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• Answer 50 questions in 15 minutes.
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• Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. FATF Recommendation 18
Countries should not allow shell banks. Financial institutions should not have correspondent banking relationships with shell banks or banks that allow shell banks to do business through their accounts.
Countries should establish national centers to receive and disseminate AML/CFT information and have access to law enforcement and others.
Letters Rogatory
Financial institutions may rely upon intermediaries to perform certain CDD elements provided the intermediary is supervised and regulated. However - ultimate responsibility remains with the financial institution.


2. Credit Card Associations
FATF principles should apply to all branches and subsidiaries of a financial institution - even those abroad. Inability to do should re reported to parent institution's regulatory/supervisory authority.
Respondent banks may be used by other banks and customers to conduct transactions through a correspondent account.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
Countries should ensure policy makers - the FIU - law enforcement and supervisors have effective mechanisms to enable cooperation.


3. According to FATF - financial transactions above a designated threshold may include situations where the transaction takes place in a single operation or in several operations...
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)
Funds transfers - Shell Corporations - Contractual Transactions.
Banking services between merchant banks and other financial institutions.
that appear to be linked


4. What is the Serious Organised Crime Agency (SOCA)?
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)
A person who tranfers stolen money (or merchandise) from one country to another - often as a result of online scams. Transfers - can be done electronically - via mail or courier service or in person.
Take immediate steps to ratify and implement the UN instruments.
The FIU of the UK


5. A pyramid scheme is also called...
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.
The financial institution can become subject to lawsuits from the failure to observe mandatory KYC standards or from the failure to practise due diligence.
a chain-referral scheme.
Open and Closed system


6. Commodity Pool Operator
Operator or solicitor of funds for a commodity pool - which combines funds from members and trades futures or options contracts.
Court order directing a law enforcement officer to seize and detain a particular person and require them to provide an answer to a compliant or otherqise appear in court.
PEP accounts need to be identified - approved by senior management - and have ongoing enhanced monitoring. Sources of Wealth and funds must also be established.
The FIU of Russia


7. Abusive Squeezes

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8. FATF Recommendation 40
The CDD and record-keeping requirements (of Rec 5 - 6 - 8 & 11) apply to non-financial businesses and professions.
Countries should ensure that their competent authorities provide the widest possible range of international cooperation to their foreign counterparts.
FATF principles should apply to all branches and subsidiaries of a financial institution - even those abroad. Inability to do should re reported to parent institution's regulatory/supervisory authority.
2% - 5% ($590B - $1.5T)


9. Vital Service Providers (VSPs)
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
People who help move the billions of dollars drug traffickers earn around the world.
It one wants to open a bank account overseas - but do it through the mail - the bank may need to be assured that the copy of the passport is correct. The Apostille mark can assure this.
A corporation - often established in an offshore jurisdiction with tight secrecy laws to protect the financial privacy of its owners.


10. Free Look Period
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)
While it is normally known as a Personal Investment Company (PIC) - in some jurisdictions - the international business company or exempt company is also the same.
A deliberate attempt to interfere with the free and fair operation of the market and create artificial - false or misleading appearances with respect to the price of - or market for a security - commodity or currency.
A contractual provision that allows the contract owner the right to return the contract within a specified period for a refund.


11. FATF Recommendation 2
Countries should ensure that knowledge can be inferred. Additionally - legal persons should be subject to theses laws.
Countries should have a central authority to collect suspicious activity and international currency reports. Should have secure - computerized data base.
tipped off that they are being investigated.
An intelligence gathering law enforcement or regulatory body that receives financial information form covered financial institutions - businesses and persons in tis respective country.


12. FATF Sepcial Recommendation on Terrorist Financing -- SR Three
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
Countries should ensure that secrecy laws do NOT inhibit implementation of these Recommendations.
Represents a profession and is made up of member professionals; has a role in regulating the persons who are qualified to enter and who practise the profession; performs cetain supervisory or monitoring type function.
Freeze and confiscate terrorist assets.


13. What is the goal of the Egmont group?

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14. FATF Recommendation 39
Countries should recognize money laundering as an extraditable offense.
A contractual provision that allows the contract owner the right to return the contract within a specified period for a refund.
a chain-referral scheme.
Provide mutual legal assistance.


15. FATF Recommendation 29
Expatriates sending money back to their home country or by other individuals sending money abroad.
Stored Value Cards - Mobile Payments - Internet Payments.
The UN Convention against Illicit Trafficking in Narcotic drugs and Pyshotropic substances [Adopted 12/88].
Supervisors should have powers to monitor and ensure compliance - including the ability to compel production of information and to impose sanctions.


16. How do 'Hedge Funds' operate?

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17. The Vienns Convention
If one needs to transport currency across borders - one needs to have the smallest package possible to avoid detection.
Pouch activity.
Countries should take immediate steps to become party to and implement fully the relevant international conventions related to AML and CFT efforts.
The UN Convention against Illicit Trafficking in Narcotic drugs and Pyshotropic substances [Adopted 12/88].


18. 'Loan Back' method. Give example of how it works.

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19. Corporate Bank

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20. FATF Recommendation 33
Money Laundering and Tax Evasion
Typical mass-market banking where individual customers use local branches of larger commercial banks.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
Direct money of Criminal A is sent to foreign bank account of company B. Investment company C is formed as A's country. A is appointed as director of C. C borrows money from B and buys building which is rented to 3rd parties. with rent - C pays off B


21. Pink Sheets
The right - but not the obligation - to buy or sell a set amount of something - such as a share or commodity - at a set price after a set expiration date.
An electronic quotation system that displays quotes of many securities traded over the counter.
The sale of a stock that the investor does not own. To do so - a securities intermediary 'loans' the stock to the investor - which comes from the intermediary's own inventory - another client's margin account or another intermediary.
The CDD and record-keeping requirements (of Rec 5 - 6 - 8 & 11) apply to non-financial businesses and professions.


22. FATF Sepcial Recommendation on Terrorist Financing -- SR Six
Impose AML requirements on alternative remittance systems.
Direct or indirect advisor on buying and selling futures or commodity options.
Person who - for compensation - provides advice on securities and investments and manages client assets.
It analyzes and processes information and disseminates it to appropriate government authorities in support of AML efforts and financial crime investigations.


23. What does Financial Sector AssessmentProgram (FSAP) do?
Impose AML requirements on alternative remittance systems.
A contractual arrangement whereby the trustee manages the property for the benefit of the beneficiary in accordance with the contractual terms set by the grantor.
Through the use of experts - the program optimizes expert resources - reduces duplication of efforts and provides uniform advice in financial sector work.
By acquiring personal information about the victim (e.g: DOB - address - CC numbers) through stealth and misrepresentations.


24. The Palemo Convention
The UN Convention against Transnational Organized Crime [Adopted 12/2000].
An introducing broker-dealer with an exclusive written agreement with a Futures Commission Merchant (FCM) that obligates the FCM to assume responsibility for the introducing broker's performance.
Intentional misrepresentation - concealment or omission of the truth for the purpose of deception or manipulation to ther detriment of a person or organization.
Ensure that entities - in particular non-profit organizations - cannot be misused to finance terrorism.


25. Why do companies export their goods at prices far below those in their home country?
Financial institutions should NOT keep any anonymous or fictionally named accounts - plus they should undertake customer due diligence measures.
No.
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
The opposing part of a transaction or trade.


26. What does FIU do?
It was the first law in any country to make money laundering a crime.
Countries should not allow shell banks. Financial institutions should not have correspondent banking relationships with shell banks or banks that allow shell banks to do business through their accounts.
The world's largest private DB of stolen art.
It analyzes and processes information and disseminates it to appropriate government authorities in support of AML efforts and financial crime investigations.


27. What does the 'SEC' (US Securities and Exchange Commission) do?
An intelligence gathering law enforcement or regulatory body that receives financial information form covered financial institutions - businesses and persons in tis respective country.
October 1980. The instigation of Basel Committee on Banking supervision (with which the group maintains close contact).
Under what authority? Among other things - it regulates brokers and dealers - under authority of the Securities Exchange Act of 1934.
A deliberate attempt to interfere with the free and fair operation of the market and create artificial - false or misleading appearances with respect to the price of - or market for a security - commodity or currency.


28. FATF Recommendation 24
Designated non-financial businesses and professions should be subject to regulatory and supervisory measures. Casinos should prevent criminal ownership - operations or management.
no regulatory power or function
Financial institutions should NOT keep any anonymous or fictionally named accounts - plus they should undertake customer due diligence measures.
In many major money laundering operations - it is not unusual to find a complicit employee in financial institution.


29. FATF's designated transactional threshold for Financial Insitutions is _____.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.
bear the mark 'APOSTILLE'
An account that does not show activity other than the posting of interest or account maintenance fees.
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)


30. What does FIU do beyond what FIU does?

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31. Identification data
No.
They can accrue value as the price of the underlying stock rises.
Expanding/Systemising the exchange of financial intelligence - improving expertise/capabilities of their personnel - fostering better communication by applying new technologies and sharing financial crimes investigations information.
Reliable - independent source of documents - data or information.


32. UK courts view on 'Suspicion'
The transfer of physical - hard-copy security certificates to book entry credits of a security holder's interest.
Countering the Financing of Terrorism (Counter Terrorist Financing).
A degree of satisfaction not necessarily amounting to belief but extending beyond specualtionas to whether an event has occured or not. Though suspicion requires a lesser factual basis than a belief - it must be built upon some foundation.
Competent authorities should have powers of subpoena - search and seizure.


33. Basel committee's 'Customer Due Diligence for Banks' when verifying a unit's compliance with KYC policies and procedures - the home country supervisors or auditors should do what?
Review customer files and conduct random sampling of accounts.
Harmful or Preferrential Tax Regimes.
To reduce financial crime - including money laundering and terrorit financing.
Should give special attention to relationships or transactions of people - companies or financial institutions from countries showing little regard for these Recommendations.


34. Underwriting
No.
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
The process of agreeing to purchase a new issue of securities from an issuer and distribute it to investors. The underwriter makes a profit between the price paid to the issuer and the public offering price.
no regulatory power or function


35. FATF Sepcial Recommendation on Terrorist Financing -- SR Four
Issue and cancel securities certificates to reflect chagnes in ownership - act as an intermediary for the issuing company - and hanlde lost - stolen or destroyed certificates.
A Correspondent Banking Client who receives Corresponding Banking services from an institution and itself provides Correspondent Banking services to other financial institutions in the same currency as the account it maintains with the institution.
Report suspicious transactions linked to terrorism.
have in place compulsory currency reporting requirements.


36. FATF Recommendation 30
A detailed report on the narcotics trade and a lengthy narrative on the status of the related money laundering issues in most nations.
tipped off that they are being investigated.
An arrangement whereby an investor pays for part of a securities purchase and borrows the rest from a securities intermediary.
Competent authorities should be provided with adequate financial - human and technological resources. Personnel should be of high integrity.


37. FATF Recommendation 20
A fund setup by an investment trust in which the number of shares can fluctuate as investors' move in and out the fund. Share prices moves in direct proportion of the net asset value of the underlying investments (no premium or discount).
Their financial institution may - wittingly or unwittingly - handle the proceeds of this crime while believing it is serving a legitimate client with major account balances.
foreign correspondent banks
Countries should apply Recommendations to any business or profession that poses a money laundering or terrorist financing risk.


38. Dormant Account
Refers to where the agent is acting under a contractual arrangement with the insurer to carry out its CDD functions (i.e. the agent is regarded as synonymous with the insurer) [FATF Risk-Based approach - Guidance for the Life Insurance Sector - Oct 0
An account that does not show activity other than the posting of interest or account maintenance fees.
Person who - for compensation - provides advice on securities and investments and manages client assets.
Countries should establish national centers to receive and disseminate AML/CFT information and have access to law enforcement and others.


39. FCPA (US)
Foreign Corrupt Practices Act
Letters Rogatory
A Correspondent Banking Client who receives Corresponding Banking services from an institution and itself provides Correspondent Banking services to other financial institutions in the same currency as the account it maintains with the institution.
a Sr Management level


40. What is meant by 'Know Your Correspondent Bank'?

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41. Market Manipulation
Confidentiality - complex beneficial ownership arrangements - offshore investment vehicles - tax shelters and credit extension services.
Procedures used to determine the beneficial owners of a correspondent bank and the type of activity that wil be 'normal and expected' for the bank.
A deliberate attempt to interfere with the free and fair operation of the market and create artificial - false or misleading appearances with respect to the price of - or market for a security - commodity or currency.
Funds transfers - Shell Corporations - Contractual Transactions.


42. What were recently identified as Emerging Money Laundering risks?
Funds transfers - Shell Corporations - Contractual Transactions.
Freeze and confiscate terrorist assets.
Under what authority? Among other things - it regulates brokers and dealers - under authority of the Securities Exchange Act of 1934.
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.


43. CFT
Countering the Financing of Terrorism (Counter Terrorist Financing).
Financial instrument whose price is realted to the underlying commodity - currency - economic variable - financial istrument or security.
Competent authorities should have powers of subpoena - search and seizure.
An order from government authority requiring a financial institution to provide transaction information on a suspect account for a specified period of time.


44. Convertible Bond
Harmful or Preferrential Tax Regimes.
Corporate bond that includes an option for the holder to convert it into other securities after a specified period at the discretion of the bondholder.
To promote the effective supervision of banks in their jurisdictions; to further international cooperation in the supervision between the Offshore Banking Supervisors - and with Basel committee member nations and other banking supervisors.
The world's largest private DB of stolen art.


45. FATF Recommendation 25
Middle East and North Africa Financial Action Task Force
Report suspicious transactions linked to terrorism.
Electronic transmissions of funds between financial institutions on behalf of themselves or their customers.
Competent authorities should provide guidelines in applying national AML/CFT measures - especially for detecting and reporting suspicious activity.


46. How does 'Product Diversion' work?
Product is purchsed with terms that it is going to foreign country A. While in transit - the product is diverted back to originating country or to another foreign market where the greatly discounted price provides for extreme profits.
An order from government authority requiring a financial institution to provide transaction information on a suspect account for a specified period of time.
A degree of satisfaction not necessarily amounting to belief but extending beyond specualtionas to whether an event has occured or not. Though suspicion requires a lesser factual basis than a belief - it must be built upon some foundation.
To provide a forum for FIU's (Financial Intelligence Unit) to improve support to their respective national AML progrmans and development protocols for the sharing of information.


47. Wholesale Banking
To promote the effective supervision of banks in their jurisdictions; to further international cooperation in the supervision between the Offshore Banking Supervisors - and with Basel committee member nations and other banking supervisors.
Funds transfers - Shell Corporations - Contractual Transactions.
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
Banking services between merchant banks and other financial institutions.


48. USA Patriot Act Section 312 'Offshore Bank'
If one needs to transport currency across borders - one needs to have the smallest package possible to avoid detection.
A bank whose license has conditions that prohibhit the licensed entity from conducting banking activities with the citizens - or with the local currency - of the country that issued that license.
An order from government authority requiring a financial institution to provide transaction information on a suspect account for a specified period of time.
An association of global financial institutions that issues guidelines is such areas as correspondent banking - private banking - terrorist financing etc.


49. How is 'Identity theft' often accomplished?
With respect to STR/SAR reporting - financial institutions should be afforded safe harbor - yet barred from any unauthorized disclosures.
Confidentiality - complex beneficial ownership arrangements - offshore investment vehicles - tax shelters and credit extension services.
By acquiring personal information about the victim (e.g: DOB - address - CC numbers) through stealth and misrepresentations.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.


50. What do boiler room salespeople typically sell?
Penny Stocks
Typical mass-market banking where individual customers use local branches of larger commercial banks.
Normally seen as non-violent or involving 'business-related' schemes rather than violent or threat or violence crimes.
A bank whose license has conditions that prohibhit the licensed entity from conducting banking activities with the citizens - or with the local currency - of the country that issued that license.