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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. In Emerging Money Laundering Risks - what 3 methods are identified as 'Funds Transfers'?
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
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.
Stored Value Cards - Mobile Payments - Internet Payments.
Passed in 1977 - the US law is primarily known for its anti-bribery provisions (it also applies to foreign companies with stocks covered by the Securities and Exchange Act of 1934).


2. Examples of White-collar crime
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.
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.
Report suspicious transactions linked to terrorism.
Money Laundering - bribery - health care - tax - bankruptcy - securities or environmental frauds etc.


3. A pyramid scheme is also called...
Person who - for compensation - provides advice on securities and investments and manages client assets.
As a financial institution service that is very vulnerable to money laundering.
Dealers in precious metals/stones - trust and company services providers - lawyers - notaries and accountants should all be required to report suspicious activity - but legal privilege cannot be violated.
a chain-referral scheme.


4. Why is a 'money order' attractive to a money launderer?
Should give special attention to relationships or transactions of people - companies or financial institutions from countries showing little regard for these Recommendations.
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.
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.
Because it represents funds drawn on the account of a financial institution and not on a particular individual.


5. The 'Art Loss Register'

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6. Convertible Bond
A fund setup by an investment trust that issues a fixed number of shares to its investors. As such - the market price of the shares fluctuates - often selling at a premium or discount to the fund's net asset value (NAV).
weakness in the implementation of bank programs - ineffective control procedures and failure to practice due diligence.
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.
Middle East and North Africa Financial Action Task Force


7. Free Look Period
Competent authorities should be provided with adequate financial - human and technological resources. Personnel should be of high integrity.
a Sr Management level
A contractual provision that allows the contract owner the right to return the contract within a specified period for a refund.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.


8. 'Commission Rogatoire' known in English as?
A contemporaneous record of the steps - observations - evidence - findings and decisions of an investigation.
Letters Rogatory
An account that does not show activity other than the posting of interest or account maintenance fees.
A record that financial institutions must retain for each cash sale of bank checks - drafts - money orders - cashier's checks and traveller's checks between $3 -000 and $10 -000.


9. Investigative Log
Securities with very low marker price - volume and/or liquidity that are traded on a securities exchange or on the OTC markets. They tend to be more volatile than those on the major exchanges.
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.
Should give special attention to relationships or transactions of people - companies or financial institutions from countries showing little regard for these Recommendations.
A contemporaneous record of the steps - observations - evidence - findings and decisions of an investigation.


10. The IMF estimates that laundered funds compromise ______ of the world's GDP
2% - 5% ($590B - $1.5T)
A federal regulator in the US - responsible for auditing risk and compliance measuers of federally chartered banks.
They pool investors' money and invest those funds in financial instruments in an effort to turn a profit. They typically issue securities in 'private offerings' that are usually not required to be registered with sa securities or financial regulator.
The UN Convention against Transnational Organized Crime [Adopted 12/2000].


11. Transparency International
Use of electronic clearing houses to facilitate electronic transfers of money that complete transactions between two parties where the buyer receives securities - goods - services etc. in exchange for the money.
Berlin- based - non-governmental organization with goal of improving government accountability and curbing national and international corruption.
If provided for money laundering to be an internationally extraditable offense.
Often co-branded by financial institution; may have VISA or MasterCard logos; can be reloadable; usually can access ATMs for withdrawls globally; non-customers can buy them.


12. FATF Sepcial Recommendation on Terrorist Financing -- SR Four
Countries should apply Recommendations to any business or profession that poses a money laundering or terrorist financing risk.
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 express trusts - including information on the settlor - trustee and beneficiaries.
Report suspicious transactions linked to terrorism.


13. Open System Stored Value Card
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
Market participants intentionally restrict a security's liquidity. May lead to increased profits when the security's price rises due to the lack of 'supply'.
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.
A prepaid card that is linked to the global funds network - which can allow for worldwide ATM with-drawls and purchases with many merchants.


14. Credit Card Associations
Financial institutions should be required - by law or regulation - to report suspicious activity to their national FIU.
If provided for money laundering to be an internationally extraditable offense.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
The International Monetary Fund (IMF) and the world bank conduct the joint program.


15. Reverse Flip

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16. How is 'Identity theft' often accomplished?
By acquiring personal information about the victim (e.g: DOB - address - CC numbers) through stealth and misrepresentations.
Passed in 1977 - the US law is primarily known for its anti-bribery provisions (it also applies to foreign companies with stocks covered by the Securities and Exchange Act of 1934).
no regulatory power or function
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


17. FATF
A merchant submits a saled transaction on his personal bankcard account to ontain cash advances through their business.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.
A co-operative property seller agrees to sell home at a well-below market reported price - then accepts the difference 'under the table'. When launderer later sells house - he recognizes 'gain' and all funds appear legitimate as it sold at market.
Financial Action Task Force


18. FATF Recommendation 21
Transportation/transfer of funds (even clean) to/from the US - if done to promote unlawful activity - or with knowledge that the funds are illicit - or to conceal/disguise the nature - location - source - ownership - etc. of funds - or to avoid feder
An intelligence gathering law enforcement or regulatory body that receives financial information form covered financial institutions - businesses and persons in tis respective country.
Should give special attention to relationships or transactions of people - companies or financial institutions from countries showing little regard for these Recommendations.
Combines funds from various members and users them to trade in futures or options contracts.


19. FATF Recommendation 25
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.
The possibility that lawsuits adverse judgements or contracts that turn out to be unenforceable can disrupt or adversely affect the operatinos or condition of a financial siutation.
Competent authorities should provide guidelines in applying national AML/CFT measures - especially for detecting and reporting suspicious activity.
Extending the offense of money laundering to include money laundering associated with all serious offenses - not only with drug trafficking [Adopted 9/90].


20. A public perception that a bank is not able to manage its operational risk effectively can...
A record that financial institutions must retain for each cash sale of bank checks - drafts - money orders - cashier's checks and traveller's checks between $3 -000 and $10 -000.
An association of global financial institutions that issues guidelines is such areas as correspondent banking - private banking - terrorist financing etc.
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.
disrupt or adversely afftect the business of the bank.


21. FATF Recommendation 4
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.
Financial institutions should NOT keep any anonymous or fictionally named accounts - plus they should undertake customer due diligence measures.
Countries should ensure that secrecy laws do NOT inhibit implementation of these Recommendations.
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.


22. What is meant by 'Know Your Customer's customer'?
To take additional steps of examination and caution in identifying their customers and confirming that the customers' activities and funds are legitimate.
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.
Transportation/transfer of funds (even clean) to/from the US - if done to promote unlawful activity - or with knowledge that the funds are illicit - or to conceal/disguise the nature - location - source - ownership - etc. of funds - or to avoid feder
Procedures used to determine the identities of the account holders of a respondent bank in a correspondent banking relationship.


23. Commodity Pool Operator
Operator or solicitor of funds for a commodity pool - which combines funds from members and trades futures or options contracts.
Berlin- based - non-governmental organization with goal of improving government accountability and curbing national and international corruption.
Attorneys - accountants - broker-dealers - communication and transportation providers - bankers and other financial service providers - concealment trap (hiding places) builders etc.
A corporation - often established in an offshore jurisdiction with tight secrecy laws to protect the financial privacy of its owners.


24. In general terms - EDD requires what of a financial institution?

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25. In what country is the Egmont Group Secretariat now located?
All admininstrative and law enforcemnt authorities concerned wiht combating money laundering and terrorist financing - including the FIU and supervisors.
Canada
Any item that a bank is wiling to accept for immediate - provisional credit to a customer's account - instantly increasing the account's balance.
People who help move the billions of dollars drug traffickers earn around the world.


26. FATF Recommendation 2
The financial institution can become subject to lawsuits from the failure to observe mandatory KYC standards or from the failure to practise due diligence.
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
Countries should ensure that knowledge can be inferred. Additionally - legal persons should be subject to theses laws.
Record retention: 5 years - data to recreate any individual transaction; 5 years after relationship ends - all customer identification data


27. Short Sale

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28. How do most governments view Private Banking?
As 'felonies' or 'all offenses in the criminal code'.
As a financial institution service that is very vulnerable to money laundering.
Countries should criminalize money laundering and apply it to all serious offenses - even if committed in another country.
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.


29. What is the goal of the Egmont group?

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30. Fraud
'Tip Off' a customer that a report has been filed. Failure to maintain confidentiality is a violation of law.
Market participants intentionally restrict a security's liquidity. May lead to increased profits when the security's price rises due to the lack of 'supply'.
Intentional misrepresentation - concealment or omission of the truth for the purpose of deception or manipulation to ther detriment of a person or organization.
a chain-referral scheme.


31. Derivatives
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
In many major money laundering operations - it is not unusual to find a complicit employee in financial institution.
High-speed matching of known or suspected patterns in very large DB's using recognition algorithms.
Financial instrument whose price is realted to the underlying commodity - currency - economic variable - financial istrument or security.


32. White-Collar crime

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33. FATF Sepcial Recommendation on Terrorist Financing -- SR Six
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
Impose AML requirements on alternative remittance systems.
A prepaid card that is linked to the global funds network - which can allow for worldwide ATM with-drawls and purchases with many merchants.
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)


34. FATF Recommendation 40
Countries should ensure that their competent authorities provide the widest possible range of international cooperation to their foreign counterparts.
A bank which uses the services of another bank - such as check clearing - wire transfers - etc. The bank providing the service is the 'Correspondent Bank'
Large companies often export their branded products at wholesale prices far below those at which those products are offered in that country.
Market participants intentionally restrict a security's liquidity. May lead to increased profits when the security's price rises due to the lack of 'supply'.


35. Why do companies export their goods at prices far below those in their home country?
May involve movement or large sums of money going cross-border and often through multiple casinos - all by a third party (the operator). Sometime operator does not identify funds owners.
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)
Impose AML requirements on alternative remittance systems.
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.


36. A 'Cash Letter' can also be referred to as _____.
An association of global financial institutions that issues guidelines is such areas as correspondent banking - private banking - terrorist financing etc.
Pouch activity.
Countries should criminalize money laundering and apply it to all serious offenses - even if committed in another country.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.


37. FCPA (US)
Foreign Corrupt Practices Act
Financial institutions should pay to any threats from new or developing technologies - especially with non f2f relationships.
Provide mutual legal assistance.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.


38. GIABA
Expatriates sending money back to their home country or by other individuals sending money abroad.
A prepaid card that is linked to the global funds network - which can allow for worldwide ATM with-drawls and purchases with many merchants.
Criminalize the financing of terrorism - terrorist acts and terrorist organisations.
Intergovernmental Action Group against Money Laundering in Africa


39. Many jurisdictions have legislation to ensure that suspects are not ____?
Helps to identify financial system strengths and vulnerabilities and to reduce the potential for crisis.
A security that offers the owner the right to subscribe for ordinary shares of a company at a fixed date - usually at a fixed price. Equivalent to stock options.
tipped off that they are being investigated.
Foreign Corrupt Practices Act


40. What is a Private Investment company (PIC)?
Money Laundering - bribery - health care - tax - bankruptcy - securities or environmental frauds etc.
A corporation - often established in an offshore jurisdiction with tight secrecy laws to protect the financial privacy of its owners.
Urge investors to buy 'house stocks' - stocks that the firm buys and sells as a market maker or has in its inventory. Oftentimes - they are running a 'pump-and-dumo' scheme.
High-speed matching of known or suspected patterns in very large DB's using recognition algorithms.


41. What is private investment company also known as?
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.
If one needs to transport currency across borders - one needs to have the smallest package possible to avoid detection.
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.


42. What must a financial institution do if they have 'Exempt Accounts'?
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.
Respondent banks may be used by other banks and customers to conduct transactions through a correspondent account.
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.
Type of foreign bank that is incorporated in the host country but is considered to be owned by a foreign parent bank. It only needs to operarted under the host country's regulations.


43. Who appear to be predominant users of hawalas and other alternative remittance systems?
Countries should ensure that their competent authorities provide the widest possible range of international cooperation to their foreign counterparts.
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.
Expatriates sending money back to their home country or by other individuals sending money abroad.
USD/EUR 15 -000 (Interpretive Note to Reommendations 5 - 12 and 16)


44. Common types of 'Derivatives'
Refers to express trusts or other similar legal arrangements - such as fiducie - treuhand and fideicomiso [FATF Risk-Based approach - Guidance for the Life Insurance Sector - Oct 09]
Financial institutions should be required - by law or regulation - to report suspicious activity to their national FIU.
Futures contracts - forwards - swaps or options.
Under what authority? Among other things - it regulates brokers and dealers - under authority of the Securities Exchange Act of 1934.


45. FATF Recommendation 30
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
Open and Closed system
Confidentiality - complex beneficial ownership arrangements - offshore investment vehicles - tax shelters and credit extension services.
Competent authorities should be provided with adequate financial - human and technological resources. Personnel should be of high integrity.


46. FATF Recommendation 11
EurAsian Group
Financial institutions should pay special attention to (and examine & document) complex - unusual large transactions - and all transactions which have no apparent economic or lawful purpose.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
A contemporaneous record of the steps - observations - evidence - findings and decisions of an investigation.


47. What is the Federal Service for Financial Monitoring?
A US Federal Court
'Tip Off' a customer that a report has been filed. Failure to maintain confidentiality is a violation of law.
The FIU of Russia
Ad interbank transmittal form - resembling a deposit slip - used to accompany cash and cash equivalent items sent from one bank to another.


48. FATF Recommendation 19
The opposing part of a transaction or trade.
Applied by an authority - it is a special seal which certifies that a document is a true copy of an original. However - it does not and cannot speak to the validity of the document's content.
Expatriates sending money back to their home country or by other individuals sending money abroad.
Countries should have a central authority to collect suspicious activity and international currency reports. Should have secure - computerized data base.


49. FATF Recommendation 33
Use of electronic clearing houses to facilitate electronic transfers of money that complete transactions between two parties where the buyer receives securities - goods - services etc. in exchange for the money.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
To profit all kinds of markets by pursuing leveraging and other speculative investment practises thay may increase the risk of investment loss.
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)


50. When was the Offshore Group of Banking Supervisors established? What was the impetus behind its establishment?
October 1980. The instigation of Basel Committee on Banking supervision (with which the group maintains close contact).
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
A co-operative property seller agrees to sell home at a well-below market reported price - then accepts the difference 'under the table'. When launderer later sells house - he recognizes 'gain' and all funds appear legitimate as it sold at market.
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.