Instructions:

• Answer 50 questions in 15 minutes.
• If you are not ready to take this test, you can study here.
• Match each statement with the correct term.
• Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Cash Log

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2. Convertible Preferred
The financial institution can become subject to lawsuits from the failure to observe mandatory KYC standards or from the failure to practise due diligence.
Take expeditious action to requests by foreign countries to identify - freeze - seize and confiscate property that is proceeds of money laundering or a predicate crime.
When residents are prevented from benefiting from a tax-regime or when non-residents are prevented from accessing the domestic market.
Preferred stocks that includes an option for the holder to convert it into common stock at a specified covnersion rate.


3. 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.
By acquiring personal information about the victim (e.g: DOB - address - CC numbers) through stealth and misrepresentations.
Council of European committee of Experts on the Evaluation of AML measures and the Financing of Terrorism
The principal US money laundering law can apply to a non-US citizen if the 'conduct' occurs 'in part' of the US.


4. Agent (Insurance Industry)
Countries should establish national centers to receive and disseminate AML/CFT information and have access to law enforcement and others.
Entities such as American Express - Master Card and VISA - which license member banks to issue bankcards - authorize merchants to accept those cards - or both.
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
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.


5. FATF Recommendation 20
Countries should apply Recommendations to any business or profession that poses a money laundering or terrorist financing risk.
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.
Countries should recognize money laundering as an extraditable offense.
It analyzes and processes information and disseminates it to appropriate government authorities in support of AML efforts and financial crime investigations.


6. Corporate Bank

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7. What does Financial Sector AssessmentProgram (FSAP) do?
Through the use of experts - the program optimizes expert resources - reduces duplication of efforts and provides uniform advice in financial sector work.
'Tip Off' a customer that a report has been filed. Failure to maintain confidentiality is a violation of law.
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.
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.


8. The Vienns Convention
Berlin- based - non-governmental organization with goal of improving government accountability and curbing national and international corruption.
Foreign Corrupt Practices Act
An intelligence gathering law enforcement or regulatory body that receives financial information form covered financial institutions - businesses and persons in tis respective country.
The UN Convention against Illicit Trafficking in Narcotic drugs and Pyshotropic substances [Adopted 12/88].


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

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10. SRO (Self-Regulatory Organizations)
Financial institutions should have AML/CFT programs that include approved policies - employee screenings & ongoing training and an audit function to test it all.
Financial Action Task Force on Money Laundering in South America
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.
Financial institutions should have adequate supervision and regulation. Ensure no criminal element in position on control. Money transfer/exchangers should be registered and subjected to monitoring.


11. Downstream Correspondent Clearer
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'.
USD/EUR 3 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
Confiscation
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.


12. FATF Recommendation 19
Confiscation
Confidentiality - complex beneficial ownership arrangements - offshore investment vehicles - tax shelters and credit extension services.
A US Federal Court
Countries should have a central authority to collect suspicious activity and international currency reports. Should have secure - computerized data base.


13. What is the significance of 'Non-Financial Trades and Businesses' in realtion to Money Laundering?
It analyzes and processes information and disseminates it to appropriate government authorities in support of AML efforts and financial crime investigations.
Maintaining correspondent accoutnts at US Financial Institutions (USA Patriot Act)
No.
They are businesses such as ariplane - automobile and boat dealers - lawyers - jewelers - real estate brokers and others that are subjec to BSA regulations (US).


14. 'Closed-end Mutual Fund' (Or Comany)

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15. FCPA (US)
Foreign Corrupt Practices Act
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).
Countries should ensure that their competent authorities provide the widest possible range of international cooperation to their foreign counterparts.
Direct or indirect advisor on buying and selling futures or commodity options.


16. FATF Recommendation 38
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
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).
foreign correspondent banks
Take expeditious action to requests by foreign countries to identify - freeze - seize and confiscate property that is proceeds of money laundering or a predicate crime.


17. What does the 'SEC' (US Securities and Exchange Commission) do?
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.
Under what authority? Among other things - it regulates brokers and dealers - under authority of the Securities Exchange Act of 1934.
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.
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.


18. (Credit card) Acquiring Bank
Take expeditious action to requests by foreign countries to identify - freeze - seize and confiscate property that is proceeds of money laundering or a predicate crime.
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).
Processes transactions for merchants who accept credit cards.
A market is which securities are bought and sold outside of establisehd securities markets.


19. Abusive Squeezes

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20. Money Mules
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.
The nature of the request - the relevant criminal charges in the requesting country - the legal provision under which the request is made - and the information that is sought.
Confidentiality - complex beneficial ownership arrangements - offshore investment vehicles - tax shelters and credit extension services.
Typical mass-market banking where individual customers use local branches of larger commercial banks.


21. Example of use of an Apostille
The exempt accounts must be documented and the financial institution that secures the exemptions must still monitor their financial transactions.
Electronic transmissions of funds between financial institutions on behalf of themselves or their customers.
As 'felonies' or 'all offenses in the criminal code'.
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.


22. Commodity Trading Advisor
Adopted in 1999 - it imposed sanctions on Taliban-controlled Afghanistan for its support of Osama Bin Laden and the Al-Qaeda organization
Direct or indirect advisor on buying and selling futures or commodity options.
They can accrue value as the price of the underlying stock rises.
They are businesses such as ariplane - automobile and boat dealers - lawyers - jewelers - real estate brokers and others that are subjec to BSA regulations (US).


23. FATF Recommendation 18
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.
Through the use of experts - the program optimizes expert resources - reduces duplication of efforts and provides uniform advice in financial sector work.
Procedures used to determine the identities of the account holders of a respondent bank in a correspondent banking relationship.
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.


24. Why is 'refining' critical to a money launderer's efforts?
Impose AML requirements on alternative remittance systems.
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.
Council of European committee of Experts on the Evaluation of AML measures and the Financing of Terrorism
If one needs to transport currency across borders - one needs to have the smallest package possible to avoid detection.


25. 'Competent Authorities' refers to _____.
All admininstrative and law enforcemnt authorities concerned wiht combating money laundering and terrorist financing - including the FIU and supervisors.
Assess any international correspondent's bank nature - ownership - management - reputation - supervision and AML & Terrorist Financing controls. Also. document relationship responsibilities.
Contract issued by an insurance company under which an investor provides the insurer with funds (a lump-sum or series of payments). The insurer then agrees to make periodic payments to the investor starting the immediately or in the future.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.


26. What is the primary use of a 'Mutual Legal Assistance Treaty'?
To allow for mutual assistance in legal proceedings and access to documents and witnesses and other legal and judicial assistance in the respective countries.
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.
Penny Stocks
Charles Ponzi - an Italian immigrant to the US who spent 10 years in jail for a scheme that defrauded 40 -000 people out of $15 million.


27. Boiler Room
Refers to dishonest broker-dealers who set up a group of high pressure salespeople who use banks of telephones to make cold calls to as many potential investors as possible.
Record retention: 5 years - data to recreate any individual transaction; 5 years after relationship ends - all customer identification data
no regulatory power or function
www.artloss.com


28. Respondent Bank

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29. A notary can issue a Apostille but it must be in a country that signed The Hague Convention (1961) and it must ___________. If the notary doesn't understand - find another one.

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30. FATF Recommendation 3
Countries should enable their competent authorities to freeze - seize and confiscate laundered property or proceeds.
The principal US money laundering law can apply to a non-US citizen if the 'conduct' occurs 'in part' of the US.
Absolutely NOT. If the decision is based purely on profile - then you are discriminating. you need to file such reports on the ACTIVITY especially if it differs from the 'normal and expected' as reflected in the customer profile.
Solicits potential customers and issues the credit cards.


31. FATF Recommendation 33
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.
Countries should ensure that there is adequate - accurate and timely information on the beneficial ownership and control of legal persons.
A professional responsible for the securities portfolio of an individual or institutional investor. In return for a fee - the manager has the responsibility of choosing and managing assets.
The means through which the insurance products and services are provided to a customer [FATF Risk-Based approach - Guidance for the Life Insurance Sector - Oct 09]


32. FATF's designated transactional threshold for Casinos (including Internet Casinos) is _____.
USD/EUR 3 -000 (Interpretive Note to Reommendations 5 - 12 and 16)
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.
Take expeditious action to requests by foreign countries to identify - freeze - seize and confiscate property that is proceeds of money laundering or a predicate crime.
A detailed report on the narcotics trade and a lengthy narrative on the status of the related money laundering issues in most nations.


33. How is 'Identity theft' often accomplished?
Processes transactions for merchants who accept credit cards.
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.
By acquiring personal information about the victim (e.g: DOB - address - CC numbers) through stealth and misrepresentations.
Charles Ponzi - an Italian immigrant to the US who spent 10 years in jail for a scheme that defrauded 40 -000 people out of $15 million.


34. Commodity
They can accrue value as the price of the underlying stock rises.
Designated non-financial businesses and professions should be subject to regulatory and supervisory measures. Casinos should prevent criminal ownership - operations or management.
Goods such as food - grains and metals that are usually traded in large amounts on a commodities exchange - usually through future contracts.
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.


35. FATF Recommendation 26
Render mutual legal assistance notwithstanding the absence of dual criminality. Where dual criminality is required - classification should not be an issue.
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]
Countries should establish national centers to receive and disseminate AML/CFT information and have access to law enforcement and others.
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.


36. Penny Stocks
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.
Operator or solicitor of funds for a commodity pool - which combines funds from members and trades futures or options contracts.
To create new overseas markets - dispose of excess goods - or otherwise recover their costs.
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.


37. As considered by UN and OECD - these are jurisdictions that have no or low tax rates - and do not attract real business or foreign investment
The International Monetary Fund (IMF) and the world bank conduct the joint program.
To allow for mutual assistance in legal proceedings and access to documents and witnesses and other legal and judicial assistance in the respective countries.
Harmful or Preferrential Tax Regimes.
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.


38. FATF Recommendation 5
Financial institutions should NOT keep any anonymous or fictionally named accounts - plus they should undertake customer due diligence measures.
Report suspicious transactions linked to terrorism.
Firm that contracts with issuing or acquiring banks to provide transaction processing and other credit-card related services for the banks.
Solicits potential customers and issues the credit cards.


39. What criterion does the US need to enforce its 'Extraterritorial Reach'?

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40. FATF Recommendation 27
Countries should designate law enforcement authorities with AML/CFT responsibilities and allow them special investigative techniques.
When residents are prevented from benefiting from a tax-regime or when non-residents are prevented from accessing the domestic market.
An arrangement whereby an investor pays for part of a securities purchase and borrows the rest from a securities intermediary.
A contemporaneous record of the steps - observations - evidence - findings and decisions of an investigation.


41. Behaviour detection

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42. Basel's 'CDD for Banks' states that the decision to open an account for a PEP should be taken at...
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.
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
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 Sr Management level


43. What does FIU do beyond what FIU does?

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44. What was the target of UN Security Council Resolution 1267?
Countries should apply Recommendations to any business or profession that poses a money laundering or terrorist financing risk.
Firm or person that solicits and accepts commodity futures orders from customers but does not accept funds. Two types of IB_C's: Guaranteed and Independent.
Adopted in 1999 - it imposed sanctions on Taliban-controlled Afghanistan for its support of Osama Bin Laden and the Al-Qaeda organization
disrupt or adversely afftect the business of the bank.


45. What are included in the Wolfsberg AML Principles on Private Banking?
A firm or person that solicits or accepts orders on futures contracts or commodity options and accepts funds for their execution.
General recommendations for client acceptance - updating client files - practices when identifying unusual or suspicious activity - monitoring - control responsibilities - reporting - education and records retention.
Have measures in place to detect the physical corss-border transportation of currency and bearer negotiable instruments - including a declaration system.
The International Monetary Fund (IMF) and the world bank conduct the joint program.


46. What normal business practise makes 'Product Division' possible?
Typical mass-market banking where individual customers use local branches of larger commercial banks.
An arrangement whereby an investor pays for part of a securities purchase and borrows the rest from a securities intermediary.
Large companies often export their branded products at wholesale prices far below those at which those products are offered in that country.
An account that does not show activity other than the posting of interest or account maintenance fees.


47. FATF Recommendation 37
Render mutual legal assistance notwithstanding the absence of dual criminality. Where dual criminality is required - classification should not be an issue.
Financial institutions should be required - by law or regulation - to report suspicious activity to their national FIU.
The terms of such exchanges - the persons subject to being exchanged - and the crimes for which exchanges will be permitted.
disrupt or adversely afftect the business of the bank.


48. Why do convertible bonds oftern have lower interest rates than non-convertible bonds?
A trust clearly created by the settlor - usually in the form of a document - such as a written deed or trust.
Reliable - independent source of documents - data or information.
A market is which securities are bought and sold outside of establisehd securities markets.
They can accrue value as the price of the underlying stock rises.


49. MENAFATF
Middle East and North Africa Financial Action Task Force
Procedures used to determine the identities of the account holders of a respondent bank in a correspondent banking relationship.
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.
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).


50. Bust-out
'Tip Off' a customer that a report has been filed. Failure to maintain confidentiality is a violation of law.
Customer makes payments on account with bad checks - then takes cash advances before they clear - thereby expanding his credit.
weakness in the implementation of bank programs - ineffective control procedures and failure to practice due diligence.
Terrorism and Terrorist Financing