information from regulated institutions? – ANS The agencies authority
to conduct examinations negates the need for a warrant or subpoena.
A customer comes into the bank and appears to be ill-at-ease waiting in the teller
line. When the customer gets to the teller, he become exceedingly nervous and
asks for a large cashier’s check to be cashed and disbursed to him in $100 bills.
What should the teller do after completing the transaction? – ANS File a SAR on
the customer
What is the term for trading through multiple accounts, where an individual
generates offsetting profits and losses and transfers of positions through
accounts that do not appear to be commonly controlled? – ANS Wash Trading<\/p>\n\n\n\n
review? – ANS Its customer base, location, products and services.
How should a financial institution deter money laundering through new
accounts? – ANS Document the identity of the party opening the account.
Determine the beneficial owners of the account.
Seek to determine the the source of deposited funds.
A commission regotorie would be used in which gateway to obtain information
from another country? – ANS An FIU request under the EGMONT principles
What are the European Union Directives on Money Laundering? – ANS They
require members to implement certain laws to prevent money laundering.
What should law enforcement provide when asking an institution to keep an
account open? – ANS a written request on government agency letterhead with
the appropriate signature.
The Wolfsberg Principles for Private Banking list circumstances that would
require additional due diligence, including activities that involve which three of
these choices? – ANS High risk countries<\/p>\n\n\n\n
Public officials, including those who had positions of public trust.
A compliance officer is looking to update an institution’s private bank
procedures. What should be included as recommended by the Wolfsberg AML
Principles on Private Banking? – ANS Approval of PEPs by at least one person
other than the relationship manager.
Which three circumstances are indicators for defining a customer as required
additional diligence according to the Wolfsberg Principles on Private Banking? –
ANS Persons residing in and having funds from countries with inadequate AML
standards.
Persons engaged in business activities known to be susceptible to money
laundering
Persons who receive funds from correspondent banking relationship
What is the Black Market Peso Exchange? – ANS<\/p>\n\n\n\n
Affidavit – ANS A written statement given under oath before an officer of the
court, notary public, or other authorized person. It is commonly used as the
factual basis for an application for a search, arrest or seizure warrant.
Alternative Remittance System (ARS)\/Underground Banking\/Informal Value
Transfer System (IVTS) – ANS Underground banking or Informal Value Transfer
Systems (IVTS). Often associated with ethnic groups from the Middle East, Africa
or Asia, and commonly involves the transfer of values among countries outside
of the formal banking system. The remittance entity can be an ordinary shop
selling goods that has an arrangement with a correspondent business in another
country. There is usually no physical movement of currency and a lack of
formality with regard to verification and record- keeping. The money transfer
takes place by coded information that is passed through chits, couriers, letters,
faxes, emails, text messages, or online chat systems, followed by some form of
telecommunications confirmations.
Anti-Money Laundering International Database (AMLID) – ANS A compendium of
analyses of anti-money laundering laws and regulations, including two general
classes of money laundering control measures\u2014domestic laws and international
cooperation\u2014as well as information on national contacts and authorities. A<\/p>\n\n\n\n
enforcement officers involved in cross-jurisdictional work.
Anti-Money Laundering Program\/Anti-Money Laundering and Counter-Financing
of Terrorism Program – ANS The system designed to assist institutions in their
fight against money laundering and terrorist financing. In many jurisdictions,
government regulations require financial institutions, including banks, securities
dealers and money services businesses, to establish such programs. At a
minimum, the anti-money laundering program should include:<\/p>\n\n\n\n\n
Arrest Warrant – ANS A court order directing a law enforcement officer to seize
and detain a particular person and require them to provide an answer to a
complaint or otherwise appear in court.<\/li>\n<\/ol>\n\n\n\n
Force (FATF)-style regional body consisting of jurisdictions in the Asia\/Pacific
Region.
Asset Protection – ANS A process that includes reorganizing how assets are
held so as to make them less vulnerable should a claim be made against a
person. Asset protection is also a term used by tax planners for measures taken
to protect assets from taxation in other jurisdictions.
Asset Protection Trusts (APTs) – ANS A special form of irrevocable trust usually
created (i.e., settled) offshore for the principal purposes of preserving and
protecting part of one’s wealth from creditors. Title to the asset is transferred to a
person named the trustee. APTs are generally used for asset protection and are
usually tax neutral. Their ultimate function is to provide for the beneficiaries.
Some proponents advertise APTs as allowing foreign trustees to ignore U.S. court
orders and to simply transfer the trust to another jurisdiction in response to legal
action threatening the trust’s assets.
Automated Clearing House (ACH) – ANS An electronic banking network that
processes large volumes of both credit and debit transactions that originate in
batches. ACH credit transfers include direct deposit payroll payments and
payments to contractors and vendors. ACH debit transfers include consumer
payments on insurance premiums, mortgage loans and other kinds of expenses.<\/p>\n\n\n\n
customers to complete basic transactions without the assistance of a bank
employee. ATMs generally dispense cash, allow check and cash deposits and
transfers to be made, as well as balance inquiries.
Bank Draft – ANS Vulnerable to money laundering because it represents a
reputable international monetary instrument drawn on a reputable institution, and
is often made payable\u2014in cash\u2014 upon presentation and at the issuing
institution’s account in another country.
Bank Secrecy – ANS Refers to laws and regulations in countries that prohibit
banks from disclosing information about an account\u2014or even revealing its
existence\u2014without the consent of the account holder. Impedes the flow of
information across national borders among financial institutions and their
supervisors. One of FATF’s 40 Recommendations states that countries should
ensure that secrecy laws do not inhibit the implementation of the FATF
Recommendations.
Bank Secrecy Act (BSA) – ANS The primary U.S. anti-money laundering
regulatory statute (Title 31, U.S. Code Sections 5311- 5355) enacted in 1970 and
most notably amended by the USA PATRIOT Act in 2001. Among other measures,
it imposes money laundering controls on financial institutions and many other<\/p>\n\n\n\n
(6th Edition)
Chapter 1-5
ACAMS Study Guide (6th Edition) Chapter
1
What is Money Laundering? – ANS Money laundering is the taking of criminal
proceeds and disguising their illegal sources in order to use the funds to perform
legal or illegal acts.
Describe the three phases of Money Laundering. – ANS 1) Placement is the
physical disposal of cash or other assets derived from criminal activity.
2) Layering is the separation of illicit proceeds from their source by layers of
financial transactions intended to conceal the origin of the proceeds.<\/p>\n\n\n\n
re-entry of the funds into the economy in what appears to be normal business or
personal transactions
Give an example of the first stage of money laundering. – ANS – Co-mingling
illegitimate funds with legitimate ones;<\/p>\n\n\n\n\n
Give an example of the second stage of money laundering. – ANS –
Electronically moving funds from one country to another;<\/li>\n\n\n\n
ultimate beneficial owner and assets.
Give an example of the third stage of money laundering. – ANS – Purchasing
luxury assets like property, artwork, jewelry or high-end automobiles;<\/li>\n\n\n\n
of, or mistakes in, decisions regarding economic policy. Due to the large amounts
of money involved in the money laundering process, in some emerging market
countries these illicit proceeds may dwarf government budgets.
2) Economic distortion and instability. Money launderers invest their money in
activities that are not necessarily economically beneficial to the country.
3) Loss of tax revenue. Money launderers diminishes government tax revenue
and indirectly harms honest taxpayers.
4) Risks to privatization efforts
5) Reputation risk for the country, and
6) Social costs
Describe 4 types of risk associated with money laundering faced by a financial
institution. – ANS 1) Reputational risk is described as the potential that adverse
publicity regarding an organization’s business practices and associations,
whether accurate or not, will cause a loss of public confidence in the integrity of
the organization.
2) Operational risk is described as the potential for loss resulting from inadequate
internal processes, personnel or systems or from external events.
3) Legal risk is the potential for lawsuits, adverse judgments, unenforceable
contracts, fines and penalties generating losses, increased expenses for an
organization, or even the closure of the organization.<\/p>\n\n\n\n
loan exposure to one borrower or group of borrowers.
What are the Methods of Money Laundering through Banks? – ANS 1) Electronic
Transfers of Funds
2) Remote Deposit Capture
3) Correspondent Banking
4) Payable Through Accounts
5) Concentration Accounts
6) Private Banking
7) Politically Exposed Persons
8) Structuring
9) Microstructuring
What is Electronic Transfers of Funds? – ANS An electronic transfer of funds is
any transfer of funds that is initiated by electronic means, such as an Automated
Clearing House (ACH) computer, an automated teller machine (ATM), electronic
terminals, mobile telephones, telephones or magnetic tapes. It can happen within
a country or across borders.
What are some indicators of money laundering using electronic transfers of
funds? – ANS 1) Funds transfers to or from a high-risk geographic location
without an apparent business reason<\/p>\n","protected":false},"excerpt":{"rendered":"