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Question # 4

A financial institution receives a regulatory enforcement action because of deficiencies in its anti-money

laundering program.

Which action should the board of directors take?

A.

Terminate the compliance officer and staff

B.

Purchase and install a new suspicious activity monitoring system

C.

Hire an attorney with instructions to protest the enforcement action

D.

Instruct the compliance officer to develop a plan to remediate the institution’s anti-money laundering

program

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Question # 5

What does the Financial Action Task Force (FATF) urge its members and all other jurisdictions to do when a jurisdiction is identified as having lax anti-money laundering / counter financing of terrorism controls?

A.

Apply counter-measures to that jurisdiction

B.

Consider customers from that jurisdiction as high risk

C.

Cease doing business with that jurisdiction immediately

D.

Apply economic sanctions until otherwise notified by FATF

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Question # 6

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

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Question # 7

On who does the ultimate responsibility for an institution’s anti-money laundering program rest?

A.

The designated AML Compliance Officer

B.

The institution’s Board of Directors

C.

All employees with customer contact

D.

The government regulator examining the AML program

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Question # 8

Which three circumstances are indicators for defining a customer as required additional diligence according to the Wolfsberg Principles on Private Banking? Choose 3 answers

A.

Persons residing in a having funds from countries with inadequate AML standards

B.

Persons engaged in business activities known to be susceptible to money laundering

C.

Persons who receive funds from a correspondent banking relationship

D.

Persons determined to be Politically Exposed Persons (PEPs)

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Question # 9

With which person(s) should an anti-money laundering officer coordinate when implementing a new hire screening program?

A.

Internal Auditor

B.

Local Financial Intelligence Unit

C.

Human Resources

D.

Institution’s Regulator

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Question # 10

What are two risks to institutions for violating anti-money laundering laws as demonstrated by the 2012 HSBC

settlement with United States authorities? (Choose two.)

A.

Forfeiture of assets

B.

Civil money penalties

C.

Loss of bank charter/license

D.

Imprisonment of bank employees

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Question # 11

What are the European Union Directives on Money Laundering?

A.

They are voluntary codes of best practice for the financial sector

B.

They are written by the Wolfsberg Group

C.

They require members to implement certain laws of prevent money laundering

D.

They require financial institutions to report suspicious activity to the Egmont Group in Brussels

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Question # 12

Which information must a United States financial institution retain for having foreign correspondent accounts as part of the USA PATRIOT Act record keeping requirements?

A.

Records identifying the owners of each foreign bank

B.

Section 314(b) information sharing results related to foreign correspondent accounts

C.

Purchase of monetary instruments of $3,000 or more involving foreign correspondent accounts

D.

A suspicious activity report filed and the supporting documentation involving foreign correspondent accounts

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Question # 13

Which insurance product is particularly vulnerable to money laundering?

A.

Annuity

B.

Casualty

C.

Collateral

D.

Regulated pension

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Question # 14

The Wolfsberg Principles for Private Banking list circumstances that would require additional due diligence, including activities that involve which three of these choices?

A.

Foreign jurisdictions

B.

High Risk Countries, including those identified by credible sources as having inadequate Anti-Money Laundering standards

C.

High Risk activities, involving clients and beneficial owners whose source of wealth originates from activities known to be vulnerable to money laundering

D.

Public officials, including those individuals who have or had positions of public trust

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Question # 15

A suspicious transaction report has been filed on an account owned by the wife of the bank's Chief Executive Officer. Which of the following is the most important consideration when deciding whether to recommend closing the account?

A.

The institution's anti-money laundering policy

B.

Requests from the competent authority

C.

Customer relations

D.

Chief Executive's reputational risk

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Question # 16

What does designing a country as being of “prime money laundering concern” allow the U.S. government to do?

A.

Obtain transactional information from U.S.-owned subsidiary banks located outside the U.S.

B.

Close some or all correspondent or payable-through accounts

C.

Ensure the inclusion of that country onto FATF’s Non-Cooperative Country and Territory list

D.

Ensure the inclusion of that country into the office of Foreign Asset Control country sanctions programs

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Question # 17

A financial institution files a suspicious transaction report on a customer as the result of a high volume of large currency deposits to pay off a loan. A law enforcement officer calls the anti-money laundering officer to discuss the suspicious transaction report. Which of the following is the anti-money laundering officer legally permitted to do?

1. Discuss any aspects of the reported activity.

2. Provide copies of the customer's loan documents.

3. Explain the customer's loan payment history.

4. Send the deposit documents referenced in the suspicious transaction report.

A.

1 and 2 only

B.

1 and 4 only

C.

2 and 3 only

D.

2 and 4 only

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Question # 18

What indicates potential money laundering activity by a lawyer?

A.

A lawyer’s trust account regularly receives wire transfers from unknown remitters in a high risk country and immediately redirects the same funds to the same remitters account in a low risk country

B.

A lawyer’s trust account receives a large value wire transfer from a publicly listed life insurance company and then immediately transfers the same funds out to an unknown individual in a low risk country

C.

A lawyer’s account in a low risk country receives a bank draft from another lawyer firm in a high risk country

D.

A lawyer’s account in a high risk country receives a cash deposit of an amount that is considerable below the reporting threshold

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Question # 19

An anti-money laundering specialist has just developed and implemented an anti-money laundering program. What is the most effective resource to evaluate the effectiveness of the program?

A.

The regulator authorities

B.

A member of senior management

C.

The anti-money laundering specialist

D.

A qualified independent party/auditor

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Question # 20

Which factor should a financial institution (FI) consider prior to sharing customer records within the same jurisdiction?

A.

The availability of the institution's information sharing practices

B.

The degree to which the collected client data is complete

C.

The locally applicable restrictions regarding the disclosure of client information

D.

The potential different time zones within the same jurisdiction

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Question # 21

Which measure to mitigate risk does the Basel Committee’s Customer Due Diligence Principles suggest banks apply when accepting business from non-face-to-face customers?

A.

Certification of documents presented

B.

Requiring an in person interview with the customer

C.

Imposing a limit on permissible account activity for a defined period of time

D.

Requiring additional review of account opening documents by senior management

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Question # 22

What is a key risk associated with Correspondent Accounts according to the Basel Customer Due Diligence paper?

A.

It is not used on a daily basis

B.

The service fees are insufficient to cover the cost of managing the account

C.

The respondent bank’s customer acceptance and know your customer policies are ineffective

D.

The volume and value of transactions passing through the account may not be in line with the original

correspondent agreement

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Question # 23

To what extent should senior management and the Board of Directors be involved in the filing of any STR?

A.

They should be informed of all significant STRs and the numbers and trends of the filings

B.

They should be given copies of all STRs filed by the institution

C.

They should review and approve the filing of all STRs

D.

They should be the only designated individuals to communicate with law enforcement

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Question # 24

How should a financial institution deter money laundering through new accounts? Choose 3 answers

A.

Document the identity of the party opening the account

B.

Query owner’s names against FATF database

C.

Determine the beneficial owner(s) of the account

D.

Seek to determine the source of deposited funds

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Question # 25

A bank is preparing for its anti-money laundering independent review, which is performed every two years

under the direction of the compliance officer. The bank’s corporate audit department will conduct the review.

The compliance officer will review the final report before it is released to the Board of Directors.

What is the issue with this situation?

A.

Independent reviews must be performed annually

B.

The review must be performed by a group outside of the bank

C.

The final report must be presented directly to the board of directors

D.

There is a conflict of interest with the management of the review process

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Question # 26

A compliance officer at a large financial institution has been tasked by senior management to lead a team in an internal review and potential revision of the institution’s customer onboarding program following a regulatory enforcement action of another institution.

Which step should the compliance officer perform first?

A.

Reviewing the institution’s risk assessment

B.

Revising training materials for frontline staff

C.

Conducting enhanced due diligence on high risk customers

D.

Resolving substantive discrepancies in customer verification

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Question # 27

A foreign politically exposed person (PEP) requests to add a beneficiary to a file insurance policy.

How should the request be processed to mitigate risk?

A.

Perform due diligence on the beneficiary

B.

Determine the source of wealth and source of funds

C.

Decline the request if the beneficiary is a foreign PEP

D.

Decline the request to add a beneficiary due to increased risk

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Question # 28

A customer has held an account at a local credit institution for 10 years. The account has received deposits twice weekly for the same amount and has never shown signs of suspect behavior. Monitoring software indicated that in the past few months the account has received several large deposits that were not in line with the account history.

When asked, the customer states she recently sold a piece of property, which is supported with a proof of sale.

Which of the following should the compliance officer do next?

A.

Investigate these unusual transactions further.

B.

Contact the local Financial Intelligence Unit for advice.

C.

File a suspicious transaction report with the competent authorities.

D.

Document reasons for not filing a suspicious transaction report.

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Question # 29

The ultimate goal of economic sanctions is to:

A.

protect the reputation of the country.

B.

prevent terrorists from profiting from trade.

C.

protect national security.

D.

reduce the profits of sanctioned countries.

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Question # 30

How should a financial institution respond to a verbal request from a law enforcement agency to keep an account open to assist in an investigation?

A.

Agree to keep the account open

B.

Request a subpoena to maintain the account

C.

Request a letter on the agency’s letterhead

D.

Request a search warrant from the local court

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Question # 31

To ensure that an institution’s anti-money laundering program is current, which step should be taken?

A.

The program should be evaluated and updated at least every six months be the Board of Directors

B.

The program should be reviews by a federal law enforcement officer for gaps in controls

C.

The program should be sent to the institution’s government regulator on a periodic basis

D.

The program should be reassessed at least annually

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Question # 32

An anti-money laundering specialist has been asked to establish a compliance program to detect and prevent money laundering and terrorist financing. Which of the following should the anti-money laundering specialist consider in developing the program?

1. Funds for money laundering and terrorist financing are derived from illegal sources.

2. Related practices are used to conceal the nature of the funds.

3. The source and disposition of funds are similar.

4. Similar techniques are used to move funds.

A.

1 and 2 only

B.

1 and 3 only

C.

2 and 4 only

D.

3 and 4 only

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Question # 33

The board of directors receives notice from the primary regulator of the bank that potentially suspicious activity has been identified and the bank president appears to be involved. The Board asks the compliance officer for advice.

Which action should the compliance officer take when informed?

A.

Destroy all records relating to the matter

B.

Insist on the president’s immediate resignation

C.

Inform the bank’s legal counsel and follow their instructions

D.

Inform the president of the regulator’s suspicions and ask for his advice

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Question # 34

Pursuant to the Third European Union Money Laundering Directive, how long after being out of prominent office should a person NOT be considered to be a

Politically Exposed Person (PEP)?

A.

1 year

B.

2 years

C.

3 years

D.

4 years

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Question # 35

The compliance officer for a private bank has been tasked with reviewing the procedure for authorized signatories on customer accounts to ensure it is in line with relevant Wolfsberg Anti-Money Laundering Principles for Private Banking.

Which three statements from the procedure are in line with Wolfsberg? (Choose three.)

A.

Where the Authorized Signatory is not a lawyer or accountant, due diligence as to the source of funds and wealth of the Authorized Signatory should be undertaken.

B.

The responsible private banker must establish the identity of a holder of general powers over an account (e.g. a signatory for the account) and, as appropriate, verify that identity.

C.

Where due diligence has been satisfactorily completed on all authorized signers, the responsible private banker may reduce the due diligence performed on the account holder and/or beneficial owner.

D.

The responsible private banker must obtain the necessary documentation establishing the authorized signer’s authority to act on behalf of the account holder or beneficial owner (e.g. a Power of Attorney).

E.

If an individual has signing authority over an account but does not act on a professional basis as a manager of funds, the responsible private banker must understand and document the relationship between that authorized signer, the account holder, and, if different, the beneficial owner of the account.

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Question # 36

What was cited by the Wolfsberg Group in its Statement on the Suppression of the Financing of Terrorism as being vulnerable to terrorist financing?

A.

Private banking

B.

Correspondent banking

C.

Alternative remittance

D.

Trade finance

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Question # 37

What is the currency threshold under the European Union Fourth Anti-Money Laundering Directive?

A.

3,000 Euros

B.

5,000 Euros

C.

10,000 Euros

D.

15,000 Euros

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Question # 38

Why do organized crime groups often use front companies? (Choose two).

A.

Because they are not registered, front companies are not subject to income and other sales taxes.

B.

Because using multiple front companies can make it easier to control an entire sector of the economy.

C.

Because they are generally subject to lighter due diligence requirements by banks and other financial services providers.

D.

Because front companies generally charge higher prices than legitimate companies, so profit margins are higher.

E.

Because they can use the company's bank accounts to comingle deposits with those of legal businesses.

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Question # 39

A bank maintains a number of United States (U.S.) dollar correspondent accounts for foreign financial institutions. Upon a routine review of a U.S. dollar correspondent account owned by Foreign Bank A, a number of transactions appear to have been originated by Foreign Bank B outside the expected activity for this account. These transactions appear suspicious and a suspicious transaction report was filed by the compliance officer.

Which step should the compliance officer take?

A.

File a report with the appropriate tax authorities in the jurisdictions of Foreign Bank A and Foreign Bank B

B.

Notify senior management of the money laundering risks by allowing Foreign Bank A to maintain its U.S. dollar correspondent account

C.

Notify Foreign Bank A of the discovery and seek documentation supporting Foreign Bank A was collusive and a willing partner with Foreign Bank B in the activity

D.

Notify other U.S. financial institutions who maintain U.S. dollar correspondent accounts for Foreign Bank A and Foreign Bank B in an effort to shut down the activity

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Question # 40

What poses the greatest money laundering risk for a financial institution offering on-line services to customers?

A.

There is a greater difficulty in matching the customer with the provided identification documentation

B.

There is a lack of human review of the customer’s transactions

C.

Institutions offering on-line services have no possibility to properly verify the identity of their customers

D.

Customers have direct access to their accounts without being detected

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Question # 41

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

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Question # 42

What does the Basel Committee’s Customer Due Diligence for Banks paper suggest that a bank needs to have in place when establishing an account for a corporate business entity?

A.

An understanding of the structure of the company

B.

A policy requiring all identified beneficial owners to undergo a national police check

C.

A process to ensure that the approval of senior management is obtained prior to opening the account

D.

A fee structure that reflects the banks’ costs in monitoring the risks associated with entity’s business activities

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Question # 43

How can violations of anti-money laundering laws be a risk to individuals?

A.

Violations can result in civil and criminal fines and penalties against the individuals.

B.

Violations can result in additional legislation that the individuals have to comply with.

C.

Violations can result in enforcement actions that damage the reputation of the individual’s employer.

D.

Violations can result in additional and more stringent anti-money laundering training for individuals.

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Question # 44

Which unusual or suspicious activity by a financial institution's (FI's) employee requires additional investigation and scrutiny?

A.

The employee avoids taking periodic vacations despite having accrued vacation time.

B.

The employee assists with transactions of a disclosed ultimate beneficiary.

C.

The employee lives a lavish lifestyle within their means.

D.

The employee is involved in a minimal number of unresolved exceptions.

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Question # 45

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?

A.

Ponzi scheme

B.

Market Manipulation

C.

Net Trading

D.

Wash Trading

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Question # 46

A law enforcement agency is reviewing a suspicious transaction report (STR) filed by a financial institution for suspicious activity on a client's account.

Subsequently, the agency requests further information.

Which supporting documentation might the law enforcement agency request from the institution to facilitate its investigation?

A.

Previously filed STRs on the same customer

B.

Account opening documents and account statements

C.

Copies of promotional materials sent to the customer

D.

A copy of the institution's STR policy and procedures

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Question # 47

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

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Question # 48

What is a method of placement that can be used by a money launderer in a deposit taking institution?

A.

Depositing cash into the money launderer’s account

B.

Sending a large number of funds transfers between accounts

C.

Withdrawing large amounts of cash from the money launderer’s account

D.

Depositing cashier’s checks and money orders into the money launderer’s account

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Question # 49

An organization uses an automated surveillance system that generates a very large volume of anti-money laundering alerts. The monthly volume of alerts has increased over the last year causing the compliance staff to fall significantly behind reviewing the alerts. As a result, the system settings are under review to determine if they are appropriate.

Which action should be included in the evaluation of system settings?

A.

Compare settings to organizations within its peer group

B.

Flag filters with no history of generating an alert for removal

C.

Review parameter settings based on the latest risk assessment

D.

Calibrate parameters based on staffing capabilities to clear alerts

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Question # 50

An organization’s automated surveillance system identifies large fluctuations in customer activity. As a result of

an audit, the compliance officer is informed that the system is not generating alerts when activity is

consistently abnormal over a long period of time. Currently the organization is evaluating new alert scenarios

in an attempt to address this problem.

Which type of scenario is helpful in mitigating this weakness?

A.

Peer

B.

Income

C.

Mapping

D.

Below-the-line

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Question # 51

Outgoing foreign transactions of similar amounts trigger a monitoring alert for a customer's accounts. During the evaluation of the accounts, the bank discovers the wire transfers were very small amounts and occurred within the last 3 months following a long period of inactivity. The wire transfers appear to originate from legal sources. To assess the potential of terrorist financing, the institution must ensure the

A.

account holder presents proof the funds are legal.

B.

beneficiaries of transfers are not on a terrorist watch list.

C.

beneficiaries of transfers are not included on the Transparency International List.

D.

account holder does not reside in a country included on the U.S. State Department State Sponsors of Terrorism List.

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